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Just three weeks after a really upbeat NBAA convention- complete with multiple manufacturers announcing new programs and halls filled with apparently enthused attendees- along came a GAMA Report that redefined doom and gloom.

Mike Potts   |   1st December 2010
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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 2010 Shipment Analysis
Surprise dip- but what does it mean?

Just three weeks after a really upbeat NBAA convention- complete with multiple manufacturers announcing new programs and halls filled with apparently enthused attendees- along came a GAMA Report that redefined doom and gloom.

Rather than a third quarter looking very much like the second – which was up by a fair margin from a miserable first quarter – we were presented with another downturn- and a fairly sharp one at that. All three categories - pistons- turboprops and jets - are down by a greater percentage than they were last quarter. In other words- we now appear to be losing ground faster than we were before.

To add insult to injury- for the first time this year billings are down- as well as unit deliveries. Compared with last year- billings fell 2.5 percent- from $13.82 billion to $13.47 billion. This is an indication that market softness is climbing into the realm of the more expensive aircraft- which (up until now) had been affected less severely than the lower priced models.

In raw numbers- shipments for the first nine months of 2010 were down 14.5 percent from a year ago- at 1-357 units compared with 1-588 in 2009. Turboprops suffered the biggest decline- down 20.8 percent at 232 units. This was down from 293 units in the same period last year. Jets were off almost as much- with a 20.3 percent decline. That represented a 125-unit drop- from 616 to 491. Suddenly Honeywell’s prediction that jet deliveries will be under 700 units this year begins to look like it might be on target after all.

The piston-powered category was off by the smallest percentage for the year – 6.6 percent- or 634 units compared with 679 last year. This is hardly good news- however. In the second quarter of this year piston deliveries were actually up slightly from the 2009 second quarter total (259 compared with 255)- after being off 7.2 percent (166 against 179) in the first quarter.

This year’s second quarter piston performance represented a potential indication of some solidifying in the piston market that I had thought might be signaling an overall industry-wide turnaround. It now looks like this potential bright spot may have been a false dawn- and not the beginning of an upward trend we are all hoping for.

In announcing these disappointing third-quarter results- GAMA’s President and CEO Pete Bunce was surprisingly upbeat- saying that “despite another drop in total shipments and billings- we [GAMA] believe that the longer-term outlook for general aviation is positive. Our industry is coming off of a successful NBAA convention [he noticed- too!] and we are encouraged by the sales announcements and a more positive outlook overall as discretionary spending starts to pick back up on a global level.”

There’s more than just a positive feeling at NBAA to support the notion that our industry should be poised for an upturn. Officially the recession in the U.S. that provoked our market collapse has been over for a year now. It’s true that unemployment in the U.S. is still stubbornly high by American standards- but for the most part the people who are unemployed are not the people who typically buy airplanes. Elsewhere the economic news is more encouraging: corporate profits are up and the stock market has seen double digit growth this year.

Across the U.S.- rail and trucking shipments continue upward – a certain indicator of solid bedrock economic activity and growth. The U.S. Government recently approved a new bonus depreciation tax incentive that should drive fourth quarter sales- and the newly-elected Republican U.S. Congress can be expected to stem what has come to be seen as an anti-business bias in Washington- D.C. All of these factors should help to ensure that this third-quarter report will be the most depressing GAMA shipment news that we’ll have to endure for a while.

Taking a closer look at the numbers- there isn’t too much to be happy about in the third-quarter GAMA numbers. In the jet market- six of the nine manufacturers reported lower year-to-date delivery numbers than a year ago- and only one of the nine had better results than in the previous quarter.

Looking at just the third quarter jet delivery numbers- a very interesting (and unusual) pattern emerges. The top five companies- based on unit deliveries- are separated by a margin of only five airplanes. Cessna continues to lead- but only just- with 26 units delivered. A year ago in the third quarter it made 68 and two years ago 123 deliveries – so you can see how far Cessna has fallen in this current downturn.

Immediately behind Cessna was Bombardier with 25 deliveries- followed by Embraer with 24- then Gulfstream with 23 and Dassault with 22. Historically the business jet market has never seen a quarter like this one.

Rating the companies by billings rather than unit deliveries presents a different picture- albeit one that is just as strange. For the first time in recent years- none of the companies had billings in excess of $1 billion for the quarter. Last quarter- three were above the $1 billion mark.

This quarter’s billings leader was… Dassault- with $920 million! This is an unfamiliar position for the French company (typically in fourth or fifth place in terms of billings- usually trailing Bombardier- Gulfstream and Cessna - sometimes Hawker Beechcraft too). Dassault’s sales performance has been quite unusual during this recession. Where other manufacturers have seen sales plummet - or in some cases struggled to match last year’s totals - Dassault has recorded a series of significant increases- sometimes in the 60-percent range.

Dassault didn’t fare quite as well in this ugly third quarter. Its 22 unit delivery total was three aircraft off its 3Q 2009 pace (25 deliveries)- and six units behind the 28 jets it delivered in the second quarter of this year. But compared with the other jet builders- Dassault captured more sales dollars this quarter than anyone else.

Gulfstream was second in billings for the quarter with $902.6 million- followed by traditional industry leader Bombardier with $854.3 million - down from the $1.16 billion Bombardier reported last quarter. Cessna’s jet billings aren’t separated from its piston and turboprop sales- so it’s impossible to place them precisely- but with total company billings of $286.4 million for the quarter it’s reasonable to assume Cessna is in fourth place- ahead of Embraer which reported $207.3 million in jet sales.

After the tight bunching of unit sales among the top-selling jet makers- there was a wider gap among the companies reporting low unit sales numbers. Hawker Beechcraft delivered 10 jets in the third quarter- down three units from the 13 it made in the second quarter and down 15 from the 25 delivered in the third quarter a year ago. Hawker Beechcraft billings totaled $264.7 million.

In the bizliner category- Airbus and Boeing continued to operate in a world largely separated from everyone else’s reality. Both companies reported three deliveries for the quarter. In Boeing’s case that was a gain of two units over last quarter – making it the only jet maker to report a quarter-to-quarter increase. Airbus matched its second quarter total. Both companies were two units above what they reported in the third quarter of 2009. At least things were better somewhere.

Bringing up the rear in jet sales was Emivest- which failed to deliver any aircraft in spite of promises to do so. A few days before GAMA released its third-quarter numbers- Emivest sought Chapter 11 bankruptcy status – a move designed to position the company for sale to new investors. Emivest now concedes it will not deliver any aircraft this year.

The turboprop segment isn’t as roiled as the jet market – most of the usual suspects are still approximately in their expected positions – but with deliveries down 22.6 percent from the second quarter (from 97 to 75 units) the recession is hitting the turboprops hard.

Of eight manufacturers reporting turboprop deliveries- six were down from their year-to-date totals a year ago and two were up slightly. Comparing this quarter with the previous three months of this year shows a slightly better picture. Three of eight turboprop builders were ahead of last quarter- four were behind and one was even.

Hawker Beechcraft enjoyed the best quarterly turboprop sales with 20- although on a year-to-date basis trails Cessna by a margin of 54 to 71. If current trends continue- Cessna will finish the year as the market leader for turboprops- de-throning Hawker Beechcraft which- along with its predecessor organizations (Raytheon Aircraft and Beech Aircraft)- has led this segment for the past 45 years.

Even as it threatens to unseat the longtime champion- Cessna finished only third in quarterly turboprop sales compared with the past quarter. In second place was Pilatus- reporting 18 deliveries for the quarter (up five from the 13 it delivered in the previous three months). Pilatus’ year-to-date total of 43 airplanes was 21 units off its 2009 turboprop pace.

Cessna reported 15 turboprop deliveries- down sharply from the 37 it made last quarter- and also 12 units off the pace it set in the third quarter of 2009. Even so- Cessna is still three units ahead of its overall 2009 turboprop delivery pace- with 71 this year compared with 68 in 2009.

Everyone else in the turboprop market was in single digits for the quarter. Piper reported seven turboprop deliveries- bringing it to 15 for the year- but that was still below the 22 units Piper had to its name year-to-date in 2009. For Piper- however- this quarter was its best (for turboprops) all year. Socata made six deliveries this quarter- down from 11 three months ago - but with a yearto- date total of 24- Socata was actually one unit ahead of its 2009 total after three quarters.

Piaggio reported the delivery of four 180 Avanti IIs- up from one last quarter and bringing it to six for the year (down from the 17 it had reported at this time last year). Quest- meantime- had two- down from the five it reported the previous quarter. That makes 11 to date- down from the 16 it reported in the first nine months of 2009.

In the piston single segment the battle for the top position in the market is being hotly contested this year- even as the category limps along in its severely recessed state. Cirrus finished the third quarter with 188 deliveries (total for 2010 so far)- giving it an 18-unit margin over Cessna- which had 170. Cirrus also led in quarterly deliveries with 61- a single unit ahead of Cessna- which had 60. In addition- Cessna reported two 162 Skycatcher light sport aircraft deliveries for the quarter- but while GAMA reports light sport deliveries it doesn’t include them in its overall totals.

Cirrus has been leading in the piston category all year- largely due to a very weak first quarter performance by traditional market leader Cessna that totaled only 30 units. Cessna came roaring back in the second quarter with 80 deliveries. It will be very interesting to see whether Cirrus can hold on to its lead and finish the year in first place – a cherished goal of the new company for much of the past decade.

While the piston market continues to languish well below the 2-755 unit level it reached in 2006- there are some signs of life in this category. Five of the 10 piston single manufacturers are ahead of their second quarter totals for the year- and four are ahead of their 2009 year-to-date pace. On balance- though- the piston single market is still struggling- with deliveries 54 units below where they were at this time in 2009.

Sitting in the third position in single-engine piston sales for the year-to-date is Piper- with 74 units- up almost 90 percent from the 39 units it had delivered by this time last year. Diamond is in fourth place in single-engine piston sales with 65 units- down from 93 last year. Diamond reported 21 single-engine deliveries for the quarter- down two from the 23 it had in the second three-month period this year.

American Champion enjoyed its best quarter since 2008- delivering 11 aircraft for the three-month period- bringing the company to 29 for the year (compared with 20 for the first nine months of last year).

Hawker Beechcraft reported delivery of seven Beech Bonanza models- bringing the total to 17 Bonanzas for the year. I continue to worry that this iconic model- which has been in continuous production since 1947- could fall victim to the current down market - particularly with the company starting to close many of its Wichita facilities- and moving production abroad.

Other companies contributing to single-engine piston deliveries in the third quarter included Liberty- Gippsland and Maule. Liberty had six units for the period- up from three last quarter; Gippsland had four- down from five in the second quarter; and Maule reported a single delivery in the quarter (and a total of three for the year).

Piston twins continue to be something of an anomaly. This is the only category ahead of last year- and in the past quarter recorded the highest delivery total since the fourth quarter of 2008 - 23 units. This consisted of 10 units from Piper- seven from Diamond and six from Hawker Beechcraft. With 61 units delivered year-to-date- the piston twin category is ahead of the 52 units delivered in the first nine months last year- and seems to be on track to exceed last year’s total of 70 units.

It’s a good bet no other business aviation category will match or exceed its last-year total.

The real question in attempting to assess how this year will finish is going to depend entirely on how big a fourth-quarter sales surge the industry experiences. If we see the typical 30-percent surge in the fourth quarter this year- the jet market will finish around 705 units. Turboprops will come in around 335 units- and pistons will finish with around 910 deliveries.

While this current GAMA report should be enough to temper anyone’s optimism- I still think jet deliveries in the 725-unit range are possible. That scenario would see turboprop deliveries finish around 340 and pistons at about 925.

Moreover- we can certainly hope that this quarter’s GAMA numbers will represent the market’s low point and that we can begin to mark recovery from now onward. With corporate profits in the U.S. starting to rise and the economy picking up- that seems like a realistic expectation.

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