On February 11 in Washington- D.C.- the General Aviation Manufacturers’ Association (GAMA) issued its year-end report on business aviation aircraft sales and manufacturing for the year 2003. Depending on your point of view- the news was either pretty good or not so good. For those subscribing to 'the glass is half full' theory- the good news was in piston aircraft deliveries- which are up 9.5 percent over a year ago.
GAMA Chairman Clay Jones said manufacturers believe that 'the impressive strength of the piston segment in 2003 is an early indicator of a broad turnaround in all segments of general aviation-' echoing a sentiment this magazine has been expressing for some time. Remember- historically the piston segment has always been at the forefront of general aviation recovery cycles.
For those whose approach leans more toward 'the glass is half empty' outlook- the news was not all rosy. Total industry billings were down 15.5 percent- to $9.9 billion and business jet deliveries were down 23.4 percent from a year ago. Total shipments amounted to a dead heat – 2-687 in 2002 compared with 2-686 in 2003.
However- as with any set of statistics- a closer look at this new GAMA report reveals a number of interesting trends that aren’t immediately obvious in the broad brush summary. While not everything is entirely positive- most of the underlying details support the notion that recovery is coming along nicely and 2004 could turn out to be a pretty good year.
In comparing the 2003 results with 2002- one fact jumps out quickly: For turbine airplanes- the first quarter of 2003 was lousy. Business jet sales were off almost 70 percent- down from 169 to 101. Turboprop airplane sales were almost as bad- down nearly 50 percent from 46 to 31. Single-engine aircraft sales- on the other hand- were on the upswing- already beginning to foretell the coming recovery.
On the turbine side- however- when you compare the next three quarters of 2003 with the same period in 2002- things start to look a little better. Turboprop aircraft for sale are 3 units ahead of 2002 in the second quarter (68 vs. 65)- and only six units behind in the third quarter (59 to 64). In the fourth quarter- turboprops are only one unit behind 2002 (109 to 110).
In analyzing the turboprop totals- the picture becomes brighter when you consider the product mix. A close look at the data reveals the fact that Raytheon Aircraft was fazing out its 1900D regional airliner toward the end of 2002. Eleven of the stand-up cabin 1900Ds delivered in 2002- but only 1 in 2003. The reduction in 1900D deliveries was directly related to changing demand in the regional airline industry- and had nothing to do with the overall demand for business aircraft. If you back out the 1900D numbers- the 2003 turboprop business aircraft deliveries exceed 2002 totals in two of the four quarters.
It’s a little harder to put a pleasant picture on business jet sales deliveries- which trailed their 2002 totals throughout the year. The good news- however- is that as the year went along- the spread narrowed. By the fourth quarter- business totals were only about 10 percent below the 2002 figures – 163 to 185. This isn’t great news- particularly if you are trying to sell business jets- but the trend is definitely going in the right direction.
The slowly rising tide of the recovering economy is not necessarily lifting all of the boats equally- either. Some companies outperformed the GAMA averages. Raytheon- for example- delivered more business jets in the fourth quarter of 2003 (37) than it did in 2002 (35). So did Gulfstream- up four units from 17 to 21. Still another company whose fourth quarter jet deliveries in 2003 were better than 2002 was Dassault: There were 23 Falcon jets delivered in fourth quarter 2003- compared with 18 in 2002.
Another factor that must be considered in analyzing the 2003 results is this: A number of the major aircraft manufacturers – Raytheon Aircraft in particular – made major adjustments in their production rates to deal with the soft market. This resulted in some unusually low delivery totals in the first quarter- particularly in the turboprop aircraft category. In the long run- these adjustments are contributing significantly to the overall financial health of both the individual companies and the industry as a whole- but they had a very negative effect on the total aircraft deliveries in 2003.
In looking through the 2003 GAMA report- other interesting factoids come to light. For the first time in many years- the venerable Cessna 172 for sale was not the production champion last year. The Cirrus SR22 single piston engine aircraft for sale claimed this honor by a narrow margin- with 355 units delivered compared with 349 for the two models of the C-172.
In spite of the strong showing by single-engine airplanes for sale- not all of the builders of single-engine airplanes did better in 2003 than in 2002. Both Socata single piston engine aircraft for sale and Maule single piston airplanes for sale saw their single-engine airplane sales totals drop last year. Socata was down to 74 deliveries in 2003- compared with 104 in 2002. Maule’s total dropped from 46 to 32.
Piper twin piston engine airplanes for sale totals were also down- from 290 to 229- although much of this was in reduced demand for its piston twin-engine models- the Piper Seminole and Piper Seneca- which were collectively down from 103 units in 2002 to 44 in 2003.
One factor that cannot be ignored in analyzing the 2003 results is the impact of the 'bonus depreciation' – the provision the U.S. tax legislation in late 2002 that allowed buyers of new airplanes to deduct a larger percentage of their total cost earlier in the life of the airplane. No one knows exactly how much impact bonus depreciation had on this year’s shipment totals. It’s likely- however- that the effect was significant- particularly in the single-engine segment where individual owners are more prevalent.
The bonus depreciation clause in the U.S. tax code is scheduled to expire at the end of 2004- and GAMA is clearly worried enough about the potential result to have cited it prominently in their news release on the year-end numbers.
GAMA has made extension of the bonus depreciation beyond 2004 a major legislative priority for this year. Clearly they don’t want to see anything happen that could de-rail the slowly developing recovery in business aviation in the years ahead.