Frank Sinatra would have approved. The General Aviation Manufacturers Association released its 2004 year end report on February 14- and simply put- it was a very good year.
The good news spanned the entire aircraft sales market: Pistons – up 8.2 percent! Turboprops – up 18.0 percent! Business jet sales – up 14.1 percent! Total shipments – up 10.3 percent! Total billings – up 19.1! Everything up! It doesn’t get much better than this.
GAMA Chairman James Schuster credited 'bonus depreciation- coupled with the continuing growth of the U.S. economy' for helping to make 2004 'a turning point for our industry.
'The fact that total shipments increased indicates that this turnaround is broadly based. GAMA member companies believe this bodes well for the future of general aviation-' Schuster said.
An analysis of the numbers supports Schuster’s statement. The recovery is solid. Moreover- some segments recorded numbers in the past year that are as strong as we’ve seen in two decades.
Looking at the raw numbers- we see that piston airplane sales totaled 2-051- up from 1-896 in 2003. This was the highest total of piston-powered airplanes delivered since 1984. Turboprops totaled 321- up from 272- and business jets for sale reached 591- up from 518 a year ago. It was the first time since 2000 that total deliveries had increased in every category.
The total of piston- turboprops and jets added up to 2-963 general aviation airplanes delivered in 2004- up more than 10 percent from the 2-686 units reported to GAMA in 2003.
All these aircraft for sale totaled $11.9 billion- up nearly $2 billion from the $9.99 billion recorded a year ago- and the third highest billings total in GAMA history. You can see why Schuster and the other CEOs whose companies comprise GAMA are pleased about the results of 2004 and enthusiastic about 2005. GAMA doesn’t include backlogs in its shipment report- but conversations with senior executives at a number of the GAMA companies indicate that backlogs are strong and much of 2005’s production is already committed to retail buyers.
That probably means 2005’s airplanes for sale growth won’t be as dramatic as we’ve just seen in 2004- because it takes a while to ramp up production and the manufacturers don’t want to build themselves into a crisis of production that exceeds demand.
It does mean- however- that profits should be strong in 2005 and that’s good. After the financial battering the manufacturers endured in the early years of this decade- they need some good years to get their balance sheets healthy again.
By its own admission- one of GAMA’s major success stories in 2004 was convincing the U.S. government to extend bonus depreciation for another year. Bonus depreciation is the tax provision that allows U.S. companies to write off a significant percentage of a business airplane sales cost in the first year of operation.
GAMA considers bonus depreciation a critical element in sustaining the recovery- which it has labeled potentially fragile. This is probably because the recovery- which began in the piston sales market almost two years ago- didn’t extend broadly through the business jet sales segment until the third quarter of 2004. Another year of bonus depreciation should certainly help propel things along.
With a tax incentive to spur fourth quarter purchases- you would expect to see a spike in deliveries during the last three months of the year- and that’s pretty much what happened.
The effect was most pronounced in the turboprop aircraft for sale segment- where almost 40 percent of the deliveries in 2004 (127 out of 321) came in the fourth quarter. Business jet sales showed a similar trend- with nearly 34 percent of deliveries (200 out of 591) recorded in the fourth quarter- as did the single engine airplanes for sale market- where nearly 33 percent of sales (654 out of 1-999) occurred in October- November and December.
For some companies- delivery rates were more balanced throughout the year- and didn’t experience the heavy fourth-quarter spike that the aircraft for sale market displayed as a whole. And while most companies enjoyed a strong year- some were still looking to find the right formula for success.
Taking a closer look at the numbers in the three manufacturing segments – business jets- turboprops and pistons – we see some interesting variations in how the airplane for sale market performed in 2004.
Among the business jet for sale category- the traditional market leaders did well- with the situation continuing to improve as the year developed.
Cessna led the year in total business jet deliveries with 181- while Gulfstream business jets for sale took in the most money from business jet sales- topping the $3 billion mark.
Interestingly- Cessna’s market-leading sales total was actually 15 units lower than the company recorded in 2003- but the business jets Cessna sold in 2004 were higher end models that brought in more money. The mid- to upper-level of the jet aircraft sales market continued to perform more strongly for Cessna than the low-level- where the company’s CJ series airplanes have yet to match their sales totals of previous years.
Cessna’s new market entries- the Citation Sovereign business jets for sale super mid-size and the Citation XLS business jets for sale both had strong aircraft sales in 2004. Cessna’s 2005 jet production was almost completely sold out as this article was being prepared- and the company is taking active steps to ensure that the strong backlog it is developing is not easily accessible to speculators. This should help to ensure that the company will maintain its position as the business jet sales unit leader in the coming year.
Gulfstream- with its $3 billion sales total coming from the delivery of 78 units- continues to demonstrate the inherent strength of the upper end of the private jet aircraft for sale market- along with a business plan that is geared to steady market production.
Gulfstream is one of the companies whose sales do not follow the industry tradition of a strong spike in the fourth quarter. The 78 Gulfstreams delivered in 2004 were distributed by quarter 17 – 20 – 20 – 21. Interestingly- the financial spread between 17 Gulfstreams in the first quarter and 21 in the fourth was more than $230 million- or an average of $57 million per aircraft. Yes- the high end of the market appears to be doing okay.
Gulfstream also did not record a huge unit sales gain in 2004 over 2003. Gulfstream’s 78-unit total was just four aircraft sales ahead of its 2003 total of 74.
Bombardier scored second place in the business jet for sales race- both in the unit volume category with 129 units and in dollar volume with a total of $2.6 billion in aircraft sales.
Like Gulfstream- Bombardier’s sales levels were comparatively steady through the year. The unit distribution for Bombardier was 34 – 27 – 33 – 35 in the four quarters of 2004. Unlike Gulfstream- however- Bombardier’s sales were up sharply from 2003- when it delivered just 70 airplanes- compared with 129 in 2004. That’s a gain of more than 84 percent. Sales dollars showed a similar gain from $1.5 billion to $2.6 billion.
Third place in the business jet sales unit volume category in 2004 went to Raytheon- with 115 aircraft. This represented only an incremental gain from 2003- when the company delivered 100 business jets for sale- but it did prove to be Raytheon’s second strongest performance in business jet deliveries in the past 10 years.
Raytheon’s Premier I entry-level business jet recorded the strongest sales in its history- with 37 units. The previous high for Premier I was 29- which it achieved in both 2002 and 2003.
Distribution of Raytheon’s jet deliveries was heavily skewed to the latter part of the year- with 39 percent occurring in the fourth quarter. The spread among Raytheon’s 115 units by quarter in 2004 was 13 – 28 – 29 – 45. This distribution was somewhat affected by steps Raytheon took in late 2003 and early 2004 to get its inventory more closely matched to market demand.
Third place in the corporate jet sales dollar volume category in 2004 went to Dassault with nearly $1.7 billion in sales recorded on the delivery of 63 of its Falcon business jets for sale- spread among seven different models. The best selling Falcon was the 2000EX-EASy with 19 units- all but three coming in the fourth quarter.
Like Raytheon- Dassualt recorded nearly 40 percent of its sales in the fourth quarter. The quarterly distribution of Falcon sales in 2004 was 11 – 11 – 16 – 25.
Embraer was another business jet maker whose sales were heavily skewed to the fourth quarter during 2004. The company’s comparatively new Legacy Executive recorded no sales in the first quarter- three in the second- two in the third- and then eight in the fourth quarter of the year.
Two business jet makers – Boeing and AvCraft – defied convention by having their best sales occur in the first quarter of 2004. Normally the first quarter is the worst airplane sales period for a business jet manufacturer- largely because tax considerations favor purchases made in the fourth quarter- which tends to have a negative effect on early first quarter results.
Boeing delivered just three of its 737-based BBJs in 2004- with two coming in the first quarter and the third in the final quarter of the year. AvCraft reported sales of nine Envoys- with four in the first quarter- none in the second- three in the third and two in the fourth quarter of 2004.
Airbus didn’t report any ACJ deliveries in 2004. Evidently the past year was not a very good one for airliner-based business jets.
Overall- the business jet market enjoyed a nice recovery in 2004. It still has a way to go to reach the 784-unit level recorded in 2001- but with total aircraft sales in excess of $10.229 billion- the market is clearly healthy. Prospects for 2005 should be even better.
The turboprop for sale market experienced the strongest growth of any segment during 2004- with airplane sales of 321- up from 272 in 2003.
The obvious market leader was Raytheon- with 102 units divided among its three King Air models. King Air started slowly in 2004- with just five airplanes delivered in the first quarter. This picked up in the second quarter with 22- followed by 31 in the third and a solid 44 in the fourth quarter. The strongest performer by model was the King Air 200 for sale- with 39 units for the year.
It would appear that Raytheon’s turboprop line classically fits the GAMA description of a market driven by improving economic conditions and spurred by late year tax incentives.
Interestingly- Raytheon did not have the largest selling turboprop model. That honor goes to Pilatus- which delivered 70 of its Pilatus PC-12 single engine turboprop aircraft for sale models.
The PC-12’s sale distribution through the year (6 – 15 – 16 – 33) was similar to what Raytheon experienced with the King Air.
Also outselling the King Air on a single-model basis in the turboprop category was Cessna’s Caravan 1B- with 51 units for the year- although it should be noted that the market for the King Air and the Caravan are very different. Their only real commonality is turboprop power.
The Cessna Caravan series delivery pattern was also somewhat less skewed toward the fourth quarter (3 – 18 – 19 – 24)- although the last three months of the year was still the strongest delivery period for the Caravan series.
The Piaggio P180 Avanti business jets for sale also had a more balanced delivery pattern through 2004 than some of the other turboprops. Avanti deliveries were spread 2 – 4 –4 – 6 among the year’s four quarters. The 16-unit delivery total represented a 33 percent gain over the 12 sales Piaggio had in 2003- so 2004 had to be counted as successful for the Italian company.
Socata EADS had the only turboprop that didn’t record a sales gain in 2004. The company delivered 31 TBM 700s- compared with 34 in each of the two preceding years. The TBM 700’s deliveries also did not exactly fit the pattern of most business aircraft- being distributed 9 – 5 – 6 – 11.
Piper’s Meridian showed a slight sales gain over 2003- with 26 units compared with 24 the year before. Meridian’s sales distribution at 7 – 8 – 6 – 5 was even more unconventional than TBM 700s- although this was almost certainly affected by the hurricanes that pounded Piper’s Florida facility last fall.
Statistically- the most improved sales in the turboprop category were recorded by Pacific Aerospace- which saw deliveries of its PAC 750XL jump by 400 percent- from 2 units to 10. This is mostly a good example of how percentages applied to small numbers can create misleading data. Deliveries of the PAC 750XL were spread quite evenly (2 – 3 – 2 – 3) throughout the year. It’s hard to see that bonus depreciation was a significant factor for Pacific Aerospace.
Rounding out the list turboprop deliveries for 2004 was Maule- which delivered two examples of its MT 7-420- one in the second quarter and one in the fourth.
Piston Airplane Sales
The piston engine market has led the current recovery in business aviation. As early as nearly two years ago it began to stabilize and then show signs of recovery. And now the piston market has climbed above the 2-000-unit level to 2-051 – making 2004 the best year for piston aircraft sales in the past 20 years.
Unit sales of piston airplanes were up eight percent in 2004- but dollar volume increased a whopping 27 percent- from $545 million to $692 million. Still- piston sales account for less than six percent of the total business aviation market.
You might not think the leaders of a company like Cessna- with more than $1.78 billion in total aircraft sales billings- would care terribly whether they are the delivery leader in piston-powered airplanes for sale- but they do.
Cessna in 2004 continued to maintain its pre-eminent position as the world’s leading manufacturer of piston engine airplanes- with deliveries totaling 654 units- up from 588 a year ago.
The majority of Cessna’s 172 Skyhawk models go to flight schools- but the bulk of its 182 Skylane and 206 Stationair models go to individuals or corporations – an excellent sign for the continued viability of the next generation of business and personal aircraft operators.
Cessna may be the largest maker of piston-powered airplanes- but the title of largest selling piston-powered airplane model went to Cirrus Design’s SR-22 in 2003.
In 2004- the Cirrus SR-22 for sale was once again the best selling piston-powered airplane. During the past year Cirrus delivered 459 SR-22s – up more than 100 units from the 355 it delivered in 2003. This far surpassed the Cessna 172 Skyhawk’s total of 236 units in 2004.
Almost all of the SR-22s went to individual operators – many of them first-time owners. The same was true of Cirrus’ other single-engine piston model- the SR-20. Cirrus reports that it has yet to make serious inroads into the training market- but it is aiming in that direction.
Cirrus Design’s total single engine deliveries numbered 553 in 2004. At that rate- the company is very close to its current production limit- so don’t expect to see huge gains in 2005. Cirrus’ backlog is strong- however- so their 2005 total should be at or perhaps a little above what was delivered in 2004. In the meantime- the company is looking at how to expand production to meet demand.
The next largest producer of piston airplanes is Diamond Aircraft- with 261 units delivered in 2004- up from 228 in 2003. With 203 deliveries in 2004- Diamond’s DA40 threatens to move Cessna’s former perennial production leader 172 Skyhawk into third place.
It is significant that two of the top three producers of piston airplanes in 2004 did not even exist 10 years ago. Clearly the piston market is evolving.
Other new players on the landscape include Lancair- which had 78 deliveries in 2004- Gippsland with 20- and Tiger with 19. All three of these new companies are delivering airplanes at a steady rate that suggests they are building to a disciplined manufacturing plan geared to meet a well-defined market. Gippsland’s deliveries were distributed 5 – 5 – 5 – 5 in 2004; Tiger’s 5 – 5 – 5 – 4- and Lancair’s 17 – 20 – 17 – 24.
These new companies share the renewed piston market with a number of traditional producers. These include- in the order of their 1994 piston production rates- Piper (163 units)- American Champion (94)- Raytheon (formerly Beech) (93)- Aviat (42)- Mooney (37)- and Maule (25).
Of these- Piper and Raytheon build the only twin-engine piston models.
Raytheon’s Beech Baron 58 became the largest selling piston twin in production in 2004 with 31 deliveries. Considering that the Baron’s average price tag is above $1 million- this fact is little short of amazing.
Piper turned out 21 piston twins last year – 10 Seneca Vs and 11 Seminoles.
Piper’s somewhat oddly distributed piston engine delivery rates (46 – 52 – 46 – 19) were- again- affected by the previously mentioned severe hurricane season. Even so- it seems unlikely that the relatively steady production rate of the first three quarters (3 – 3 – 3 for the Seneca- and 2 – 3 – 6 for the Seminole) would have resulted in either passing the Baron’s production in 2004.
Of the other companies building single engine airplanes- American Champion delivery rates were flat (26 – 24 – 20 – 24)- as were Maule’s (7 – 8 – 8 – 2) except- oddly- for the last quarter. Aviat does not report its quarterly deliveries to GAMA.
Mooney’s (8 – 5 – 4 – 20) were impacted by a change of ownership- and presumably benefited at least from fourth quarter buying spurred by accelerated depreciation rules.
Raytheon’s only single-engine model still available is the Beech Bonanza A-36- which experienced deliveries (7 – 15 – 17 – 23) in a pattern comparable with Raytheon’s other models – soft in the first quarter- with progressive growth- and more than a third of total sales coming in the fourth quarter.
Two other companies delivered piston airplanes in 2004: OMF recorded one Symphony in the first quarter- and Socata reported three Tampicos and two Trinidads- all in the first quarter. Socata subsequently announced it is exiting the piston market- while OMF is reportedly in bankruptcy and may never produce again.
It was also recently announced that another longtime supplier of piston singles- Commander Aircraft- is being liquidated.
So the piston market is as healthy as it has been in 20 years- but the mix of products are clearly evolving. New companies have become major players in the field while some others are fading away.
The economy is stimulating the market and the delivery patterns of many companies suggest that tax incentives are playing at least some role. In the coming year- the industry could well be headed for one of its best sales years yet. Stay tuned. We’ll let you know.