A parent had twin boys. One was a pessimist and the other, an optimist. For their birthdays, dad gave the pessimist-twin a room filled with toys. The pessimist-twin was sad. When asked why, he replied that if he played with the toys, he'd surely break them all. For the optimist-twin, dad gave him a big pile of horse manure. The optimist grabbed a shovel and dove right into the pile exclaiming, "With all this manure, there has to be a pony in here somewhere!"
Ronald Reagan was fond of this joke. And for the 2016 state of business aviation, I think it might be apropos. Three major new aircraft forecasts, two of which were related in the past month, all point to a healthy business aircraft market for new aircraft over the next decade. The forecasts expect from 7,900 to 8,300 new aircraft deliveries. Growth is expected to be solid in North America as it retains its title as the dominant business aircraft market fro at least 10 more years. But, still there are cracks.
Brian Foley recently released his look at the pre-owned business jet aircraft market. His prediction is for declining activity in the pre-owned market for the next five years. He thinks we have entered a slowdown in the pre-owned market. He's developing a pre-owned forecast model to get to the model and cabin-class level of detail. Lest you forget, Brian's firm, BRIFO, predicted a severe and lengthy downturn in the business jet market in September 2008. He has the input of some significant players in global business investing, so heed his call.
In two recent events, at one of our Conklin & de Decker seminars, and again at the National Aircraft Finance Association annual meeting, forecasters and financiers were pretty flat on the state of the global economy. A quarterly survey of leading CFO's by Duke University said these individuals think there is a 31percent chance of a recession in the US by year end 2016. Interestingly, 61% of the firms in the survey expect to increase employment in 2016. Top concerns in the U.S. include economic uncertainty, the cost of benefits, difficulty finding qualified employees and regulatory requirements. Don't forget, every four years, we worry with the uncertainty about the outcome of the Presidential election. Other concerns in the global economy include the price of energy and oil markets, China's slowing economic growth and currency problems, terrorism in the Middle East, and economic and political turmoil in Brazil.
Regardless of the forecast and opinions, aircraft will remain a vital tool for communicating and conducting business. You ned to have a plan, and a budget, and keep both up to date. Control what you can: your costs, your mission, your skills. Never miss an opportunity to market the effectiveness of the business aircraft. Buy now if you are in the market to do so. New aircraft manufacturers will be looking to make the year-end targets. As Brian Foley surmised, the pre-owned market will remain soft. If you are selling, you are fine if you are upgrading. What you may "loose" in the value of your current aircraft will be made up in the value of a larger aircraft. If you are selling, and downgrading, might as well do it sooner rather than later. Don't walk away from qualified offers. Pick your broker carefully. Find one who is making deals and knows the market for your aircraft. Communicate and listed to your customers. For the flight department, every person on your aircraft is a customer. And everyone in your company is important to your success. Consider upgrading your aircraft if you are keeping it. Is your aircraft ready for ADS-B?
Last item, got a shovel?