Written by Molly McMillin
The Wichita Eagle
A resurgence expected last year in the general aviation market didn’t happen, but an increase is expected for 2012.
“Unfortunately, you will see that a resurgence did not take place for the industry as a whole,” General Aviation Manufacturers Association chairwoman Caroline Daniels said Wednesday, speaking of 2011. “However, 2011 did furnish signs of a sustained recovery and some reason for optimism.”
The 2011 decline in general aviation aircraft delivered was in the single digits at 3.5 percent. That’s after three years of double-digit declines since record deliveries in 2007. Billings, however, were up slightly last year “This is an indication that the trough in the industry cycle has been established,” Daniels said during a webcast from Washington, D.C. Some manufacturers showed flat or improved performance last year over 2010.
Deliveries by Wichita’s general aviation manufacturers rose last year. Wichita planemakers delivered 45 percent of all general aviation aircraft last year. GAMA released year-end general aviation shipment and billing numbers Wednesday during a state-of-the-industry event in Washington. Shipments for 2011 totaled 1,865 planes, down 3.5 percent from 1,932 planes the year before. Billings totaled $19.1 billion, up from $19.0 billion in 2010. “We don’t think we can go anywhere but up,” said Pete Bunce, GAMA president and CEO. “But how great the slope is depends on economic conditions.”
Those conditions include uncertainty in the European and global economy, he said. The good news, however, is that a majority of the market fundamentals for the industry are moving in the right direction. Unemployment levels are declining, corporate profits are up, flight activity has improved and emerging markets are driving new sales, GAMA officials said.
Despite a return to strong corporate profits, “it seems though, that companies remain in a wait and see mode,” Daniels said. Eventually, the healthy profits will turn into business from pent-up demand, she said. The number of used aircraft for sale has declined slightly, but is still at historically high figures. The amount of used aircraft inventory affects the sale of new planes.
The impact of the economic recession has been felt most acutely in the lighter end of the business jet market, while larger jets have turned in a steady performance. Buyers of large jets rely less on third-party financing and emerging markets have favored the large-jet category, Daniels said.
Wichita general aviation deliveries, 2007-11
*2011 figures do not include Hawker Beechcraft’s fourth-quarter deliveries or billings. All figures do not include shipments for military use. **Hawker Beechcraft 2007 figures include shipments from Hawker Beechcraft and its predecessor, Raytheon Aircraft. When 2010 fourth quarter Hawker Beechcraft numbers are eliminated, total 2011 billings were 0.4 percent higher than a year ago. GAMA will adjust figures after Hawker Beechcraft’s earnings results.
For months, Bill Boisture, chairman of Hawker Beechcraft Corp., has described the market as “bumping along the bottom.” Last year, Boisture predicted that demand in 2011 would be much like 2010, and 2012 would be much like 2011. “I have to say, sadly we were right,” Boisture said this week about demand last year. “We’ve felt like and thought for many reasons that ’12 would be a lot like ’11. And I can’t see much reason yet why that would be different.”
He hears the discussion that the economy is improving. “I hope for the sake of the American people that that’s true,” Boisture said. “But I would say that I don’t think that has really filtered through into a significant change in the aircraft market in our sector.” People are beginning to be a little more optimistic – or maybe they’re more accepting that today’s economy is now the new normal and they have to grow their business, he said. And if buying an airplane is needed to grow it, they have to figure out how to do that in today’s circumstances, Boisture said. The company has figured out how to be better at aggressively selling airplanes in today’s market, he said. “Our team continues to improve and continues to have a tighter focus,” Boisture said. “I think we’re getting better at it.” The availability of financing remains a big issue, however, especially in the light jet through piston aircraft market segments, he said. “The amount of equity that a buyer has to come with to get aircraft financing for a new airplane is significantly higher,” Boisture said. Financing is less of an issue with higher-priced airplanes and almost nonexistent in the large jet category, he said, because most buyers don’t need financing. GAMA’s Daniels agrees. “Third-party financing has been difficult to secure since the downturn,” Daniels said. That has led buyers to cancel aircraft purchases. “Once financing flows more freely, the aircraft market will improve,” she said.
At Cessna Aircraft, the amount of interest and activity at the beginning of the year increased from the same time a year ago, Brad Thress, Cessna senior vice president of business jets, said recently. “It’s a great way to start the year because the last two (years) have started so slowly,” Thress said. The industry is no longer in a time of monstrous order backlogs, however. Instead, companies must sell airplanes this year to make production expectations. Cessna has aggressively increased its sales force to find customers. “We are in the hunt for every deal,” said company spokesman Dianne White.
Cessna is continuing to invest significantly in new products, Thress said. Last year, it introduced the Citation M2 and the Latitude. “But there’s more coming that we’ll be announcing in the coming years,” he said. “It’s good business long-term to invest a lot in new products so as we do emerge from the downturn, we’ll have a fresh (products) in an invigorated market.”
Working with the FAA
One of the biggest issues facing manufacturers, said GAMA’s Bunce, is the need to streamline the certification process.
The volume of certification activities from planemakers is on the rise, and there is pressure to keep up, said Walter Desrosier, GAMA vice president of engineering and maintenance. “We’re working with the FAA to move to a more systems-safety oversight,” Desrosier said. The way it does certification today is by reviewing and approving every drawing and every test. “They’re involved in the minute details of routine day-to-day activities that are the same,” he said. “It’s the same widget being designed for one airplane to the next airplane to the next airplane.” There’s interest and support for the FAA to focus on a systems safety oversight that would leverage limited resources to focus on “safety critical” areas, new technologies and new manufacturing methods, Desrosier said. To do that means the FAA would oversee a company’s program that has FAA-approved processes and procedures. “The FAA would oversee how they’re doing that and the FAA would be able to accept that,” Desrosier said.
Language in the FAA reauthorization bill signed by President Obama includes a commitment for the industry and the FAA to work together on ways to be more efficient, Bunce said. “We’re very encouraged,” Bunce said. “It has to get done. There is a gigantic bottleneck there. The amount of work is accelerating while budgets are diminishing.” Another issue is a transition from today’s aviation fuel to unleaded fuel for piston-powered airplanes. That’s “absolutely vital,” Bunce said. And last year, bonus depreciation allowed buyers of business aircraft to depreciate their planes 100 percent. That helped spur sales. Whether that will be extended is unclear, Bunce said.