AIN Staff

9:00 5-1-2010The end of 2009 just may have signaled the low point of the recession. But before anyone breaks out the champagne, take note of the fact that this year hasn’t started out with a bang so much as a deep breath and hopeful sigh of relief.
Bombardier, for example took a look at its numbers for its fiscal year 2009 and expressed relief that it wasn’t as bad as it could have been. Indeed, although the company delivered 59 fewer aircraft in fiscal year 2009/10 compared with the previous year, it increased its revenue market share from 31 percent to 32 percent. 
The UBS Investment Research’s March business jet index showed a stable market, with pre-owned business jet inventories remained roughly unchanged in February. It also took note of business jet activity “cycles sequentially lower than in February.” Nevertheless, the survey “continues to reflect improving customer interest and a strong 12-month outlook.”
Bombardier Inc. president and CEO Pierre Beaudoin projected confidence about this year and next, saying profitability should be higher in the second half of 2010 as the result of “a more favorable pricing environment, and increased orders.” At Gulfstream, which is already looking forward to the entry into service of the midsize G250 and the large-cabin G650 in 2011 and 2012, respectively, the Savannah, Ga.-based OEM is anticipating better days and reportedly working on new designs that may leverage elements of the G650.
In its April business aviation monthly report, JPMorgan forecast renewed development among business jet manufacturers, suggesting announcements at this month’s Ebace convention. Programs to watch, said JPMorgan, include a new, clean-sheet Gulfstream 450 replacement, a Global Express II from Bombardier, and perhaps a resurrected large-cabin Citation Columbus from Cessna.
A Gulfstream spokesman told AIN that the company is constantly evaluating new technologies and how they might apply to new aircraft design. But he added, “We are not ready at this point to discuss possible new models.”
Embraer is also expecting the economy to improve, albeit slowly, and the business aviation industry along with it. In a forecast released at the Sun ’n’ Fun Fly-In in Lakeland, Fla. in April, the Brazilian OEM forecast delivery of 10,000 business jets valued at $190 billion over the next decade.
If such an estimate proves accurate, the next 10 years will be better than the previous decade, when manufacturers shipped 8,000 jets worth $15 billion. Nevertheless, the forecast for this year and next is relatively flat, with demand rising more sharply in 2012 and building to 2008 levels–about $22 billion in annual business jet deliveries–in the 2016/2017 time frame.
This bodes well for Embraer, which expects to begin deliveries of its Legacy 650 late this year and the new Legacy 450 in late 2013 or early 2013 and the Legacy 500 in late 2012 and 2013.
At Honda Aircraft in Greensboro, N.C., the Japanese OEM expects the first conforming HondaJet in mid-2010, and the first deliveries are to begin “by the end of 2011.”
In short, said several analysts, the OEMs are looking at the signs of economic recovery and emerging from hibernation.
While the General Aviation Manufacturers Association (GAMA) reported in February a drop in total business jet shipments from 1,313 in 2008 to 870 in 2009, GAMA chairman and president of Honeywell business and general aviation Rob Wilson noted signs that the worst of the economic crisis might be over. “The inventory of used aircraft has peaked and is now declining, flying hours are on the rise, and inquiries for new orders are beginning to grow again,” he noted.
Recent Argus TraqPak data is more specific, and also encouraging. Released in mid-April, the tracking data showed March 2010 business aircraft activity up 12.9 percent from February 2010, and perhaps better yet was year-over-year (March 2010 versus March 2009) activity was 8.5 percent, with the Part 91 operational market segment showing the strongest increase at 11.5 percent. The only down side was “normalized data” which showed charter activity slightly down and fractional activity up 0.9 percent.”
The index for the UBS Investment Research Business Jet Monthly for March indicated “a stable market and in line with our prior survey from January following increases in each of our previous eight surveys.” At the same time, despite an index reflecting a stable market, said the report, “our straight-up measure of absolute business conditions moved modestly lower this time, the first decline in a year and indicative of a slight degradation in market conditions.”
Avinode’s Business Intelligence market intelligence report for March showed its March 2010 charter demand index “constantly staying above 2009 levels for the same period.” The Avinode Pricing Index and the U.S.-specific pricing index both followed a stable upward trend, according to the report, “meaning increased charter prices both locally and globally.”
David Rimmer, executive v-p of Ronkonkoma, N.Y.-based ExcelAire told AIN he believes the charter industry is now entering its next up cycle. Charter rates, he said, are beginning to firm up, though some of the “more desperate” operators are still discounting heavily, with some rates barely covering fuel costs.
XOJet’s first quarter 2010 financial results appeared to support Rimmer’s assessment. The San Carlos, Calif.-based charter operator reported its first 200 deliveries of two Challenger 300s, and according to CEO Blair LaCorte, XOJet “experienced strong demand for its services [in January], resulting in a 31-percent increase in flight hours over the same month in 2009.”
In the used aircraft market, UsedAirplanes.com reported “an increasing lead-to-traffic ratio and projects stronger sales for the industry in 2010.”
According to UsedAirplanes.com founder Mark Horne, most encouraging is that more people “are showing interest in both our brokers and their listings. For example, for every 1,000 new [unique] visitors to our Web site, our brokers are getting more leads and inquiries than what was generated by 1,000 new visitors last month. This is a good indication that there are more serious buyers than lookers at this time, and we see this trend continuing.”
While industry analysts are claiming Warren Buffett’s U.S.-based NetJets fractional ownership operation has been losing something in the neighborhood of $1 million a day, NetJets Europe appears to be improving. In fact, NetJets Europe claims it will post an operating profit this year as a result of cost-conscious companies opting for share ownership rather than outright jet ownership NetJets Europe executive director Mats Leander told a Bloomberg reporter, “Business will be better than expected, although of course it’s still early in the year.” Leander expressed surprise as “how many corporate customers have been switching to us.”
Certainly there are plenty of indicators of an industry recovery, and the first quarter 2010 delivery numbers from GAMA are expected to show some life. “So far this year, our members are encouraged by increased levels of activity and interest,” said GAMA spokeswoman Katie Pribyl. “What we don’t know yet is how that will translate to actual billings and shipments.” &nbsp;&nbsp;&nbsp;

Slow but steady growth continues in early ’10 

9:00 5-1-2010The end of 2009 just may have signaled the low point of the recession.

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