All Aviation Articles By Allen Howell

Business Travel is up with Airlines and Business Aviation

News of the past two weeks indicates some signs of recovery in travel overall and maybe even the beginning of a recovery in the business aviation sector of travel.

But is it a real recovery across the entire industry?

USA Today reports that business travel is up, and surveys of travel executives indicates that their company’s people will travel more in 2011. Even though travel will be up there is a new mindset that is more frugal about how travel dollar are spent.

Excerpts from the USA Today article:

The economic downturn has left its mark. The ACTE survey finds that 54.1% of corporate travel executives in the U.S. are “encouraging or mandating” alternatives to travel, such as videoconferencing. And a survey by Egencia finds that 56% of North American travel managers say they increased advanced-ticket bookings in the last year to keep expenses in check.

“In general, travel managers and purchasers have decided this new frugality is working well, and it’s allowing them to do a lot with a limited travel budget, and they’re sticking with it,” says Noah Tratt, vice president, supplier relations for Egencia Americas.

That can mean squeezing two or three clients into a trip. Corporate fliers are more likely to be sitting in coach when criss-crossing the U.S., though they might be able to book business class for flights overseas. And business travelers may be asked to use the frequent-flier points they’ve accrued on business trips if they want to upgrade to a premium section.

A NY Times article reports that Gulfstream orders in the 3rd quarter were the best since 2008 and deliveries are up over last year. The catch here is that the majority of Gulfstream aircraft now are being sold outside the US.

The good news is that people still need to travel to grow business. Video conferencing has not yet totally replaced the face to face meeting.

[more]The bad news is that Cessna laid off another 700 employees in September and slowed production so the recovery is not across the board here in the US. Used aircraft prices are still depressed indicating a lack of demand. The manufacturers think, or hope, this will change in 2012.

It seems to me that the US Business Aviation market is going to be stuck in a no growth mode for 2011 with maybe some recovery in 2012, barring a major economic game changing event.

Where the growth seems to be is in Asia, India and Latin America. There is great opportunity in China where there are only about 1000 GA aircraft in the country of 1.4 billion people compared to 200,000 GA aircraft here in the US.

Has the US Business Aviation market reached maturity in its life cycle?

If so, then we must find ways to reinvent the business if we want growth.  Or move to China.

Is business aviation stuck in the economic doldrums?

Over the last year, I have frequently been asked how it is going in our business. To be honest, it has been a rough ride for most of us in aviation.  These sincere questions that I get about our business and the industry we work in come from vendors, customers, friends and family.

My answer is usually something like “it feels like treading water with concrete filled boots …. but we are still above water.” Most of our peers in business aviation and many in other industries say the same things. Never have we worked so hard just to stay even or dig out of the hole.  

Two years into the toughest economic conditions I have seen in business aviation, the media reports that we are no longer in a recession.  That may be true, but progress seems to be measured in inches rather than in nautical miles.

Flight activity reports from Avinode and industry trade associations are optimistic, showing slight increases. Fortunately, businesses and individuals have not stopped flying in business and private aircraft; so, our part of the world seems to be picking up nicely in the third quarter of this year.

But when I speak with friends who are out there selling new aircraft, peers in the charter and aircraft management business, and vendors who supply our industry with fuel, aircraft, parts and support services I get different feelings about recovery. While we may be seeing an uptick in charter, ask the aircraft manufacturers in Wichita if the recession is over.  If not for government related aviation spending and international demand for new aircraft, the aircraft manufacturers would be hurting even worse than they are.

It seems that not too many businesses are buying new aircraft in the US, and the reversal of this trend could be years in the making. There is a huge inventory of used aircraft right now and the prices are lower than at any other time in the last 30 years, at least in relation to the price of new aircraft. Manufacturers are discounting new aircraft off of list price, something that was practically unheard of in this industry even as recently as three years ago.

So what is the solution, short of accepting that we will just be here in the trenches for the next few years and will have to slug our way out of the aviation recession?

I don’t know the answer, but the question is certainly worth considering by those of us who don’t want to accept that the current situation is what must be.

[more]

It seems that in the history of the United States, game changing innovation has spurred major growth. The railroads connected the country, opening up new markets.  Mass production and the automobile opened and connected the country even further, creating millions of good jobs.  And in the last few decades, technology innovation created a whole new economy.

The barrier to growth in business and private air travel seems to be price. To surmount that barrier, either more people need to attain the financial ability to take advantage of private aviation or the price has to come down. Either solution works just as well for growth in business aviation..

We can’t do much to affect the affluence of the overall population; but, we can innovatively lower the price of private aircraft travel to bring in a bigger audience.  Three decades ago, Southwest did this in the airline industry and changed the demographics of airline travelers. I don’t know that private aviation can do exactly what what Southwest did; however,  there must be a combination of solutions that, in aggregate, will change the pricing of business aviation to bring in a larger customer base. 

One thing I feel certain of is that the growth and restart of this economy, in general, and of the business aviation economy, in particular, will not come from any government program.

So, let’s not wait on the politicians for the answer. Let’s create our own recovery!

What do you do with a few hundred parked regional jets?

Based on reports in USA Today, The Wall Street Journal and Bloomberg, Delta plans to park a big majority of the 50 seat regional jet fleet, operated by its subsidiary Comair, for economic reasons.

Other regional airlines have already parked, or they are soon to park many of their 50 seat or less aircraft. Michael Boyd of Boyd Group International is quoted in an Arkansas Online article saying that by 2015 US airlines will only be operating 200 regional jets with 50 or fewer seats, down from about 1200 at an all time high.  The 50 seat regional jet does not work in a cost driven airline world, especially when fuel is high.

There are two outcomes from these decisions that are interesting to me. [more]

1)      As the airlines park these aircraft, service to many smaller markets will be cut. In many cases, they are not parking the aircraft to put larger aircraft on the routes. In an unregulated airline system the airlines are not going to fly where they can’t make money and that is bad news for smaller markets.

2)      There will be a big group of Canadair CRJ 100/200 and Embraer ERJ 135/145 regional jets sitting in the Arizona desert, possibly numbering in the hundreds.

As I hear from people in the leasing industry, the market for regional airline turboprop market is strong worldwide because the used fleet can be leased or purchased very cheaply compared to new prices. The operating costs of turboprops are much lower than the regional jet, especially on short haul routes that are common in developing economies.

So what do you do with a few hundred regional jets that are parked? At what price point do they become economically viable? Where are the new missions for these aircraft that would bring value and a new life for these aircraft?

Back in the early part of the last decade this same problem existed with the regional airline turboprop fleet as they were parked in favor of the new regional jets. Airlines going to an all jet fleet parked their Saab 340’s, Jetstream32’s and 41’s, Embraer 120’s and Beech 1900’s and the desert was full of stored aircraft. Ten years later you don’t see many sitting around. Most are deployed outside the US meeting the mission requirements of small airlines and government special use operations.  

Eventually the market will figure out how to redeploy these regional jets that have a lot of life left in them. It is all about economics. The combination of capital costs (lease or financing) and operating costs have to meet a point where it makes sense in a new use. Lower capital costs allow for lower utilization operations such as air cargo and charter.

It seems that a big opportunity exists for charter operators to use these aircraft for contract flying, corporate shuttles and on demand point to point charter. There is a service gap that continues to grow as airlines focus on high-density domestic markets. Could these regional jets help fill the gap?  

What do you think?

Will Congress Ever Pass the FAA Reauthorization Bill?

Congress is still not getting the job done with the FAA Reauthorization bill.

In previous posts  on Plane Conversations I have discussed the issues surrounding all of the different provisions of the bill and why it still hasnt passed into law.

I still don’t know why Congress has to pile in all these controversial provisions that deal with Unionization of FedEx and landing slots at a couple airports into a major funding bill that has been in a stall for years.

The only reason I can think of is good old fashioned politics and game playing on the hill, and in the mean time issues with safety, upgrade of a severely outdated air traffic control infrastructure and long term funding to run the FAA gets postponed again.   

If those of us who run businesses and make payroll every week ran our business like these guys do business on “The Hill” we would have been out of business a long time ago.

Reporting from the Los Angeles Times by Julia Love, Tribune Washington Bureau in a July 30 article:

 Responding to the deaths of 50 people in the crash last year of a Continental Airlines flight near Buffalo, N.Y., Congress passed legislation Friday requiring increased training and experience for regional airline pilots.
The House passed the measure, which also extends Federal Aviation Administration funding, on a voice vote just before midnight Thursday, and the Senate approved identical legislation Friday morning. No member of either chamber objected.
The legislation requires all airline pilots to log at least 1,500 hours of flight time before flying passengers, up from the current 250-hour minimum for newly hired copilots. The bill also boosts training, mandates the creation of a national database of pilot records and aims to reduce pilot fatigue by directing the FAA to update rules on pilot duty hours.

So under political pressure from the families who suffered loss from the crash in Buffalo congress has passed a special bill dealing with pilot requirements and training for airlines.

 The target for the FAA long term funding reauthorization is now set for September 30.

 Any bets on whether they get it done before election time in November?

Aviation: Serving 500 or 5500 Airports?

Anybody interested in providing the solution?

The DOT’s Future of Aviation Advisory Committee recently met and comments made in the meeting  indicate that small market airports are not in the airlines’ future plans – at least not the large carriers.  In fact, if not for the DOT’s Essential Air Service program, many cities currently receiving airline service would be in the no- airline zone. You can’t blame the airlines for not wanting to lose money; and, the current airline business model doesn’t work to serve smaller cities without government subsidies.

So, if the airlines cannot provide the solution, who can?

With fewer service options and more time spent processing through the system, the time to travel between small cities by airline often exceeds the time it takes to drive. Why fly when the drive costs less and doesn’t take much, if any, more time? Because flying often doesn’t make sense with the current options available, more people are opting for other means of transportation, drawing resources away from small airports.

What those airports and their communities don’t know today, but could know, are the true travel intentions of the people they are trying to serve. The airports must find out who, when and where.  In other words, they must identify the demand. 

Identifying the demand could be as simple as finding physicians in a community who are all attending an AMA convention.  This is just an example of the concept of group-buying, using an eight-passenger jet or a 30-seat regional airliner for the day to meet the specific demand to connect a group directly to another city.  Other examples could be alumni traveling to sporting events, golfers going to a new course or hunters traveling to a new lodge, etc.  If there is known demand, then supply will surely meet it. So, how do we find the demand?

Can Social Networking be a tool small communities can use to solve their air transportation problems through aggregating demand for travel?

Yes, it can.   Business Aviation, including small and large air charter operators, and small regional airlines, are in the perfect position to solve those air transportation problems.  We are sitting on a highly flexible (mobile), underutilized and diverse fleet of aircraft. Travel needs could be met on demand and by the seat with the right knowledge.  This may not provide a low fare airline solution that everyone thinks they want in their hometown; but, it could provide time-efficient and point-to-point travel at a reasonable price.

Isn’t that what we really want anyway?

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