Strongest second quarter deliveries for 23 years.
Wow! What a quarter! The General Aviation Manufacturers’ Association just reported a total of 917 airplanes delivered in the second quarter of 2005. In terms of deliveries- that’s the strongest second quarter this industry has experienced since 1982. That’s right: The strongest second quarter for deliveries in 23 years! Pretty good- huh?
Billings for the quarter were just a whisper below $3.6 billion- and that’s just sensational- although- from a records standpoint- that’s not as spectacular as the delivery milestone. You only have to go back six months to find a stronger quarter ($3.86 billion in the fourth quarter of ’04) and only back to 2001 to find a stronger second quarter.
Still- $3.6 billion is one great quarter for general aviation sales. Clearly we are headed for a record year. At the current pace billings should top $14 billion this year. You read correctly - $14 billion. That’s the highest total ever in business aviation… by a HUGE 62 percent margin. The previous record was $8.6 billion- set in 2001. If we reach $14 billion – and I’m betting we will – we will have more than doubled the $6.8 billion billings total from last year. How else can you describe this other than ‘Incredible!’
That’s not the half of it. The delivery story is even better. If deliveries maintain the current pace for the next two quarters we will finish the year at 3-382- which would make it the best year for business aircraft sales since 1982.
It’s not hard to predict we will reach 3-500 this year. To do that we’ll need a third quarter equal to this quarter’s performance- and then a fourth quarter jump to 1-035 units. With bonus depreciation tax incentives- it’s not hard to imagine such a scenario. A more probable outcome however- would see the third quarter of this year coming in a little off the second quarter pace – maybe in the 850-unit range. Then it would take a 1-100-unit fourth quarter to get us to 3-500 airplanes for sale deliveries.
The biggest barrier to this happy vision is production capacity. Can the industry actually build 3-500 airplanes in a single year? I’m betting it can.
And what about the chances for surpassing the 1982 total? Not so good. The industry delivered 4-266 airplanes in 1982. To match that total we’d have to deliver 2-718 units over the next six months- or an average of 1-359 airplanes for sale per quarter. There just isn’t that much production capacity out there right now.
Moreover- the production capacity for a 4-300-delivery year isn’t likely to be forthcoming anytime soon. The people leading this industry today know all too well what can happen when their production capacity gets too far out ahead of the market. It’s expensive and painful to try to rein in production when the ramp is starting to fill up with unsold inventory. Look for production to build fairly slowly in response to growing demand.
Nonetheless- if the airplanes for sales market is out there the industry will respond- albeit somewhat cautiously. If things continue to go well- look for something close to a 4-000-unit year in 2006. Then- maybe in 2007 we will surpass the 1982 total- with airplane sales of about 4-300 units.
Forecasts right on the money?
These rosy predictions are consistent with the most respectable long-term industry forecasts. Last year at the National Business Aviation Association convention- Honeywell and Rolls-Royce both forecast solid growth throughout this decade- with corporate jet deliveries averaging 750 units a year.
This year we are on target for 650 jet deliveries – and that’s if sales aren’t any stronger than they have been for the first six months. A more optimistic scenario would have private jets for sale matching their second quarter total of 185 units. That would get us to a 695-unit total for jets sales in 2005. The optimistic forecasts of Honeywell and Rolls-Royce look like they could be right on the money.
The Honeywell and Rolls-Royce forecasts only look at the jet market. They don’t make any attempt to forecast the lighter end of aircraft sales business and general aviation where the turboprop aircraft for sale and the piston products mostly live. The central assumption- however- in forecasting improvement across the span of the industry’s products- is that the rising tide will eventually begin to lift all of the boats.
Review of the uneven tide
Regular readers of this column may recall that in my observations of the current recovery- it has been noticed that not all the boats are coming up with the tide. While billings and delivery totals are both growing nicely- for some companies- aircraft sales in 2005 were not keeping pace with the 2004 totals.
In this second quarter’s GAMA report- that situation looks like it is finally starting to change. Some segments of the aircraft for sale market – most notably the very high end and very low end of the jet market- are beginning to see renewed growth. Things are still not as good in these segments as in other parts of the market- but signs of improvement are beginning to show.
Looking at the jet aircraft market- we see a total of 185 aircraft delivered in the quarter just past- up from 140 units in the first three months of this year- for an increase of more than 32 percent. More impressive is the 49-percent gain over the second quarter a year ago- when just 124 business jets were sold. Clearly the jet airplane sales market is gaining strength quickly.
The top end of the jet market looks substantially stronger than it did in last quarter’s GAMA report- when no deliveries were reported by either Boeing or Airbus. In fact there hasn’t been a reported delivery of an airliner-class business jet in the GAMA statistics for more than a year.
In this quarter’s GAMA filing- however- Airbus reports one delivery in the quarter just past and- somewhat belatedly- three more from the first quarter that they haven’t told us about until now. We welcome Airbus to the family of companies reporting deliveries through GAMA.
The addition of Airbus to the GAMA fold will play a major role in setting new billings records. Boeing meanwhile has not recorded a BBJ sale since the first quarter of 2004. Look for this situation to change.
Taking a step down the business jet category to the simply large business jets of Gulfstream and Bombardier- we see an aircraft for sale market that is performing very evenly and very solidly. Gulfstream delivered 21 aircraft in the second quarter- up one from its first quarter total of 20. Gulfstream’s deliveries have been very consistent for more than a year- with totals of 20 or 21 units being reported every quarter. Bombardier’s high-end products- the Global Express and CL 850- 870 and 890 are similarly consistent at two units among each series per quarter this year. For Global Express this is a somewhat slower pace than last year- when a total of 20 units were delivered over the year. The CL series is new this year. Bombardier airplane sales in the remainder of the markets it serves are up quite sharply from a year ago- however. As a result Bombardier delivered a total of 45 jets in the second quarter of this year- up from 27 a year ago (second quarter). Billings for Bombardier for the first half of the year are up by more than $500 million over a year ago.
Elsewhere in the jet aircraft for sale market- Dassault’s deliveries are picking up- with 14 units delivered in the second quarter this year compared with just five in the first quarter. The new Embraer Legacy Executive- meantime- is also well ahead of last year’s pace- reporting six units for the first half- compared with three a year ago.
Cessna- the traditional leader in business jet sales by unit volume- had a huge second quarter with 65 jet deliveries- up 22 percent from the first quarter when it delivered 53. More remarkable- the second quarter of Cessna jet sales were up 95 percent over the second quarter in 2004. Cessna CJ for sale series- which had been under-performing the market until recently- doubled in sales from a year ago- up from 11 units in last year’s second quarter to 22 this year. Raytheon’s jet sales showed similar strong improvement- on both a quarter-to-quarter basis as well as over the past year. For the quarter- Raytheon reported 35 jet deliveries compared with the 13 jets it delivered in the first quarter. Compared with a year ago- Raytheon’s second quarter jet sales were up 25 percent- from 28 units to 35. About the only jet maker with no good news to celebrate was AvCraft- which delivered no airplanes in the second quarter and is reportedly on the verge of financial collapse.
The turboprop aircraft for sale market
The turboprop market also enjoyed good gains. Turboprop deliveries for the second quarter were up more than 47 percent from the first quarter- with 84 aircraft delivered compared with 57 in the first three months of the year. Compared with the second quarter a year ago- turboprop deliveries increased just over 10 percent- up from 76 units in 2004 to 84 in 2005.
With aircraft sales increasing- some of the market anomalies that come about because of low delivery numbers are now disappearing- and the traditional leaders are reasserting themselves into the normally expected places.
Raytheon regained its perennial top position in the turboprop market- with deliveries of 27 of its twin engine King Air models. Meantime- Cessna- which for one Camelot-like shining moment in the first quarter held the overall market lead in the turboprop deliveries- settled back into second place this quarter with 23 Caravans delivered. Pilatus has third place in turboprop deliveries with 20- up sharply from the nine units it delivered in the first three months of the year.
Unlike last quarter- when total turboprop deliveries were up- but half the turboprop makers failed to record aircraft sales gains- this quarter’s success was spread more widely through the market. Both Socata and Piaggio showed improvement over the first quarter- Socata being up 50 percent from four units to six while Piaggio recorded a 100-percent gain- from one unit to two.
The only lagging turboprop maker was Piper- but only by a single unit. Piper deliveries of its single-engine Meridian were down from seven units in the first quarter to six in the second. Piper has been delivering Meridians at this rate – about 26 airplanes a year – for some time so this may reflect production capacity more than any actual weakness for Piper’s product in the market.
...And the pistons…
It was in the piston airplane for sale market that the really exciting news came this quarter. Piston deliveries were up more than 200 units over the first quarter of this year- and up a total 269 units over the same quarter a year ago. Again- wow! This market recovery thing is starting to look very- very real.
Leading the piston charge was Cessna- with delivery of 199 piston-powered airplanes in the second quarter- all of them singles. For the last couple of years Cessna’s traditional dominance in the single-engine market has been threatened by Cirrus Design.
In fact in the first quarter of this year Cirrus opened up a fairly significant lead over Cessna in the race for most single piston airplane deliveries- by a margin of 143 to 102. Cessna has said that it has no plans of ceding the single engine aircraft market to Cirrus- and this quarter’s deliveries represent a full broadside by Cessna in this single-engine war- putting Cessna back in the lead for the year at 301 units to 295. Look for this battle to rage all year- and probably continue well into the future. Cirrus incidentally had a good quarter- with 152 deliveries.
Cessna and Cirrus are not the only companies scoring good sales in the piston category this year though. Diamond Aircraft had 96 deliveries for the quarter- including 20 of its new diesel-powered twin-engine DA42 Twin Star. This airplane is fueling the first real surge in twin engine airplanes for sale in quite a while. Total piston twin deliveries for this year is 55 airplanes – beating the 52 unit total the industry delivered in all of last year.
Piper delivered 17 piston twins this quarter and Raytheon contributed six more. Everywhere you look- the aircraft sales market is looking up.
Of the single market- Piper delivered 56 this quarter- for a total of 73 overall airplane sales for the quarter - a 97-percent increase over its first quarter total of 37. It appears that Piper is recovering from the hurricane damage that cut into its production capacity last fall.
Others scoring well with piston aircraft sales this quarter included Columbia Aircraft (formerly Lancair)- which delivered 35 airplanes- up 40-percent from the 25 it recorded in the first quarter; American Champion with 27- up 42 percent from the 19 it had in the first quarter; and Mooney- which had 23- up 15 percent from its first quarter total of 20. Raytheon delivered 19 of its venerable Bonanza models- up 111 percent from the nine it delivered in the first quarter. Meantime- Maule had seven deliveries- up one unit from the six it sold in the first quarter.
Gippsland and Tiger each matched their first quarter output in the second- the former with five deliveries and the latter with four. Socata- which has vacated the single piston aircraft sales market but is apparently still selling from inventory- recorded four piston sales- up one from the first quarter when it delivered three.
And if you are truly looking for evidence of widespread recovery- you can be inspired by Symphony- struggling out of bankruptcy to deliver four airplanes in this remarkable second quarter. For Symphony (formerly OMF) it was their first delivery since the first quarter of 2004.
Everywhere you look- it’s great news!