New Year’s Eve was an early night for me. I was fighting off a nasty cold and despite the intake of grape-related products, ran out of energy before 2011 said hello. But as I didn’t sleep much either, I guess I was awake for the New Year. With some drugs in my blood, the cold’s effects are waning as I write this. If my outlook for 2011 is a bust, I will claim it is the after-effects of decongestants!
2010 was a year of what I’ll call a stagnant recovery. Economic signs were generally positive. The US stock markets finished 2010 with double digit gains versus 2009. NASADQ was the biggest gain up almost 17% over the year. However, rising corporate profits and stock indices have not resulted in job gains here in the US.
Business aviation is tied in with corporate profits, so that much bodes well for our industry in 2011. Aircraft sales are expected to be (relatively) strong for the last quarter of 2010 if the December activity of aviation tax and legal folks are any sign. Flight hours flown seems to be on the rise as well as charter activity. But again, new jobs and rehires are not showing strength just yet.
So here go my picks for 2011:
Business aviation activity will continue to show steady, but slow, growth. I think aircraft sales will slowly increase here in the US, be flat in most of Europe, and show some strong growth in the Middle East and Asia. As with the past several years, I think more than half of the new aircraft sales will be outside the US. So for US-based aircraft brokers with International experience, this should be a better year for you.
Used aircraft values will stabilize. Popular, newer models will likely show some appreciation as the correct for being under-valued. Older business aircraft values will be stable. I don’t look for any appreciation in first generation business jets as these low prices are the new normal.
As one banker said to me about aircraft age, 15 is the new 20. In other words, financial institutions will continue to be wary of lending substantial amounts on older aircraft. Full disclosure and down payments will continue to be required as credit is available to the well qualified.
Fuel prices will rise considerably in 2011. Crude is inching to $100 per barrel. While some have forecasted up to $150 per barrel for this year, others think the increases will be much lower. So $6 to $7 per gallon may be on the near horizon. This will have negative effects on business aviation as I doubt budgets are increased for many operators. So if you don’t have a wallet full of fuel discount cards, better sign up now! And don’t forget to use Max-Trax to map out your fuel stops en route.
Jobs. I don’t see a lot of hiring in new manufacturing within aviation. The OEM’s are still hurting and will be very cautious in re-hiring employees until they start getting a solid order book. Even with Bonus Depreciation here in the US that is still a ways off. MRO’s should see a good year as operators that have put off maintenance and refurbishments need to have the work done. That should bode well for jobs in that sector. As flight hours pick up, that should mean more jobs in the cockpit. Again, I suspect companies will be cautious and slow to re-hire. Do more with less is the mantra for aviation managers (again) this year.
So what does this mean for the typical operator? I hate to repeat myself, but managing and controlling your costs will be job #1. Which means that you will need to understand your costs, track your costs, and budget wisely. I hope we can be a help.