AIN Staff

Described by some economic analysts as "a trough year," 2010 ended on a positive note with the S&amp;P 500 on a fourth-quarter tear and the January 31 Dow Jones Economic Sentiment Indicator signaling that the U.S. economy is slowly emerging from the recession. (Never mind that the National Bureau of Economic Research declared the recession to have ended in June 2009.) On February 11, the U.S. Department of Labor announced a drop in the unemployment rate from 9.4 percent to 9 percent, and the Thomson Reuters/University of Michigan preliminary index of consumer sentiment in February climbed to 75.1 from 74.2 a month earlier.
All of those are good signs, but perhaps the best news came from consultancy firm Deloitte, which reported on February 3 that 69 percent of fourth-quarter company results exceeded market forecasts. With 187 U.S. companies reporting fourth-quarter results, Deloitte noted net income or profits for all 2010 were up an average of 45 percent over 2009. And of 34 European companies, most in Continental Europe, fourth-quarter profits rose on average 25 percent over 2009. "This [2011] will likely be the year in which corporations begin to spend again," said Deloitte.
And the likely response from a business aviation industry in which aircraft sales growth follows corporate growth might well be, "From your mouth to God's ears."
Aviation market intelligence provider JetNet released a report on January 31 that "brought welcome good news." Noting that new aircraft orders follow growing sales of aircraft from the pre-owned inventory, the Utica, N.Y.-based firm reported pre-owned full-sale business jet transactions for 2010 improved by 16 percent compared with 2009. And they exceeded the 2008 transaction level by 4.8 percent, with a drop in the average asking price likely a prime motivator.
Tom Benson, executive v-p at aviation information specialist Amstat, took a more positive stance with regard to the used aircraft market in the Tinton Falls, N.J. firm's January business aviation market update. Discussing the 2010 fourth-quarter business jet and turboprop market, he said used-aircraft sales "represent the most transaction activity since 2008."
At the same time, he added a word of caution, pointing out that this increase in activity in fourth-quarter 2010 transactions was a modest 2.3 percent and 2 percent for jets and turboprops, respectively, "well below their historical quarterly average of 3.4 percent."
In terms of business jet activity, Avinode Business Intelligence of Goteborg, Sweden, told its readers that, with the passage of the month of January, "We're slowly starting to see increased charter levels. Business traffic is up and running and the winter season has really kicked in.
"This bodes well for the progression of demand in February and March as business travel begins to ramp up again and mid-winter holidays around the world begin to affect the charts."
JP Morganπs Business Jet Monthly for February said the market is "looking for a turnaround in bizjet OE [original equipment] demand this year, as we see a reasonable chance for this to occur, with a pickup in demand underpinning our forecast for an 18-percent increase in deliveries in 2012."
A recovery is not a foregone conclusion, however, said the report on a cautionary note. "A stubbornly high number of used business jets available at attractive prices remains a key obstacle."
Some Signs of Life in 2011 for New Aircraft Sales
In 2010 Airbus delivered 15 executive aircraft. The sales were valued at more than $1.5 billion at list prices, setting a new record for that segment of the manufacturer's business. Airbus also logged orders for eight aircraft last year–for seven ACJs and one widebody A330.
Bombardier Aerospace had a less-than-encouraging third quarter in its 2009 fiscal year, which ended Oct. 31, 2010. Revenues were down slightly from the previous fiscal year and the groupπs deliveries dropped from 61 for the same quarter in the last fiscal year to 53 for the third quarter ending October 31.
However, on a more positive note, the company received net orders for 23 aircraft in the third fiscal quarter of fiscal year 2009, compared with seven for the same period last fiscal year. And while the Canadian OEM had forecast deliveries the last fiscal year to be 15 percent lower than in the previous fiscal year, it nevertheless started the last month of its current fiscal year (which ended Jan. 31, 2011) with a firm order from an undisclosed customer for six large-cabin business jets valued at approximately $385 million.
Bombardier Aerospace president and COO Guy Hachey, in a recent conference call, said the company expects a rebound in its fiscal fourth quarter and that it will make its projected numbers for the year. The market apparently agrees; Bombardier stock rose about 7 percent in the first six weeks of 2011. Bombardier's fiscal year-end report is due in mid-March.
According to George Tsopeis, v-p of aviation services for Zenith Jet and head of its business aviation consultancy practice and publishing in Montreal, Canada, calendar year 2011 could be a watershed year for Bombardier.
In the U.S., Cessna and Bell Helicopter emerged from 2010 with relatively healthy fourth-quarter revenues and aircraft delivery increases. Cessna revenues increased $105 million over fourth quarter 2009, and delivery of 79 business jets topped deliveries in the fourth quarter 2009 by 11 aircraft. Cessna also booked "the highest number of quarterly gross business jet orders since the third quarter 2008." No less impressive was that the number of "white-tail" unsold aircraft dropped from 65 at the end of September to 10 at the end of December.
At Bell, revenues increased a total of $173 million in the fourth quarter and the commercial helicopter segment accounted for $119 million of that total.
Dassault Falcon ended 2010 with 95 deliveries, 18 more than in 2009 and the largest delivery total in at least the past decade. Forty-one of the deliveries were Falcon 7Xs and with production of the latest trijet now in full swing, delivery of another 41 Falcon 7Xs this year appears likely.
The General Dynamics Aerospace Group (which includes Gulfstream and Jet Aviation) was the company's "primary growth segment," according to GD chairman and CEO Jay Johnson. He pointed out in the companyπs fourth-quarter conference call that the group ended 2010 with stronger operating earnings, a strong order book, reduced customer order defaults, backlog growth and a depleted used-aircraft inventory.
Hawker Beechcraft ended 2010 with a total of 320 aircraft deliveries. The company delivered 123 aircraft in the fourth quarter with a value of $700 million. That fourth-quarter number includes 72 turbine-powered airplanes. "The fact is," said executive v-p Shawn Vick, "we delivered what we planned to deliver and matched production to market demand. We're focused on ensuring we meet our commitments, and thus far, we've done so."
In response to suggestions by some analysts that Hawker Beechcraft might be for sale, Vick noted that the company's private equity parents, Goldman Sachs and Onex Partners, "understand this business well. And while people like to speculate about the future when you're held by private equity, we're not paying attention. We're delivering high-quality products and enhancements to our existing product line and being successful on all those fronts."
At Piper Aircraft, where the new <a href="?q=node/26861">PiperJet Altaire</a> was announced in October, the company is moving ahead following a 2010 fourth quarter in which production at its Vero Beach, Fla. manufacturing plant was up more than 75 percent compared with 2009. Piper recently added 140 engineers to its jet development team. Certification and first deliveries of the Altaire are expected in 2014.

Will 2012 Bring Good News?
So how is 2011 going to shake out? For the most part, analysts are optimistic.
Richard Aboulafia, senior analyst at The Teal Group, believes 2011 will be "good news for the market, and 2012 will be good news for new-airplane deliveries.
"Weπve had a three-year downturn in a market accustomed to a two-year downturn, but I do think 2012 will be the turning point," he said.
Like other analysts, Aboulafia drew the relationship of corporate profits and business jet sales. "In terms of corporate profits, we're back above the peak profits we saw in the third quarter 2006." But he also pointed out, "corporations are still skittish and hanging onto the cash."
The Teal Group in its 21st Business Jet Forecast is predicting:
• Deliveries of 10,750 business jets worth $208.8 billion from 2011 through 2020, including 587 bizliners and regional jet reconfigurations worth $36.8 billion, plus 3,153 turboprops worth $146.2 billion.
• Among dedicated business jets, the top half of large-cabin aircraft will grow faster than the bottom half of midsize and small aircraft.
• Business jet deliveries will rise steadily but not precipitously through 2020.

Is Bizav Industry Cleared for Takeoff?

Described by some economic analysts as &quot;a trough year,&quot; 2010 ended on a positive note with the S&amp;P 500 on a fourth-quarter tear and the Janua

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