That sound you hear is the subdued tightening of belts as business aviation faces a recession after a half-decade of unprecedented growth.

It was in early 1996 that the General Aviation Manufacturers Association (GAMA) pronounced “the recovery under way” with a report that deliveries and billings in 1995 had jumped 16.1 and 16.7 percent, respectively. “The downward spiral has stopped at long last,” said Edward Stimpson, then president of GAMA. And it was in 1995 that U.S. business aircraft manufacturers Cessna, Gulfstream, Learjet and Raytheon delivered a combined total of 632 turboprop and jet aircraft, counting it an excellent year.

Fast-forward to 2001. GAMA figures released that spring for the year 2000 showed the same four U.S. manufacturers delivered a combined total of 871 turboprop and jet business aircraft. Equally impressive were total billings for the four OEMs for all aircraft in excess of $7.86 billion, up from $6.66 billion the previous year.

Less than a year since that glowing report, the recession is official and business aviation is considering its options.

In hindsight, there were signs of an economic downturn last spring. According to a Dassault Falcon Jet spokesman, it was then that the Teterboro-based company saw a decline in the used aircraft market, “which often precedes a similar downturn in new aircraft orders.”

Dassault Falcon Jet has “a very significant” aircraft backlog, “perhaps greater than that of some other OEMs,” that will carry the company well past this year. But he added that while Dassault still expects to increase production this year, “it’s less than what we had originally planned.”

Dassault has no plans for employee cuts early this year, he said, but noted that “the company is monitoring the market very closely. If there are significant changes, we would have to reconsider our position.”

Other companies are also forecasting production cutbacks. Canada’s Bombardier Aerospace was expecting to deliver 174 business jets for its fiscal year 2001, which closes at the end of this month. But for fiscal 2002, that number is expected to drop to 137. Bombardier attributed the decline in business-jet deliveries to the current economic slump.

Boeing Business Jets president Lee Monson told AIN the Seattle-based OEM saw the recession coming in May and decided at that time to reduce the 2002 production rate for its Boeing Business Jet line by about 15 percent. He added, however, that the company had received no cancellations or requests for deferred deliveries. Boeing has also shelved “for the time being” plans for a BBJ3 (based on the 757).

A Cessna Aircraft spokeswoman said the Wichita manufacturer had “planned to hire approximately 1,000 additional people for our ramp-up in production for 2002 and 2003.” In July, that ramp-up was put on hold and a hiring freeze went into effect. While actual ramp-up numbers are unavailable, the company was expecting to deliver about 300 Citations by the end of last year–42 more than in 2000. And deliveries this year are expected to remain at about 300 aircraft.

Gulfstream Aerospace last fall announced company-wide layoffs of about 350 full-time employees at its eight facilities nationwide. A spokeswoman said the decision did not stem from September 11 but was made in response to the economic climate, which had affected near-term sales. “People are being much more cautious about executing sales agreements.” Cuts at Gulfstream also included a 50-percent reduction in overtime and cuts in research-and-development funding. Those measures were put into effect before a reduction in force and “probably saved a total of 430 jobs.”

While Raytheon Aircraft late last year reported a “strong backlog” valued at more than $4 billion, including 300 Premier Is and 150 Hawker Horizons, it implemented additional workforce reductions in October. The reductions in force, combined with other cost-cutting measures, said the company, were designed to “bring costs in line with a slowing economy that was made worse following the tragic events of September 11.” The layoffs were expected to affect at least 750 hourly and salaried workers in the fourth quarter last year, primarily those at its Wichita headquarters.

Charter and Frax Up

While September 11 might have had some effect on the economy, it was not all negative. On-demand charter operators and fractional ownership programs reported a sharp rise in interest in subsequent weeks. Much of that early interest was attributed to safety concerns, but some believe this is a short-term phenomenon. Of more interest is the effect that increased security will have on business travelers in terms of unproductive hours spent standing in long lines at airports and the frustration of canceled flights if sporadic terrorist threats continue.

“Interest was higher immediately after September 11, but sales activity hasn’t followed because of economic conditions,” said Monson. But he added, “Those whose early interest was prompted by concerns for safety will still be there when the economy begins to recover and their confidence in the economy returns.”

Said Brian Barents, former president and CEO of Galaxy Aerospace,  “I never shared Honeywell’s degree of enthusiasm for the size of the market going forward,” referring to Honeywell’s annual aviation market forecast released just before September 11. (See box at right for updated forecast.)

Barents said the industry was “fooled a bit by robust backlogs and large orders by fractional program providers.” Fractional-ownership orders, he noted, at one time represented about 40 percent of the total backlog.

At the same time, Barents expressed confidence in the ability of the business aviation industry’s ability to survive the current economy decline. “The tragic events of September 11 will ultimately have a positive effect on demand for business jets, but the economy must be able to support that demand.”

It would appear that the confidence of Barents and Monson is being borne out in the fractional-ownership market. In an interview last month in the Dallas Business Journal, Flexjet director of marketing Stephen Phillips reported a 30-percent increase in inquiries after September 11. But there is a difference between inquiries and sales. “We’re seeing brisk sales now,” he said, “but we can’t attribute that to September 11. I believe,” he added, “we’ll really start to see the effects–if there are any–in February or March.”

Gulfstream also expressed confidence in an economic recovery in the near future. “Gulfstream had purposely made every cut possible before resorting to layoffs. We want to be ready to ramp up quickly when the market improves,” the spokeswoman noted. “And the most difficult aspect of a ramp-up is replacing the skilled people you lost.”