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The tough year marches onward. The General Aviation Manufacturers Association has released its Third-Quarter 2009 Shipment Report and the market slump that began about a year ago continues to unfold- with shipments down 46.8 percent compared with last year- and billings down 23.5 percent.

Mike Potts   |   1st December 2009
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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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GAMA Third Quarter 2009 Shipment Analysis
There’s more to it than just being “way down from last year”...

The tough year marches onward. The General Aviation Manufacturers Association has released its Third-Quarter 2009 Shipment Report and the market slump that began about a year ago continues to unfold- with shipments down 46.8 percent compared with last year- and billings down 23.5 percent.

In raw numbers- there were 1-587 business aviation aircraft delivered in the first nine months of 2009- against 2-982 in the same period for 2008. This year’s billings stand at $13.771 billion. In 2008 the total was $17.995 billion.

Following a pattern that is now well established- the piston market remains the most heavily impacted- down 58.7 percent. In unit numbers that translates to 679 deliveries- compared with 1-646 in the first nine months of 2008.

Business jets are down 37.8 percent- at 615 units- compared with 988 a year ago. The turboprop segment continues to do comparatively well- off just 15.8 percent. A total of 293 turboprops were delivered in the first nine months of 2009- compared with 348 last year.

The good news in all of this is that the market seems to be finding something of a bottom. The jet segment is settling into a year that looks remarkably like 2006- while the turboprops are performing more like they did in 2007. The piston market… well- it’s at a 13-year low. Piston airplanes are selling better than in 1996 but nowhere near the rate achieved in 1997. I first observed and commented on this trend last quarter. Its continuation offers some grounds for optimism- and provides a basis for analyzing the market in more positive terms than just saying “we’re way down from last year.”

The total jet market in 2006 amounted to 886 aircraft. It was the third best year in the history of business jet manufacturing- so it wasn’t so long ago that we were thinking these numbers were pretty good. At the time- in fact- it was an all-time record.

Comparing today’s jet market with three years ago- we see that during the first quarter of 2006 there were 188 jets delivered- compared to 191 this year. In the second quarter the market reached 226 units- against 223 this year- so at the mid-year point the total for both years was an identical 414 deliveries.

Going into the third quarter of 2006- the market dipped a little – just as it did this year. The third quarter total for 2006 was 214 business jets- compared with 201 this year – that’s a difference of just 13 units- both for the quarter and the entire year. Now the key issue is: What will happen next?

In the fourth quarter of 2006 the market experienced a strong surge- as it has in every year in the modern era of business aircraft sales- dating back to the early 1960s and perhaps longer. Every year- that is- except last year.

In 2008 there was no discernable surge. Business jet deliveries reached 325 units in the fourth quarter of the year- which was exactly the same number delivered in the third quarter of the year. Nothing like that had ever happened before in the sales history of this industry.

The best delivery quarter for business jets in 2008 actually came in the second quarter- when there were 366 jet deliveries. As a fraction of the total year’s deliveries- the fourth quarter amounted to just 24.7 percent of the 1-313 business jets sold. In a normal year that number would have been around 30 percent.

In 2006- which was a typical year- the 258 business jets delivered in the fourth quarter represented 29.12 percent of the 886 units total for the whole year.

The surge occurs every year for solid reasons: In the United States- tax laws encourage fourth quarter buying of large assets like aircraft. A few years back- when 70 percent of business aircraft buyers came from the U.S.- the surge could be even more pronounced than it is today- where more than 50 percent of aircraft buyers live elsewhere in the world.

In addition- there is a natural tendency in all countries and cultures to spend budgeted money before the end of the year to avoid losing it. In reality- the surge probably occurred in the business aviation market last year- too- even though the numbers don’t reflect it.

Without the surge- last year’s fourth quarter numbers probably would have been about 20-percent lower than what we actually saw. But the key question regarding the current market is: Will there be a surge during the fourth quarter of 2009- and if there is- how big will it be?

I’m expecting a surge- and I think it will cause fourth quarter sales to be about 30 percent of the 2009 total. The reason I’m expecting that is because the market factors producing the surge are not really affected by a falling market.

So what are total business aircraft sales likely to be for the full year in 2009? If the jet market continues to perform like it did in 2006- we should finish the year in the 850- 875-unit range. If we reach 900 units- it will be a sign the market is picking up.

On the other hand- if no surge develops in the fourth quarter- the jet market will probably total 800 to 820 aircraft for 2009. If the final number is much less than 800 units- that would be a sign the market has not found the bottom- and that 2010 will be another tough year.

The turboprop market is in a similar situation- but the year they are re-living is 2007. In the first quarter of 2009 the turboprops were 10 units ahead of the 2007 pace- 89 to 79. By mid-year the gap was down to just five units – 191 this year compared with 186 two years ago. Now the 2009 total has fallen behind a little- at 293 units against 300 in 2007.

The question of whether there will be a surge is huge for the turboprop market if it is to keep pace with 2007. That year the surge drove fourth quarter sales to 159 units – nearly 35 percent of the 459 turboprops sold in 2007. Will we see a comparable surge this year? That’s a lot to ask for in a down market.

I’m expecting a surge in turboprops- but less dramatic than in 2007- with the fourth quarter perhaps equaling 30 percent of the year’s total sales- and final turboprop deliveries reaching about 420 to 425 units. A surge matching what happened in 2007 would give us a turboprop total around 450 units for the year. If total turboprop sales fall below 400- again it will be a sign that the market is still sinking.

With no surge we would be looking at a total market of about 900 airplanes this year. But the piston market has been falling since 2006- so the drop can’t be blamed entirely on the factors that have caused the turboprop and jet markets to falter.

Last year there was not only no surge in piston deliveries- but the market fell during the fourth quarter. The 473 piston aircraft delivered in the last three months of 2008 represented barely 22.3 percent of the 2-119 piston- powered aircraft sold. A similar performance this year would put the total market in the range of 870 to 880 units. If that happens- the market is still in decline. That would be particularly bad news for those who subscribe to the theory that signs of recovery will appear first in the piston market.

It also raises the possibility that business jet sales could exceed piston sales for the year – an idea that was previously unthinkable- but actually occurred during the first quarter of 2009 and could happen for the year if jet sales are starting to rebound while piston sales continue to fall. Of course- that would undercut the theory that piston sales will lead recovery in the other markets. But- again- who knows?

Unlike the jet and turboprop markets- there is no comparable year that appears to mirror what is happening in the piston market today. The closest recent example was 1996 when the market was at 801 units and growing in the wake of aviation tort reform laws in the U.S. that made piston aircraft production feasible for many manufacturers again.

By 1997 piston sales were up to 1-123 units and headed higher still. In a worst case scenario we should finish this year significantly better than 1996. Even a best-case scenario won’t approach the 1997 total.

Realistically- I think we’ll see a fairly traditional surge in the piston market during the fourth quarter of 2009- driven by tax incentives and year-end budget pressure that will produce total sales into the 965-975-unit range. A finish above 1-000 units could be interpreted as the beginnings of a recovery in the piston market that would perhaps herald coming upturns in turboprops and jets in the near future.

Looking at actual market performance for the last quarter and the first nine months of 2009- we see a somewhat uneven situation that is generally down- but not without high points.

In the jet market- three of the nine companies reporting deliveries actually had better numbers this year than last. These included Embraer- which benefited from the introduction of a new model; Emivest (nee Sino- Swearingen) which delivered an airplane for the first time since the third quarter of 2007; and Dassault Falcon Jet- which simply did better in spite of the down market.

The overall jet market performance was down 37.8 percent- but this figure is badly skewed by the numbers from Eclipse- which had 43 deliveries in the third quarter of 2008-but was out of business by the end of the year.

The usual suspects were in their typical positions in the jet market- Bombardier leading in billings at $1.015bn for the quarter and $3.948bn for the first nine months. Cessna led in deliveries with 68 units for the quarter and 221 for the year-to-date.

Bombardier was second in deliveries- with 36 for the quarter and 140 for the year so far - followed in third place by Gulfstream- with 17 and 74 respectively- and Hawker-Beechcraft with 25 and 64 in fourth spot.

In billings- Gulfstream was second with $768 million for the quarter and $3.054 billion for the year. This quarter was the first time Gulfstream billings had been below $1 billion for a quarter since the first three months of 2006. Dassault was third- with $974 million for the quarter and $2 billion for the year so far.

As mentioned- Dassault’s deliveries were ahead of last year for both the quarter and the year-to-date. The company reported delivery of 25 airplanes this quarter- compared with 14 a year ago. The company’s nine-month delivery total was 51 units- up from 48 last year.

Embraer’s total was sharply higher- with 27 aircraft in the quarter and 56 for the year- compared with 10 and 26 last year- respectively. Embraer’s increase was driven by the company’s introduction of its new Phenom 100- and was enough to propel the company to fifth place in business jet deliveries- ahead of Dassault which had previously occupied fifth place for the past several years.

With another new aircraft scheduled to enter the market late this year- Embraer could easily occupy the third position in business jet deliveries by this time next year. At the high end of the jet market- Airbus continues to lead Boeing in airliner-based jet deliveries by five to three units for the year - although the two companies were tied in deliveries for the quarter at one unit each.

Like the jet market- the turboprop segment showed mixed results. Three of the eight manufacturers reporting turboprop deliveries were ahead of their nine-month totals from a year ago.

Hawker Beechcraft continued to lead the turboprop segment- but its margin is down significantly from a year ago and it wouldn’t take much for either second-placed Cessna or third-placed Pilatus to move into first place. Hawker Beechcraft reported delivery of 74 units for the first nine months- and 23 for the third quarter- down from a year ago when its totals were 110 and 31 respectively.

Cessna recorded 68 turboprop deliveries- up two units from the 66 it delivered in the first nine months of 2008. For the quarter Cessna was also up two units at 27- compared with 25 a year ago. Pilatus- meantime- followed closely at 64 for the year-to-date- up from 61 a year ago- although its quarterly total of 20 was down compared with the 26 it sold in the third quarter last year.

Next was Socata with 23 for the year-to-date- narrowly edging out Piper- which had 22 turboprop deliveries. Both companies reported eight deliveries for the quarter. Piaggio reported delivery of six aircraft for the quarter- bringing its year-to-date total to 17.

Quest was among the companies having a better year this year than last- with 16 deliveries year-to-date and seven for the quarter. Its Kodiak 100 model completed its first full year of production last year- so this sales improvement is not entirely unexpected- but is still worthy of note in the down market.

Rounding out the turboprop market was Pacific Aerospace- which delivered three units for the quarter and nine for the year-to-date.

While the turboprop market is doing well overall- and will certainly record either the third or fourth best year in the segment’s history since 1981- the category is not without problems. The market for traditional twin-engine business turboprops is softer than it has been at any time in the last three decades with the exception of the three years following 9/11.

Whether this year turns out to be the third best or the fourth best since 1981 will depend entirely on whether there is a fourth quarter sales surge in the turboprop segment. Currently the third best year for turboprops was 2006- when there were 412 delivered. The top year was 2008- with 535. In 2007- the total was 459.

The piston category- meantime- has been devastated. Leading piston manufacturer Cessna has delivered just 223 piston aircraft this year. That’s just five more than the 218 it delivered in the third quarter alone last year. The situation at number two- Cirrus- is about the same. To date this year it’s delivered 189 aircraft. Last year it had delivered 186 in just the third quarter.

Not surprisingly in a segment so hard hit- none of the piston manufacturers is even close to last year’s totals. Among the ‘leading’ pack- Diamond has 93 singles year-to-date- down from 196 last year. Piper has 39- down from 122. Hawker Beechcraft reported 22- down from 44- and American Champion had 20- down from 42.

The piston twin market has also been ravaged in this down market- with 52 deliveries for the year to date- and 23 for the quarter. That’s a reduction of almost 65 percent compared with 148 for the first nine months of 2008- although just 43.9 percent from the quarterly total of 41 a year ago.

As we close out a very difficult year- it remains to be seen whether the industry has found the bottom of the market and can start back upward in the year ahead. In its recent forecast- Honeywell has predicted that next year will be even tougher- with a further market drop of 10 to 15 percent forecast.

The results of the next quarter should tell us a lot about what lies immediately ahead. If we experience a traditional fourth-quarter sales surge- the year will finish ahead of what Honeywell is predicting- and this could represent the market bottom from which recovery might start to happen. If there is no surge- look for another down year in 2010.

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