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2005 Outlook

by David Wyndham 1. January 2005 00:00
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Much of North America is quite cold - which is normal for January! Even on Olde Cape Cod, which is normally moderated by the (always above freezing) waters of the Atlantic, is in a deep freeze. I was tempted to announce a new Conklin & de Decker office in Hawaii, but no. I'll just wear my Aloha shirt and turn the heat up.

What isn't cold is business aviation. While 2004 was not a return to 1999 - mid 2001 level of activity and sales, things are picking up. I figured I'd update a few issues for 2005.

VLJ's are still hot. Eclipse flew their certification flight test aircraft at the end of 2004. Right on schedule. Their website has a timeline which gets updated. Anyone interested can see what progress is being made. Certification is still expected early in 2006. Eclipse has a lot to prove, their company, their airplane and the concept of the VLJ. They seem to be staying on schedule and are keeping their focus on certification.

Cessna is making progress on the Mustang. Its PW615F engines are undergoing testing. Cessna is busy with this aircraft, plus the updated CJ1+ and CJ2+ models. While there isn't a press release a week about the Mustang, rest assured that Cessna is all but a sure thing for getting the Mustang to market.

Adam has slipped in their certification estimate for the A700. Adam expects to certify their A500 twin piston first and then apply much of that data to the A700. They are negotiating with the FAA on how much common data there will be. So, it looks like 2006 at the earliest. Adam has been "quiet" recently, so I'm curious as to what's new there.

It looks like no manufacturer will make it first to market much sooner than the others. Cessna and Eclipse both appear to have the funding, and thus the best shot at making their current targets. Adam appears to be doing adequate with funding, but recent delays in the A500 will cause delays with the A700. If the FAA makes the A700 do a lot more testing than anticipated by Adam, the schedule could slip some more. The rest of the proposed VLJ aircraft have not shown any remarkable progress. Cessna and Eclipse appear to have the lowest risk of failure.

Aircraft Selling Prices. Pre-owned aircraft sales are steadily improving. For more and more models, it is not a buyer's market anymore.

Currently, 13% of the turbine fixed wing business aircraft fleet is available for sale. That still indicates a softness in the market. However, if you separate current production models from out-of-production models, the numbers tell another story. Only 6% of the active current production fleet is for sale. For the out-of-production models, the number climbs to 17%. So, if you are hunting for a bargain, you are not likely to find it in a late model production aircraft.

But, if you are looking at out-of-production aircraft and find one that is in excellent condition, with RVSM, you may be able to negotiate on the selling price. After all, there are likely to be many alternatives - even if they require RVSM and other updates. The market for these older aircraft favors the buyer.

Non-RVSM aircraft that are for sale may just end up sitting for a while longer, waiting either for their upgrade or sale to a non-RVSM nation. But for late model aircraft, sales should see a steady improvement.

With the market for late model aircraft tight, this favors the seller, and the new aircraft manufacturers. That doesn't mean that a fair price can't be negotiated, but that the selling price offer from last year that you didn't accept won't be lower this time around.

Helicopter market picking up. As tough as it was for the fixed-wing market, the rotor-wing market was worse off. Today, it can be described as cautious optimism. Industry consolidation is underway. Sikorsky now makes piston helicopters (they purchased Schweizer). Bell teamed with Agusta-Westland (themselves a combination of manufacturers) to face off against Sikorsky for the US President's new helicopter. Sales are up. If gas prices continue to increase, oil explorations (and its need for helicopter support) will pick up. We'll have a better feel for the state of the rotor-wing industry after next months Heli-Expo in Anaheim, California.

Things to watch in 2005.

Cost pressures are there already. Fuel prices may continue to be volatile. As the aviation industry picks up speed, employment will increase and with it, pressure to increase salaries.

Avionics updates aren't done. While RVSM was the big issue for a lot of aircraft, TAWS (terrain warning systems) and Mode - S transponders (in Europe) may still present issues. When evaluating older aircraft, check and see if these are required, and if so, if they completed.

User fees and airport access. There are more and more pressures for user fees to be imposed. Similarly, some local airports are trying to restrict general aviation access, or impose prohibitive fees. Groups like NBAA, HAI, AOPA and more know this is a hot topic. If you aren't a member of the appropriate group, join!

I'd like to hear if the RVSM implementation is affecting your flight operations. Just send me an e-mail with your experiences to date. What other issues do you see for 2005? Please let me know.

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David Wyndham



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