GAMA Second Quarter 2007 Shipment Analysis Let the good times continue to roll! The General Aviation Manufacturers Association (GAMA) sales numbers are in for the first half of 2007 and they’re great – just like you expected. The only real question- in my opinion- is whether we’ll break the $20 billion sales mark for the year. My guess is we will – rather easily- in fact. Actually- there probably are a few more questions worth discussing- and this aviation article will examine them in ...
GAMA Second Quarter 2007 Shipment Analysis
Let the good times continue to roll!
The General Aviation Manufacturers Association (GAMA) sales numbers are in for the first half of 2007 and they’re great – just like you expected. The only real question- in my opinion- is whether we’ll break the $20 billion sales mark for the year. My guess is we will – rather easily- in fact.
Actually- there probably are a few more questions worth discussing- and this aviation article will examine them in detail. The market is continuing to evolve in some rather interesting ways: Big jets; little jets; single piston engine aircraft for sale; twin piston engine aircraft - all experienced interesting developments.
For the fourth year in a row- GAMA chose to announce the first half numbers at the Experimental Aircraft Association’s (EAA) AirVenture in Oshkosh. Interestingly- the current recovery was just moving into high gear when GAMA started making the first half announcement in Oshkosh in 2004. The previous year- when the announcement was made in Washington- D.C.- the market was still going down. All the Oshkosh announcements have featured strong gains. Maybe it’s an omen of some kind.
This year’s Oshkosh announcement fits GAMA’s standard recent profile: Sensational results couched in a rather reserved package. Both shipments and billings were up over the six-month period a year ago- shipments by 1.7 percent at 1-883 units and billings by 11.7 percent- for a total of $9.8 billion.
Business jet aircraft shipments continued to grow at a healthy 14.7 percent from a year ago- reaching 475 units- compared with 415 in 2006. The turboprop market grew even faster- at 15.2 percent- although the total turboprop market of 182 units is well below the jet level. It’s almost hard to remember there was a time when turboprops outsold business jets by a ratio of two to one (although that was almost 30 years ago).
Piston engine aircraft sales were off slightly for the second quarter in a row- down 4.2 percent for the half-year period. Looking at the specifics- I still don’t think this is a harbinger of market trouble ahead. We’ll discuss this in the detailed breakdown of the piston market (below).
In announcing the continuing good news in the market- GAMA’s president and CEO Pete Bunce said- “General aviation manufacturers are committed to creating a renewed interest in flying through the introduction of products that will spur more people worldwide to experience the exhilaration of flight… The innovative technologies that our aviation manufacturers are showcasing at premier events like AirVenture have a direct correlation with making flying easier and safer.”
There was no mention in GAMA’s official announcement of the on-going battle over user fees- rising fuel prices- or any other issues that might threaten the continuing boom in business aviation. And why should there be? AirVenture – or Oshkosh- as most of us call it – is too much of an aviation celebration to be a venue for discussing anything negative. And besides- the U.S. Congress is on vacation for the summer- so all the legislative battles were temporarily on hold.
The big news in the business jet market is that the long-anticipated first wave of Very Light Jet (VLJ) deliveries has finally begun in earnest. Cessna delivered 10 Mustangs in the second quarter- and Eclipse delivered 17 Eclipse 500s. This represents the first serious volume delivery of VLJs- and it’s a trend that is only going to grow. Cessna is forecasting at total of 44 Mustang deliveries this year- and has announced plans to produce 150 a year by 2009.
Eclipse Aviation says it still plans to deliver 200 units this year. As if to emphasize that point- Eclipse CEO and president Vern Raburn arrived in Oshkosh with what could become the first second-generation VLJ – a concept single-engine V-tail airplane that has been secretly in development for about six months and has already accumulated more than 30 flight hours. The Eclipse Concept Jet was on display throughout the seven-day Oshkosh show. With VLJs starting to enter the market in serious numbers- it’s not inconceivable that we could have the first 1-000 unit business jet year in 2007. It seems virtually certain that we will reach that milestone in 2008 if we don’t make it this year.
Will we see more VLJ models this year- beyond the Mustang and the Eclipse? Probably not. The Adam A700 is clearly running a little behind its announced schedule- based on delays with its piston-powered Adam 500 stable mate- with which it shares numerous components and parts. The Embraer Phenom 100 and Spectrum S-33 aren’t scheduled to debut until 2008. There is almost a zero chance that any of them would be delivered early.
Nonetheless- it seems very likely to me that more than 100 VLJs will be delivered this year. If Eclipse makes its projected numbers- there could be close to 250. With Cessna and Eclipse both gearing up for full production and as many as four or more additional VLJ models potentially hitting the market- 2008 should be a huge year for VLJs.
Perhaps the biggest surprise in GAMA’s jet delivery numbers- however- was at the very top of the market- in the category of airliner-based business jets. Airbus- with five units for the first half- exactly matched its 2006 totals. Boeing- however- reported no deliveries of its BBJ models in the second quarter.
A year ago Boeing had three second quarter deliveries. Boeing’s first quarter deliveries this year were also down by one unit- from four to three. For the first half of the year- then- Boeing’s total BBJ deliveries were down 57 percent from a year ago. This is quite a surprise from a company that was reporting a 100-unit backlog in this category last year. Boeing’s explanation: No BBJs were scheduled for delivery last quarter.
Elsewhere- the business jet category is doing quite nicely and performing pretty much as expected. Bombardier continues to lead the sales dollar category by a wide margin- recording $1.4 billion in aircraft sales for the second quarter and almost $2.74 billion for the year to date. Bombardier’s unit deliveries totaled 113 aircraft for the six months.
Interestingly- this was actually one aircraft fewer than it delivered in the same period a year ago- but Bombardier’s billings on the slightly reduced volume were still up by around $100 million. This illustrates a continuing trend in the market of fewer and fewer aircraft costing more and more money.
Cessna- by contrast- continues to deliver more and more aircraft. Cessna’s total aircraft production- including all categories – pistons- turboprops and jets – was up 56 percent from the first quarter of this year to the second. A total of 335 Cessnas were delivered in the second quarter- compared with 214 in the first three months of the year.
Putting perhaps an exclamation point on its leadership role as the world’s most prolific business jet builder- Cessna delivered 163 business jets in the first half of 2006 (67 in the first and 96 in the second quarters). This was up 13 percent over the 144 it delivered last year. Almost all of Cessna’s gain over 2006 came in the second quarter- which was up 28 units or a whopping 23 percent over the 2006 second quarter total of 78 units. Every model of Cessna’s jets except two saw a delivery increase from the first quarter to the second this year. And where there was a shortfall- it was small – one unit for the Citation X and two for the XLS model. On the other hand- where there were increases- they were mostly large – Mustangs and Encores each up by 10 units and CJ2s up by six.
Gulfstream is solidly in second place in business jet billings- with a total of $2.3 billion for the first half of the year. With 66 units recorded in the six-month period- Gulfstream is in fourth place in deliveries. Gulfstream’s production has increased markedly over the past three years. There was a time when its quarterly output was very consistent in the 20-unit range. Now Gulfstream is averaging better than 30- and in the past quarter hit a high of 36 deliveries.
Gulfstream production (and sales) would not have to advance very much more before it would begin to challenge Bombardier for the number one ranking in business jet dollar sales volume. Throughout the decades of the 1980s and 1990s- Gulfstream was the unchallenged leader for business jet billings. It has only been in this decade that it has been relegated to the number two position by Bombardier. Perhaps Gulfstream will once again resume the lead. The newly renamed Hawker Beechcraft holds the number four position in business jet deliveries- delivering 30 jets in the quarter just past. Carrying over the 32 units recorded in the first quarter under the old Raytheon Aircraft banner- that’s a total of 62 jets for the year.
An area of growth that has to please the new investors at Hawker Beech is the entry-level Premier I model- which has seen 27 models delivered so far this year. When the Premier I was first introduced- its builders were hoping for an annual sales volume of about 60 units per year. Since deliveries began in 2001- the jet has never really approached that level – its best year was 37 units and most other years were in the 20s (23 last year)- but this year it just might reach 60. We certainly expect it to get close- although Hawker Beech isn’t releasing any forward-looking production data at this time.
And it’s not just Premier’s sales that are picking up. The whole entry-level or light-jet category is seeing strong gains. This category has been the slowest segment to recover since the market turned down in the wake of the 9-11 terror attacks and the recession that followed. Now however- Cessna’s CJ series and Hawker Beechcraft’s Premier I are all seeing good growth.
Dassault- builder of the Falcons- was next in the business jet market- with 30 units delivered in the first half of 2006 and billings totaling $981 million. Like Cessna and Gulfstream- Dassault has ramped up production to meet the growing market- and the company’s delivery performance reflects that. Falcon deliveries were up 72 percent from the first quarter of this year to the second.
Of Dassault’s 30 deliveries this year- 19 came in the second quarter. Embraer also recorded growth from the first quarter to the second this year. A total of 12 Legacy 600s worth nearly $297 million have been delivered this year- with seven of those deliveries coming in the second quarter.
About the only exception to the jet market’s overwhelmingly good news comes from Sino Swearingen- where financial problems and production woes prevented any deliveries in the first half of this year. As the quarter closed- Sino was getting ready for its second delivery (the first came in the fourth quarter of last year) but the deal didn’t get done in time to make the first half GAMA totals.
On balance- then- we are looking at a very healthy business jet market as we enter the second half of 2007. Business jet growth continues all across the market and is poised to drive the industry to its first $20 billion year. Actually- $21 billion is not out of the question.
Much the same can be said for the turboprop market- where every manufacturer showed gains over their 2006 totals. Hawker Beechcraft- nee Raytheon- continued in its traditional market leadership role- with delivery of 62 of its King Air models- up nearly 15 percent from last year when it recorded 54 sales.
Pilatus was next- with 41 for the year- up nearly 14 percent from the 36 airplanes it delivered in the same timeframe a year ago. Third place in the turboprop race went to Cessna- with 34 deliveries spread between its two Caravan models. This was an increase of 17 percent over the 29 Caravans delivered in the first half of 2006.
The balance of the turboprop market was divided among EADS-Socata- Piper and Piaggio. Piper delivered 21 of its Meridian models- up slightly from the 20 sold in the first half of last year. Similarly- Socata recorded sales of 18 TBM 850s- up a unit from the 17 it reported for the same time period last year.
Piaggio had the biggest gain among the turboprop makers on a percentage basis- delivering six of its P-180 Avanti IIs in the first six months of this year. That represented an increase of 300 percent over the two units delivered in the same period in 2006.
THE PISTON AIRCRAFT FOR SALE MARKET
With all the good news coming out of the jet and turboprop markets- it’s hard to believe things aren’t quite so positive on the piston side- but that appears to be the case. Looking at the raw numbers for the total market- piston sales are off 4.2 percent for the first half of 2006- totaling 1-226 units- down from 1-270 last year. Is that a catastrophe? Hardly.
In fact- even with the shortfall from last year to this one- we are still headed for the second or third best year for piston sales in the last quarter century. The only reason this is even a topic for discussion at all is because the piston market has always been ‘the canary in the mine’ for the business aviation industry.
SINGLE ENGINE AIRPLANES FOR SALE
So is the canary getting sick? I don’t think so… Of 12 aircraft companies reporting single-engine piston deliveries in 2007- six of them reported increased sales over a year ago- and one had numbers that matched last year’s total.
So a majority of the market is doing as well or better than last year. Of the five with reduced numbers- one is a start-up trying to overcome initial production issues- and another is wrestling with funding issues unrelated to the overall health of the market. As was the case last quarter- the market leaders in the piston arena had the biggest shortfalls from a year ago- but both say the cause is production related- not the result of a softening market.
Cessna’s piston deliveries were off 66 units for the first half of 2007- down from 418 in the first six months of 2006 to 352 this year. The reasons for this drop are two-fold. First Cessna had a one-time sale of 50 airplanes to China last year. Second- Cessna’s singles are built in the same Independence- Kansas- factory where production is getting up to full speed for the new Cessna Mustang VLJ. Piston production has been curtailed a little this year to accommodate the Mustang.
A close look at the numbers shows that almost all of Cessna’s piston shortfall came in the first quarter. Cessna’s second quarter totals were down just 12 units from a year ago- at 219 aircraft compared with 231 in 2006. Cessna is projecting that its total piston deliveries will trail the 2006 totals slightly throughout 2007. Nonetheless- Cessna should still produce more than 800 piston-powered airplanes this year- and expects to sell every one of them. So no problems in the piston market as far as Cessna is concerned.
Also reporting fewer piston deliveries in this quarter and for the year to date was Cirrus- with deliveries down from 341 units in the first half of 2006 to 268 this year. Cirrus says its reduced delivery numbers are the result of a changeover to its improved G3 wing- as well as the introduction of a turbocharged version of its airplane.
Nonetheless- Cirrus is still looking to finish the year close to its 2006 total of 721 deliveries.
Elsewhere in the piston market- the news is generally upbeat. Diamond sales were up in all categories- with single engine piston deliveries up more than 27 percent over last year. All told for the first six months of 2007- Diamond delivered 154 piston singles- compared with 121 in the first part of 2006. Columbia had the next highest piston single total- with 101 units- up significantly from the 67 it delivered at the same time a year ago. Last year at this time- Columbia was still delivering just one model- its Columbia 400. This year it is also delivering the Columbia 350- which is accounting for nearly 30 percent of its sales thus far.
As expected- Piper’s single engine piston sales were off slightly. The company has announced its intention to concentrate on the higher end of the market- hopefully selling fewer airplanes for more money. This strategy appears to be working. In the first half of this year it sold 104 airplanes for $79 million. Last year 110 Pipers yielded just $73.4 million.
Piper’s single engine piston deliveries were off 18 units from a year ago- although most of the shortfall came in the first quarter. In the second quarter the difference was just five units- and if you discount the five 2006 deliveries of the Piper 6XT- which is now out of production- Piper single engine piston deliveries in the second quarter were equal with last year’s.
Mooney was another piston manufacturer that didn’t quite match last year’s total. For the six-month period Mooney deliveries were off about five percent- down from 42 units to 40. On a positive note- Mooney’s 22 units delivered in this year’s second quarter matched last year’s second quarter total.
Hawker Beechcraft’s 36 unit total for its Bonanza series exactly matched the 36 units delivered in the first six months a year ago- when sold under Raytheon Aircraft. With the 21 units reported for the second quarter of this year- the Bonanza enters its 61st year of continuous production – a simply amazing statistic.
American Champion- with 32 units- and Maule- with 25- both had nice gains over last year. Champion’s total was up more than 14 percent over last year’s 28 deliveries- while Maule was up 19 percent over last year’s 21 units.
The newcomers to the piston market- Alpha and Liberty- also appeared to be prospering. Now in its second full year of production- Liberty delivered 26 XL2s- up from 12 last year. That’s a gain of more than 116 percent. Alpha- which debuted this year- delivered six airplanes for the first half of its first full year- doubling its first quarter total in the second quarter from two to four.
Over at Adam- the other new manufacturer in the piston market- the news was less rosy. After delivering one airplane at the end of last year- Adam has been unable to report any deliveries so far this year. Initial production problems should soon be overcome- however- and I would expect to see Adam resume delivering airplanes- perhaps as early as the third quarter.
Finally- Australian plane maker Gippsland was slightly off its 2006 pace- with seven of its GA8 Airvan models delivered this year compared with 10 a year ago.
TWINS ENGINE AIRPLANES FOR SALE
Skimming over the surface of the piston twin category- and the overall picture is very bright. Deliveries are up more than 22 percent from a year ago- making this the fastest growing segment of business aviation today – by a wide margin- actually. If only the overall twin market wasn’t so small. Total piston twin deliveries for the half-year totaled 110 units- up from 90 in 2006.
Dip beneath the surface- and the numbers show a slightly different picture. All of the gains are from just one manufacturer – Diamond. Of the other two players in the market- one was even with last year and the other was down.
Diamond delivered 82 of its diesel powered Twin Stars- up from 57 in 2006. That’s a gain of almost 44 percent. Piper’s 14 piston twin deliveries matched its 2006 total while Hawker Beechcraft’s Baron model also recorded 14 deliveries- down from 18 a year ago.
Taken on balance- then- we see a piston market that may be off slightly compared with last year- but there are still plenty of success stories among the key players- and all of the reasons for the shortfall appear to be unrelated to any structural weakness in the market. The canary is doing just fine at this time. And the rest of the market is setting new records almost daily.
In a few weeks- new forecasts will be issued from both Honeywell and Rolls-Royce – the most respected prognosticators in our industry. Last year’s forecasts predicted the good times would continue through the end of this decade and perhaps beyond. All of the leading indicators for business aviation appear to suggest the rosy forecasts are fully justified. Let the good times continue to roll!