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Market continues to move from strength to strength.

Mike Potts   |   1st December 2005
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Mike Potts Mike Potts

Mike Potts is a writer and consultant who has been involved in aviation for more than 30 years....
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Market continues to move from strength to strength.

The almost unbelievably good news continues! The General Aviation Manufacturers Association (GAMA) third quarter aircraft sales results show an industry that is continuing to perform at a record pace: A total of 2-423 airplanes delivered over the first three quarters- with billings totaling around $10.3 billion.

Deliveries are up substantially in every category – as has been the story throughout this year. Business jets are up 30.4 percent over the same nine-month period a year ago. Turboprop sales are up 17.5 percent- and piston airplane sales are up 25.6 percent. Total shipments are up 25.7 percent and billings are 28.9 percent ahead of last year.

There’s no doubt about it – this is going to be the strongest year for unit deliveries since 1982. It is already the strongest year for billings in the industry’s history. The old record of $8.6 billion- set in 2001- was surpassed sometime in the middle of this year’s third quarter.

You read correctly! We are already $1.7 billion ahead of the previous most successful year in the history of business aircraft sales and we still have a full quarter to go. So the only real question becomes 'What will the new record be?'

Three months ago in World Aircraft Sales Magazine- I speculated that a $14 billion year might be within reach. At the time I thought that was a pretty aggressive prediction. Today it actually looks conservative.

If this year’s fourth quarter billings match last year’s- we will finish the year at $14.2 billion… what’s the likelihood that will happen? From here- it looks pretty good. Consider these facts: Historically- the fourth quarter is the strongest for corporate aircraft sales. Some years more than a third of the industry’s billings and deliveries come in the fourth quarter.

Add to that the fact that every quarter of this year has been more than 20 percent ahead of last year. If that trend continues- we could actually reach $15 billion in billings for 2005. That would be a gain of more than 73 percent over the previous most successful year in the history of this industry. Not bad- huh?

And what about deliveries? I’m still predicting we will reach 3-500 units this year- but that forecast is not a ‘slam-dunk’. To achieve 3-500 units- the aircraft sales industry will need to have delivered 1-077 airplane sales over the final quarter of 2005.

The biggest impediment to reaching this milestone will be industry production capacity. Can we turn out nearly 1-100 airplanes in three months? It could be tough. There was a time when 1-100 airplanes in a quarter would have been a modest goal – but that was a very long time ago.

Between the years 1955 and 1982 the industry routinely produced more than 1-200 airplanes a quarter. It did that every year during that period. It didn’t miss a single one. Some of you may even recall that in 1978 the industry averaged almost 1-500 airplanes a month.

But since 1982- production totals have plummeted. There were some years in the early 1990s when total annual production didn’t reach 1-100 units. Production capacity was pared back to match demand- and has only been increased cautiously in recent years.

Forecasts foretold bizjet boom

The boom we’re experiencing this year was- of course- to some extent predicted. Both Honeywell and Rolls-Royce in their annual forecasts last year said we should look for business jet deliveries in the 750-unit range before the end of the decade.

We will probably top 700 jet deliveries this year- and 750 might be in reach with a very strong fourth quarter – if the industry can build that many airplanes. Most of the jet makers- however- are saying that the majority of their production is already committed to retail buyers- and has been for some time. With long lead times for major components such as engines- it just hasn’t been possible for the industry to spool up production rates as quickly as demand has accelerated in this remarkable recovery.

Honeywell and Rolls-Royce don’t attempt to forecast the turboprop or piston markets- however- and that’s where much of the growth in deliveries will have to come from if we are to reach 3-500 units this year. There weren’t any respected forecasting organizations telling plane makers to gear up for a record production year in the piston and turboprop categories.

On the other hand- the bonus depreciation provisions in the U.S. tax laws are scheduled to expire at the end of this month- so there will have been a significant number of buyers wanting to close aircraft sales before December 31 and a terrific incentive for airplane manufacturers to satisfy those customers.

The bonus depreciation factor will play a major role in pushing the industry toward a 750-jet sales milestone as well as a 3-500-unit overall delivery record.

Ironically- it would have been easier to hit some of these targets in previous years than it will be in 2005. That’s because the U.S. Internal Revenue Service has cracked down hard on a prior practice by some airplane manufacturers of selling and counting as delivered some airplanes that were still on the assembly line.

This got so bad at one point that some airplanes counted as year-end deliveries were little more than piles of aluminum subassemblies with serial numbers attached when December 31 rolled around. Completion of some of these phantom airplanes reportedly didn’t actually occur until as late as the second quarter of the following year. You can’t get away with that anymore.

So it will be very interesting to see whether the industry has the production capacity to deliver 3-500 airplanes this year. There appears to be plenty of customers ready to buy these airplanes- if only we can get them built.

Third quarter specifics

Looking at the specifics of the third quarter numbers- we see some interesting trends: For more than a year since we have been reporting on this emerging recovery- we have been observing the unevenness of the sales growth. While some categories (mid-size business jet sales- for example) have been doing phenomenally well- others still appear to be mired in recession.

The most notable example of under-performing the recovery was in the ultra-large business jet category- where Boeing had reported the sale of only one BBJ in the past five quarters- and none during the current calendar year. This past quarter- however- saw Boeing break out of the doldrums with three deliveries worth more than $133 million.

Airbus also had an excellent quarter- reporting two business jet sales configured versions of its A319- 320- 321 series worth $100 million. That’s five airliner-class business jets worth almost a quarter of a billion dollars delivered in a single quarter. Clearly prosperity has reached the ultra-large business jet category.

Thus- the sale of five airliner-class business jets was a major contributor to making the third quarter of 2005 the second most successful aircraft sales quarter (based on dollar volume) in the history of business aviation ($3-855-326-168).

The most successful quarter in the industry’s history ($3-860-421-355) occurred last year- in the fourth quarter of 2004. Interestingly- the difference was just $5-095-187- or approximately the price of one light private jet or one heavy turboprop.

Look for the upcoming quarter to be the best in business aviation history- possibly in the $4.6 billion range.

Business Jets For Sale

The traditional business jet manufacturers continue to do very well- as you would expect in a market that is 119 units ahead of last year’s nine-month total – 510 units this year compared with 391 in 2004.

Cessna aircraft continued to lead the pack- as it has all year- with 62 jet deliveries- (there are nine models in Cessna’s lineup now). Interestingly- the lowest selling model in the past quarter was the least expensive – the CJ1. The best selling Cessna citation jet was the mid-size Citation XLS jet aircraft for sale- with 16- followed closely by the even larger mid-size Sovereign model with 12 units.

Also recording 12 units was the new Citation CJ3 business jet Cessna model. Cessna’s jet production is reportedly committed to retail customers well into next year.

Gulfstream continued to be a company reporting high-dollar sales. The 24 Gulfstreams delivered in the third quarter brought in a total of $906 million. In fact if trends continue- Gulfstream sales total for 2005 will exceed the total sales reported by the entire general aviation industry in 1995- which was a record year for the industry.

Also hitting high-dollar sales- Bombardier delivered 48 airplanes in the quarter- up from 45 in the second quarter of this year and 15 units ahead of its third quarter pace in 2004. Raytheon reported delivery of 29 jets- including 13 Hawker 800 XP jet aircraft for sale- 14 Hawker 400XPs (formerly Beechjets)- and just two Premier I models. The light end of the jet sales market continues to be the weakest segment in the turbine market- and the lone portion of the industry still waiting to be ignited by the recovery.

Sales of Embraer’s new Legacy Executive- based on its highly successful regional airliners- continued to rise- with six units delivered in the past quarter. With 12 units reported this year so far- it now seems almost certain that Legacy Executive sales for 2005 will exceed last year’s total of 13 units.

Dassault’s deliveries continued to lag behind last year’s totals- but the reasons are entirely production related. Look for Falcon deliveries to begin increasing sharply as the company moves into next year with a strong airplane sales performance.

In summary- then- the jet sales market is doing very nicely and appears to be headed toward a 750-unit year. It could occur as early as this year- but if not- it will almost certainly happen in 2006- just as predicted by Honeywell and Rolls-Royce in their forecasts last year.

Turboprop Aircraft For Sale

The lower end of the aircraft sales market is doing very nicely- too. In the turboprop segment- traditional market leader Raytheon is once again comfortably in the lead- with 27 of its King Air models delivered in the past quarter.

Second place in the turboprop market in the third quarter of 2005 was shared between Cessna and Pilatus- both with 19 units reported. Then came Piper with 11 deliveries- followed by Socata with nine. Interestingly- all of these airplane sales are single-engine models. The single engine turboprop has come to dominate a market that 20 years ago was made up almost exclusively of twin-engine products.

Piaggio- with two units of its Avanti P180- delivered the only twin-engine turboprops reported during the past quarter. With the exception of Piaggio- all of these turboprop manufacturers are on pace with or comfortably ahead of last year’s delivery totals.

Single Engine Airplanes For Sale 

The piston market also enjoyed good growth- coming in to the fourth quarter of this year more than 25 percent ahead of where it was in 2004.

Last year there was a tight race between Cessna and Cirrus Design to see which company could claim the honor of being the world’s leading builder of single engine piston-powered airplanes. This year Cirrus opened a strong early lead in the first quarter (143 to 102)- but Cessna recovered in the second quarter to narrowly reclaim the top spot by a margin of 301 to 295.

This quarter- however- the Cessna production machine exerted its dominance- turning out 198 piston singles. Cirrus- reportedly operating at close to its production capacity- delivered 152 of its SR20- SR22 and SRV models – the same number it delivered in the second quarter of this year. So it looks like Cessna is going to be the single-engine production champion this year.

Solidly in third place for single engine production is Diamond Aircraft- with 241 airplanes delivered during the first nine months of this year. It is interesting to note that just seven years ago- in 1998- neither Cirrus nor Diamond produced a certified airplane. Now they are among the market leaders.

By contrast- Raytheon and Socata - once market leaders in piston singles - did poorly in the past quarter. Raytheon delivered just four of its classic Bonanza models- while Socata- with piston production halted and sales coming from left over inventory- reported just one delivery.

Elsewhere in the piston market- the news was better. Piper’s piston deliveries totaled 41 airplanes for the past quarter- fully 32 percent ahead of its quarterly total in the previous year.

American Champion reported 25 deliveries and could top the 100 mark for the year with a good fourth quarter. Columbia sales were up 14 percent from the second quarter- with 40 units reported in the past three months. This brought total Columbia aircraft sales for the year to 100 airplanes.

Mooney continued to perform well beyond its 2004 level- with 23 airplanes delivered in the third quarter of 2005 compared with just four in the third quarter a year ago.

Mooney’s total deliveries for the year have now reached 66 units – a 288 percent increase over the 17 airplanes the company had delivered as of this time last year.

Maule delivered 10 airplanes in the past quarter- with year-to-date sales running at about the same level as last year. Maule’s fourth quarter last year was unusually weak- with only three airplanes reported. It seems likely then- that Maule will be among the companies recording overall gains when the final numbers for 2005 are reported.

Gippsland Aeronautics- makers of the GA8 Airvan- reported delivery of seven units for the third quarter- a 40-percent increase over the five units it delivered in each of the previous two quarters. Tiger continues to turn out a steady four airplanes per quarter- a rate they have maintained all this year.

Symphony Aircraft- which restarted production in the second quarter as it battles back from bankruptcy- reported three deliveries in the third quarter. Symphony’s total for the year now stands at seven.

While the numbers of these smaller companies may seem insignificant- collectively they are important to the industry and its overall health.

If the industry is to reach the 3-500-unit milestone this year- the small increases in production by the Gippslands and the Symphonys of this world will play a critical role in reaching the goal.

Twin Engine Airplanes For Sale 

The final category reported by GAMA is the twin piston aircraft. Perhaps because the numbers are small- GAMA did not choose to highlight the piston twin market in its quarterly delivery report news release.

Nonetheless- on a pure percentage basis the piston twin category has experienced far stronger growth than any of the other categories.

Twin piston airplane sales for 2005 were more than 117 percent ahead of 2004. That’s more than four times greater than the overall market average- and nearly three times faster than the next segment (business jets- with 30.4 percent growth).

Leading this mercurial rise in the twin engine airline market – and leading by an improbably wide margin – is a somewhat unlikely candidate: the diesel powered Diamond DA42 Twin Star.

With 18 deliveries in the past three months- the Twin Star has captured 60 percent of the piston twin market – at least for this quarter. While the numbers are not large- the Twin Star’s sales performance suggests that the market is ready to reward the manufacturer who tries something new and different. The success of Diamond and Cirrus in the single engine market would point to the same conclusion.

Meanwhile- the remaining 40 percent of the piston twin market was evenly divided among three other competitors.

Two Piper piston twins- the Piper Seneca V twin piston engine and the Seminole- each recorded four sales each- while the venerable Beech Baron 58 twin piston engine aircraft for sale was also sold to four customers during the third quarter of 2005.

With all of the market segments rising and strong forecasts for continued good sales on the horizon- this would indeed appear to be a good time to be in the general aviation manufacturing business.

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