August 2010 Aviation Articles

'One Hit Wonders' and the state of the marketplace today

“One Hit Wonders” and “Nervous Nelly’s” best describe the potential client base active within the used business jet and turbo-prop market today. A “One Hit Wonder” is someone who makes a very low offer for an advertised aircraft, and if the offer is countered as a part of what would normally be termed ‘normal negotiation’, immediately vaporize and are not available for any further discussion. “Nervous Nelly’s” are buyers whom constantly sit on the fence without stepping off either side of it. They sporadically hang around for days asking all sorts of questions and scenarios, but when you believe that they are ready to make a move, they back away and go quiet for a month or so. “One Hit Wonders” rarely make a deal, but the “Nervous Nelly’s” must be attended to, otherwise six months into the future you learn much to your consternation that they finally reached gestation while talking to another broker, and in turn have bought an aircraft that you would never have shown them, because ultimately it was wrong for them.

Unfortunately this current environment of “Price-Only Buyers” shall most likely prevail as the ‘norm’ for several years to come. Now when I use the term, “Price Only Buyers”, I am describing how, in most cases, the skills and interests normally associated with ‘educated’ and ‘intelligent’ buyers are all but lost today. To illustrate this, an excellent example is found within the Dassault Falcon 20-5 retrofit market. [more]

Even though it is probable that there are two or three kits still in existence, to allow the conversion of several more Falcon 20s, the likelihood of this happening is highly improbable. Since the Honeywell TFE-731 engine retrofit program started in the late 1980s, there have been 117 aircraft that have gone under the knife, so-to-speak, and now sport Honeywell instead of their old General Electric CF700 engines. Today 30% of the fleet are available for purchase in a used condition.

Conversions at the peak of this program normally cost around $4,500,000 to have accomplished. This was on top of the initial acquisition price of the candidate aircraft itself. Many F Models trickled onto the used market in the $7,000,000 to $9,000,000 range. Most sold quickly, because there was high demand for these large-mid cabin aircraft that gained almost a doubling of its range due to the improved fuel efficiency of the retrofitted engines.

23 Falcon 20 Basic Model (which is 13% of the 173 model fleet), 6 Falcon 20D Model (which is 10% of the 61 model fleet), 13 Falcon 20E Model (which is 21% of the 63 model fleet), and 75 Falcon 20F Models (which is 54% of the 138 model fleet) have all since been converted. The greatest distinctions between these four different models are that the D, E and F Models have bigger ‘fuel feeder tanks’ (they carry an extra 80 gallons of fuel); the E and F Models have a higher Zero Fuel Weight; and lastly the F Models eliminated many of the corrosion prone spot welds by going to rivets as a replacement, plus they carry 40 more gallons of fuel than the other Models, they are equipped with Single-Point Refuel Ports as standard, and most significantly they have Full-Span Droop Leading Edge-High lift Devices which provide for shorter take-offs and landings.

Notwithstanding avionics differences between each model, in the 1990s, a Falcon 20C-5BR (Basic Model) would on-average, trade $2,000,000 less than a Falcon 20F-5BR. Now in today’s market virtually none of the Models will break $2,000,000 during a sale, while many, including F Models, sell at or below $1,000,000. With this price-evening of the field, the distinctions of Model differences are pretty much lost on most buyers. The price/value basically takes the educated and intelligent decision making out of the equation. Buyers focus on price alone and pretty much don’t care about the Model differences, which once mattered a great deal. Hence my assertion that Educated and Intelligent Buyers have left the field of business negotiation-conflict.

Why has the Falcon 20-5 Market been levelled so quickly, you might ask? Well I am afraid that it all boils down to age. Business Aviation is relatively young. It can be argued that here in the United States, the Beechcraft Model 18 was the first real-purpose-built Business Aircraft. This and the ex-wartime Douglas DC3 formed the backbone of the post-war Business Fleet of Corporate America. Things rapidly altered in 1959 when the turbo-propeller powered Gulfstream GI was first introduced. Then came the Lockheed JetStar, the North American Rockwell Sabreliner, the Beechcraft King Air, the Learjet 23, the DeHavilland Hawker 125, the North American Rockwell Jet Commander (Westwind), the Dassault Falcon 20, the Gulfstream II, the Cessna Citation 500, and-on-and-on until the present day.

Production deliveries of the Dassault Falcon 20 started in 1965, the year I was born. Production pretty much ended in 1985. The oldest Dash-Five Falcon has celebrated its 44th birthday this year. There is both a force of natural attrition, and also an-industry attrition that which determines the useful life of a product like a business aircraft. Natural attrition is determined by the cost of replacement parts availability and cost. Industry attrition is determined by the banks that lend money to purchasers of these products. Both systems normally run fairly close together, however in the last 50% or so of a product’s life, industry begins to lead the natural state by 15 to 20 years.

In the early 1990s, most banks were quite vocal in letting buyers know that they were reluctant to finance aircraft that were manufactured before 1980. By 2000 that had year-model comfort threshold had risen to 1985. By 2005 we were looking at 1990. Now today, in late 2010, while we are all recovering from the worst recession in living history, that threshold has leapt-up to the smallest gap ever to 2005. Banks just don’t like old aircraft. Of course you can borrow money to snatch up an incredibly deflated value Dassault Falcon 20F-5BR (80%+ discount from ten-years ago), but there is a strong likelihood that you will have to put 80% of the money down as your collateral down-payment, while you are allowed to borrow only 20% of its purchase price. This would have been in reverse 18 months ago, i.e. 20% down and 80% financed. Yes, the world has been completely turned onto its head.

Unfortunately this cause and effect is rife between almost 75% of the entire active fleet of business aircraft. Back in February 2009, I wrote at this site how the business fleet had experienced a 40% to 60% drop in value since the previous year (2008); then in August of 2009 again at we discussed the issue of “when is old, too old?” Now today, I am reporting to you that some models have dropped to 80% or more from their previous values of pre-recessionary times, while a large segment of the fleet just does not currently have any resell value, even at any price.

The secret to success in buying and reselling used business aircraft has not changed on-jot. Instead it has tightened up. In all cases now, the path to enlightened success lays in buying the Youngest, Lowest Time, Best Equipped Aircraft that you can stretch your money to purchase. It’s as simple as that. Meanwhile if you are looking at the new “paradigm of values”, when the economy does improve significantly in five to ten years from now, there is a great chance that your position taken today might see you realizing 300% or 400% on top of what you pay today, when you decide to sell later.

We see now real signs of improvement in the business jet and turbo-prop market, except for the cherry-picking that is still going on in the GIV/GIVSP markets; however, the Gross Domestic Product of the U.S. economy has grown by about 3% so far this year, with good signs that it will maintain this recovery pace without interruption. The only year that historically the U.S. economy saw a ‘double-dip’ recession was in 1981, and that was in response to the Federal Reserve raising the interest rate to combat inflation. Well there is no one, in my own opinion, that would suggest that we are to fear inflation at the moment, or anytime soon, therefore I would love to see the term “Double-Dip Recession” to be struck from the English language, so we can all get on with seeking out a faster path to recovery. My ‘two cents.’ Ciou.

Handguns at the Security Checkpoint: Don't Do It.

According to a recent post on The TSA Blog, at least two passengers a day are caught at security checkpoints with a gun in their carry-on luggage. According to the post, when the passengers are caught, the most common response is "I didn't know it was in the bag." Unfortunately, that excuse works for the TSA just about as well as "the dog ate my homework" works for a high school teacher.

Once caught, a passenger potentially faces a number of consequences. First, the subsequent interaction with and interrogation by local law enforcement will quite often result in the passenger missing his or her flight. Next, the passenger could face criminal prosecution for violation of 49 C.F.R. 1540.111 which prohibits carriage of a weapon on your person or accessible carry-on luggage if security screening was required before boarding of the aircraft. The passenger may also be prosecuted under other local statutes that prohibit possession of a handgun at a checkpoint or in the secured area of an airport. [more]

Finally, and in addition to criminal prosecution, the TSA could also initiate a civil penalty action seeking to impose a civil penalty/monetary fine against the passenger for violation of 49 C.F.R. 1540.111 The penalty could range in amount from $1,500 to $7,500, depending upon whether or not the handgun was loaded. The civil penalty action is similar to an FAA enforcement action and does not provide as many constitutional rights and protections as a passenger would have in a criminal proceeding.

The TSA recommends, and I concur, that all passengers double check their carry-on baggage BEFORE arriving at the security checkpoint to confirm that they do not have a handgun or other prohibited item(s) in their luggage. Seems like a "no-brainer" to me. But, if you are caught "packing" at a checkpoint or in the secured area of an airport, hire an aviation attorney to help protect your rights.

For more information on the restrictions placed upon firearms at airports and in aircraft, please read my article on the topic: Carrying Firearms On Aircraft.

Aircraft Maintenance Costs Can Sting!

A friend was recently stung by a wasp. He was doing some yard work and apparently disturbed the wasp who took umbrage at his summer nap being interrupted. The sting hurt and caused several days of uncomfortable swelling. I was joking with him that aircraft operating costs can be like that. They seem small at first compared to the big amount of the aircraft acquisition, but ignoring them can sting and cause you discomfort.

We find this in two areas when we review costs with operators. The first is failing to understand the cyclical nature of maintenance costs. Things like fuel are very stable and predictable. The more you fly the more your annual fuel cost grows. Maintenance tends to come in chunks. Yes, brakes and tires come at a predictable pace, but those inspections and component replacement/overhauls do not. A heavy maintenance inspection that occurs at infrequent intervals can have a high cost. [more]

If you last did a “C Inspection” at a time when you had plenty of cash, then all was OK. But what if that "C" is coming due soon, like maybe this year? You may be cutting back your flight hours to save money but that darn “C” still comes due, on time or on the calendar! You may have been very successful in 2009 at reducing your budget only to have to ask/explain the 50% increase for 2010.

A second sting to non-aviation financial folks is the magnitude of these heavy inspections and overhauls. Reminding them that it took six years and 4,200 hours to get to this cost doesn’t remove the pained look they get when they see the price quotes.

I think a big reason aircraft maintenance costs come as shocks to these folks is their point of reference is the family automobile. Oil changes are $40, a set of tires can run to $400, and then the 100,000 mile check runs to $800. All those numbers are the frame of reference they may use when looking over the aircraft costs. None of those prepare them for the magnitude of a major airframe check or overhaul.

Life Cycle Costing out for at least several years is a help. An even bigger help is the (constant) process of educating non-aviators as to the nature of the costs to own and operate such complex, critical equipment. And yes, if there is a major cost item coming due; provide as much advance notice as you can. Lastly, guaranteed maintenance programs can help with smoothing out these costs – fodder for another article.

Gulfstream G650 nears speed of sound, earns title of fastest civilian jet

Courtesy of Gulfstream

The Gulfstream G650 neared the speed of sound in flutter testing this week, hitting Mach 0.995, and established itself as the fastest civilian aircraft on the planet.

In achieving the speed, test pilots Tom Horne and Gary Freeman, joined by flight test engineer Bill Osborne, took the aircraft into a dive where the nose of the aircraft pitched 16 to 18 degrees below the horizon, Gulfstream said in a statement.

Flutter designers applied a range of vibration frequencies during the dive on the tail, wing and flight-control surfaces to make sure the plane could naturally dampen them without further action from the pilots. The company said the aircraft performed “flawlessly” during the test. [more]

A photo of the three-member test crew on the Gulfstream web site this week showed each of them beaming smiles and  flashing thumbs-up gestures. 

Since the G650 flight-testing program began in November 2009, four airplanes have completed 575 hours in more than 170 flights. The entire testing phase will span 1,800 hours.  

“The airplane is very predictable,” Horne said. He is the senior experimental test pilot for Gulfstream. “It’s very easy to control and to get precise control at those speeds. The airplane response has matched the expectations of our engineers, and we’ve been able to easily fly the test conditions and march through the test plan.”

The ultra-large cabin, ultra-high speed G650 will carry eight passengers and a four-person crew on 7,000 nautical-mile legs at Mach 0.85. The company says it can cover 5,000 nautical miles at Mach 0.90.

Various floor plans can accommodate up to 18 people, according to the company web site, which dubs the G650 “the fastest, widest, longest business jet”

Technological features built into the aircraft will include a Planeview II avionics suite, featuring a Triplex flight management system, 3-D weather radar, automatic emergency descent mode, Head-Up Display (HUD) II and Enhanced Vision System (EVS) II, among other features.

Shape-shifting rescue planes: Where can we sign up for one?

OK, so maybe the technology has not come this far yet.

It’s a bird. It’s a plane. It’s a shape-shifting UAV robot?

Developers in Cyprus and Israel, as part of EUREKA, a European collaborative science effort, recently announced creation of an unmanned aircraft that will be able to change shape in order to maneuver in severe weather while performing maritime search-and-rescue missions.

The National Science Foundation this week published a thorough review on the U.S News & World Report web site. The article calls the result from the “E! 3931 ASARP” project a cheap-to-build, small, and handy aircraft that will shorten the duration of sea-based rescue operations and be able to operate from land or water in extreme weather. [more]

Final stages of testing continue on a prototype in Cyprus. Commercial use will also depend on governmental aviation regulations, according to the article, assumedly to allow the design’s moving parts the legal freedom to, ahem, spread its wings.

Project director Dr. Michael Amprikidis said the use of cutting-edge technologies such as aeroservoelastic trim tabs allow the airframe to reformulate itself and its light mass to overcome harsh conditions by doing so.

"A tab can have very high oscillation frequency,” Amprikidis was quoted in saying in the article. “Traditional flight surfaces cannot match these frequencies, leading to up-and-down movement of aircraft during turbulence."

Read more here.

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