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2008 Outlook

by David Wyndham 1. January 2008 00:00
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I hope everyone had a safe and happy holiday season. As we head into a New Year, I thought I'd provide my two cents worth on what might happen in the aviation market.

There are economic threats looming out there for 2008. US consumer spending will have to level off. Consumers have spent more than they earned for several years now, most of that fueled by a boom in real estate prices. That market is in a bust. The sub-prime loan crisis has spread beyond the consumer market and even commercial credit is tightening. That will hit general aviation as fewer aircraft owners will be able to afford upgrades, or to fly more hours.

Fuel prices. 2007 saw fuel prices rise well over $1 per gallon. The Globalair.com Airport Resource Center shows about $4.739 per gallon for 100LL nationwide. However, local prices can range to plus or minus $1 from that average. I don't look forward to any huge fuel price increases quite like we saw in 2007, but don't plan on seeing any decline. There will always be some volatility, so keep an eye on the price of crude oil. I would not be surprised at another $0.50 per gallon increase over the year. This means that with less money in the bank, and more money spent at the pump, general aviation will likely see a decline in flying hours in 2008.

Aircraft Sales. 2007 set yet another record year for general aviation deliveries and sales. However, most of those dollars came from the turbine sector with many new turbine models sold out for two or more years. Piston sales were mostly flat in 2007. The piston market will stay flat or decline in late 2008 as it is closely connected to the US consumer market.

While VLJs won't "darken the skies," at least two, the Mustang and Eclipse, will start to see the accumulation of some fleet hours. The VLJ will be a bright spot in the low end of the market. New VLJ entrants who don't have their funding secure will have a very tough time in 2008.

The Maintenance, Repair and Overhaul (MR&O) market will also see a turbine/piston split. The turbine MR&O will stay strong due to the growth in the turbine fleet. With a declining piston market, things will stay flat at best. Much of the piston fleet is well over 20 years of age. Look for aging aircraft issues to continue to develop.

Overall, I'd expect 2008 to be a good year for general aviation, the turbine market much more so than the piston market. This is more due to the inertia of 2004-2007 than a strong economy in 2008. Look for cracks in the aviation economy as we go into the second half of the year. The piston market already is experiencing the pain now.

Are you expecting to fly more, less or about the same hours in 2008? Why? Click reply and let us know.


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