Business Jet Industry Takes Off — Will Interest Remain Aloft?
Demand for business jets could be flying high once again, as the economy slowly recovers and emerging global markets enter the fray. Can interest remain aloft?
Dan Hubbard, senior vice president of communications for the National Business Aviation Association, says after weathering some turbulent times there are reasons to be hopeful.
“When the economy slides into a recession, business aviation is one of the first things to follow that in terms of sales dropping way off, hours dropping way off,” he explains.
“So, predictably, if unfortunately, we have the greatest recession since the Great Depression, and we’re tied closely to the economy, the whole industry is going to fall off precipitously, and it did.”
While business might not be picking up full throttle just yet, Hubbard believes there is reason for “cautious optimism” based on three important industry markers.
A look at the first quarter data from the General Aviation Manufacturers Association, GAMA, shows that while there was actually a decrease in the jet market, there was an increase in sales of piston airplanes, which are smaller aircraft, seating between one and six passengers, flying at lower altitudes and traveling relatively short distances of 300 to 400 miles.
“The reason that gives us cause for optimism is that an uptick in sales in piston airplanes typically is a sign of a broader recovery across the board for all types of airplanes,” Hubbard notes.
A second positive sign, according to Hubbard, is an increase in flight hours, or hours that a company has an airplane in the air, which is up five to seven percent from this time last year.
“Now, that said, they had fallen off by about a total of 35 percent or so. It’s been steadily coming back up, but we still have about fifteen percent or so to get back to the big peaks of 2007 and 2008.”
Hubbard says the third useful metric that industry people look at is the used airplane fleet.
“Much like the housing market, if there’s a glut of them out there, people don’t view it as a good thing,” Hubbard says. “That means that a lot of companies have gotten rid of the airplane and because there are so many of them, that’ll drive prices down.”
According to Hubbard, the 2009 and early 2010 used fleet was the largest ever, contributing to an unsettling picture overall.
“That fleet is now diminishing,” Hubbard says. “It’s down quite a bit, which is a good sign, but as that’s happening, a lot of airplanes have sold at much lower values than they otherwise would have.”
Time is Money
Hubbard reasons that one explanation for the increase in flight hours is that companies have not have lost sight of the value of a business jet.
“Using it optimizes time, efficiency and flexibility and what you’re seeing is, for companies who already do own an airplane, they’re putting it back into full use again,” he says.
Doug Oliver, director of corporate communications at Cessna Aircraft Company, a leading designer and manufacturer of light and mid-size business jets, agrees with Hubbard.
“It might sound hokey but I’ve heard it referred to as a time machine,” says Oliver. “It allows people to use their time more wisely because they’re connected in flight. Security’s better. You can do business on the airplane because you’ve got your top people with you.”
Oliver also notes that everyone boarding the aircraft has been pre-screened, another big time saver.
“You basically go to the airport and get on and go,” he says.
Because business jets are faster and offer direct travel, companies save on pricey add-ons such hotels and meals, as well as additional ground transportation.
Who’s On Board?
Oliver says while most people envision the very rich jetting off to Monte Carlo, that client accounts for a very small percentage of users. He also points out that while the perception is that only CEOs fly business jets, more often it is technicians who are able to board a flight with the parts they need to fix something in a plant or factory more swiftly.
In addition to the stalled economy keeping business jets grounded, the industry took a lot of flak in late 2008 when executives from the top-three automakers arrived in Washington, D.C. on private jets to ask the government for public funding.
“There might have been a number of good reasons why they did that but whatever the case, they did not communicate any of them and so it led the congressmen holding that hearing to think ‘well, then there must’ve been no good reason why you used the airplane,’” Hubbard explains. “And then I think in Washington a conventional wisdom took hold that said ‘maybe there is never a good reason to use the airplane.’
“Most of the turbulence was related to the economy but it was made some amount worse, we don’t know how much, with the perception fallout after that event,” he said.