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Recovery In Business Aviation?
Some can see signs- while others only potential.

Recovery is coming: To the economy- to business in general- to business aviation specifically. So says a variety of forecasts- outlooks and status reports – many of them focused on a specific aspect of the economy or business aviation.

After one of the worst drops in sales and deliveries in several decades last year- no one wants to believe recovery isn’t on its way; most of us would prefer to at least feel that we’re already into recovery mode. If only we had a universal recovery-indicator translator to help us know by how much. The truth is; the term “recovery” needs a lot of flexibility to apply and interpret. In many aspects of life and business we measure change with firm definitions representing empirical terms – which- in theory- gives us universal context. Unfortunately such measures- objectively described- sometimes fall short in how they ascribe a situation.

For example- how much down goes into a back-slide? What degree of decline defines a recession? To a certain extent- it’s a little like trying to decide when an incline becomes steep enough to constitute a slope – and when a slope can rightfully be called a cliff. So- to focus on a currently important word – one with a truly fuzzy definition – how do we define ‘recovery’?

Not only do people use the word in limited contexts these days – contexts of challengeable natures- as well – they seem to struggle to define ‘recovery’- let alone actually agree on a definition.

SO- WHAT DOES MAKE RECOVERY?
Engineers and designers- draftsmen and craftsmen once labored long and hard mastering the ability to interpret objects drawn using pencil on paper. The creators gave the world guidance on how an object should be made with three views and an oblique perspective.

The importance of the creators’ ability to portray the various angles and attributes depended on their ability to discern both the physical and use perspectives. Today pencil and paper- T-squares- right-angle triangles and compass sets still constitute the basic tools of design and engineering – but the work comes into existence on computers that improve precision and reduce some of the manual labors of this fundamental work. Tools aside- however- our own ability to relate to the different views and discern the perspectives remains as important as ever.

Such it is with defining recovery in business aviation. Perspective drives perception- and perception guides conclusions. We asked around the business aviation community and- not too surprisingly- received a number of varied- acceptable- applicable answers – all different. But to the observer- their perspective holds just as much validity as that of someone else looking at the question from a different perspective.

THE LEADING INDICATORS
Most analysts and observers noted declines in flying among private aircraft operators ahead of the plunge in pre-owned aircraft sales which preceded the off-the-cliff decline in new aircraft shipments. Those who see a pattern – or a cause and an effect – in this cycle expect that for the recovery to become real- two things have to show up over a period of many months.

Flying: Use- utilization- operating hours and fuel flows will indicate that businesses are feeling more comfortable about their prospects – or more aggressive- some say – and are returning to business travel in the company airplane to support their own recovery pursuits.

Surrogate measurements for pure flight hours include fuel sales and aircraft rental or charter frequencies. Other business indicators influenced by use and flight activities include maintenance work and demand for professional pilots.

Sales: An up-tick in sales of pre-owned business aircraft- and a sales-driven decline in the available for-sale inventory add a different view of what must happen to consider recovery as an in-progress phenomenon. Substitute points for unit sales include registration changes and transaction reports; indicators influenced by these include hull values- loan activities and title-review activities. Thankfully today- research evidence and anecdotal indicators seem all to be pointing positively.

NUMBERS GAMES
The well-received aircraft-tracking folks at FlightAware.com produced a mixed picture of private aircraft operations in its report on February 2010.

General aviation- in its entirety- declined 1.8 percent in February compared to January of this year. Compared to February 2009- general aviation flying declined a somewhat steeper 3.0 percent. That general aviation activity is down year-over-year seems clear here- indicating a trend continued since it began in 2008.

But the adjectives change when you focus on specific elements that compose the FlightAware.com report. Flight of turboprop and fanjet aircraft grew February-over- February by 2.2 percent and 8.8 percent- respectively; compared to January- propjets crept down 1.2 percent while jet traffic barely moved the needle at a 0.1 percent gain. The FlightAware.com report does indicate considerable declines in the use of single- and multi-engine piston aircraft.

In terms of turbine airplanes- the trend seems to lean toward a recovery of traffic – a slow- probably uneven- recovery trend. Other reports also indicated gains in business turbine aircraft operations in recent months- none of them pure and across the board in all segments.

Analysts such as Brian Foley predict a long- slow recovery road for business aircraft sales with a market still below its dizzying 2008 pinnacle in 2019- the 10th year of a forecast that starts with this year. Foley looks at fuel consumption by business aviation as the indicator of choice for his forecast- with fuel consumption averaging 2.1 billion gallons a year by the end of the decade-long cycle. By comparison- last year business aircraft operators consumed about 1.6 billion gallons in 2009 – well below levels other reports tallied for 2007 and 2008.

So ‘recovering’ seems a valid observation with a long way to go before climbing back to the level of the peak just past – if- that is- the community actually climbs back to that level of new-plane sales.

So- what will constitute a market ‘recovered’ well enough for us to stop referring to a ‘recovery’- anticipated or on-going? For the FBO operators we sampled- when business is strong enough to stop looking for ways to save money – or stop losing it. Or when the FBO owners can bring back the long-timers they had to shed at their last rounds of adjustments. “We’ve managed to hold on to people by and large- though we’ve had to adjust some hours and be a lot more finicky about our expenses-” said the operations manager of one large independent FBO.

“We’re pumping less fuel- of course- but our hangars are still full-” added another. “We also instituted some small charges for services we used to perform for free because we didn’t fill three positions that we moved off third shift. When we need to fill those three overnight slots again- we’ll be seeing the kind of 24-hour use that tells me people are flying more.”

Other positive indicators: upward creeping re-sale numbers- stabilizing aircraft values- even limited value appreciation for some specifically in-demand models.

MAKING DO MAKES WORK
For the maintenance shops- ‘recovered’ is something of an odd term because so much capacity edged more into upgrade work as routine and cyclical maintenance work dropped with flying hours.

“When a couple of our customers couldn’t sell their jets they had to back off other deals – but they were fortunate enough to get back most of their investments-” related a busy avionics modifications/interior-upgrade operation east of the Mississippi. “At the same time- he upgraded the radio stack to some new Garmin equipment. Next up- probably late this year- he wants to pull the steam gauges out of the left side and go glass there to match his radio stack.

“The OEM took a small hit on a sale and resold it; we got a big boost from the collapsed deal…it’s not exactly like we got hurt – and we’ve had other business come in under similar circumstances: they want to upgrade or refurbish an airplane they previously wanted to sell.”

A paint-scheme designer knows of more paint-and-interior refurbishment work – his shop is getting a decent share of the contracts to design and oversee the paint work. “Yet we’re still not as busy as in 2007-08- when backlogs of new orders drove a lot of new customers to us to design the livery for their new plane-” the shop owner explained.

“We’re not dying- but we’re not as busy – and would love to be back at that level. If people continue to look at holding on to their existing airplane or even buying a newer pre-owned plane- we could be back at the level of two years ago within a year. I’d call that ‘recovered’ – and fully.”

OEMs: SUSTAINABILITY/RESTORED GROWTH
The questions of ‘recovery’ and ‘recovered’ always accompany examinations of the major OEMs in aviation – and seldom get answered before the next downturn that follows the next industry blast through the old downturn and the new growth that comes and redefines the new ‘normal’.

Recovery- according to some- will never come in the form of exceeding the 2008 sales and delivery pinnacle. Recovery by flight hours and other utilization may well come- we get reminded- without the community buying at the levels of two and three years ago – the only times new jet sales exceeded 1-000 units.

But no honest voice will claim that pinnacle is unachievable nor that it shouldn’t be pursued. That may make those years such a target that the industry collectively celebrates breaching that level some years away. Meanwhile- the language of distress will nonetheless start to fade out of our vocabulary and thought processes when the industry can post even modest- year-over-year gains in sales – dollars- units- you pick…but both would be a big bonus.

Recovery could also be considered a done deal if the community somehow found its numbers growing again – more pilots- more aircraft owned by more operators flying more hours to more airports. That recovery parameter stands as both the least likely and the most-important for business aviation to sustain- regardless of the view of recovery you take.

General aviation- business aviation- can ill afford to see its ranks continue to dwindle if the community is to sustain itself economically- politically and - as importantly - socially.

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