Industry waiting to see recovery analysts predict

AINonline
January 26, 2010, 5:31 AM

The analysts and pundits continue to maintain a positive outlook for the economic future of the business aviation industry, but the experiences of those in the trenches doesn’t always match the picture analysts paint.

David Wyndham, v-p and owner of Conklin & de Decker, said last month he is seeing “glimmers of hope” for a business aviation industry still slogging through an economic bog.

While noting that cash remains king, he foresees a slow improvement in credit markets this year. And he noted, “The financial industry is headed back to stability.”
Also in January, Brian Foley of Brian Foley Associates reaffirmed his earlier forecast of “measurable signs of recovery by mid-2010,” citing such factors as a 2.2-percent climb in the U.S. gross domestic product in the third quarter, a global stock market rebound and a lower dollar value.”Other good news came from JPMorgan, which last month upgraded its rating for Bombardier stock but at the same time issued a cautionary forecast of a slow recovery and the belief that new business jet demand remains a “prominent risk.”

A Gradual Rebound
The Aerospace Industries Association (AIA) told attendees at its December year-end aerospace review and forecast lunch that, “As the global economy strengthens, net new business aviation orders are expected to begin recovering in 2010, leading to growth of new business aircraft deliveries in 2011/ 2012.” (See article on page 29.)

However, AIA president and CEO Marion Blakey added a note of caution, reflecting the lesser accepted possibility of another downturn before a true economic resurgence. However, she added that it will be “far less severe than previous down cycles.”

Closer to the front lines of business aviation activity, business aviation flight hours continue to climb. Global online charter portal Avinode in mid-January released its demand index for the following 30 days. The index showed the projected value of business jet charter orders over the next 30 days is up 7 percent over the previous month’s projection.

And there are more positive signs of recovery. Pilatus announced early last month that it will return to full work schedules this month. While there were no layoffs, the company had reduced working hours at its main plant in Stans, Switzerland, in September, mainly for aircraft production.

Cessna Aircraft, particularly hard hit by the recession, revealed last month that it will revive the Citation Sovereign production line and recall 180 workers. All the Wichita OEM’s assembly lines are now back in operation–albeit at reduced rates–and further layoffs are not anticipated.

The recovery, said Foley, is “quietly reorganizing,” noting that with all the negativity with which the industry has been bombarded for so long, “it’s hard to visualize an improvement.”

Certainly, there has been no lack of bad news. Troubled fractional operator NetJets cancelled orders for aircraft, a move that spelled a $2.6 billion loss in backlog by Hawker Beechcraft. Cessna parent company Textron also announced in December the possible cancellation of some $1.1 billion in orders. While there was no confirmation that the customer was NetJets, the fractional giant had announced orders from Cessna totaling more than $1 billion at the Paris Air Show in mid-2007. According to Cessna’s Web site, there have been no orders since, from any customer, that were even close to that total.

Layoffs Continue
A January 11 story in New Jersey’s Bergen County Record reported that
“the jobs outlook at Teterboro Airport, the largest base for business jet travel in
the New York metropolitan area, remains bleak.” The story went on to note that charter service providers and aircraft management firms have cut staff, and takeoffs and landings at Teterboro had dropped from 13,806 in October 2008 to 13,508 in October 2009 and were off 23 percent from the same month in 2007.
Dassault Falcon announced in December the layoff of 150 employees and 55 more contract workers at its Little Rock, Ark. completion center. The center had already cut 140 contract positions at Little Rock.

Edwards & Associates, an affiliate of Bell Helicopter, announced January 11 a “workforce reduction,” cutting nearly 16 percent of the helicopter modification center’s 315 employees. The move, said a Bell spokeswoman, is the result of the economy and an effort to “remain competitive in the world market.”

Along with some good news came more bad news from Cessna. The Wichita OEM announced it will close its plant in Columbus, Ga. and transfer the work to plants
in Independence, Kan., and Mexico over the next two years. Cessna chairman and CEO Jack Pelton acknowledged general signs of an economic recovery, but he added, “While these signs are encouraging, they have not been reflected in the general aviation market, which tends to lag the economy by 18 to 24 months.”

The short story is that the business aviation industry continues to survive, while looking ahead to a much-anticipated economic recovery. And while most believe a recovery is somewhere on the horizon, it’s not coming quickly enough. Said Foley, “Whereas we were whiplashed by the speed and severity of the downturn, we’ve now begun a six-year up cycle whose pace will seem glacial in comparison.”    

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