I had a chance to catch up on some of my reading this week on what is happening in the market and I found an interesting snippet at AINOnline:
“Elevated used inventory, attractive used pricing and macro uncertainty continue to hold down demand for new business jets,” JPMorgan Equity Research noted in its latest business jet monthly report, issued this morning. “As a result, OEMs are eating further into their backlogs, and if these don’t stabilize in the coming quarters, further [production] rate cuts seem likely.
This is obviously not good news for those that are producing new jets, but those that have inventory in used jets it means now is a good opportunity to make a push for sales with those jets they have. The report goes on to state:
As for pre-owned jets, JPMorgan said used inventory of in-production models edged up to 11.8 percent in August versus 11.6 percent in July, with all categories showing increased inventories.
“We believe this increase is a bump in the road and expect that inventories…will continue to decline gradually,” it added. Meanwhile, average asking prices for pre-owned jets increased 1.3 percent in August, reaching $11.4 million.
It seems that used inventories will be reduced which is good news for all. When those inventories are reduced the new jets coming into production will also increase.
We are continuing to get reports from all of the sectors in the industry that the slide has slowed and the recovery has begun. It may be wishful thinking on the part of many of the manufacturers at this point but not for two separate business jet companies.
Business Jet Traveler reports that Bombardier CEO and President Pierre Beaudoin opines that he feels that the economic recovery is shown through the idea that less cancellations are occurring from customers. He specifically states that Bombardier is “starting to see signs of recovery as shown by the significant reduction in business aircraft order cancellations”, and this is backed by the statistics that during the second quarter this year they only had 26 cancellations of ordered aircraft while the same time period last year showed 80 cancellations. It appears that their orders may also be on the rise.
It is also reported that Gulfstream is seeing the market begin to get better and that it is not where it needs to be in the big picture but it is on the rise and headed in the right direction.
With these two companies showing signs of improvement and other manufacturers beginning to report the same numbers and forecasts, we can begin to see that the economic problems for companies in this industry may soon be able to recover from some of the worst conditions seem in a recent memory.
Operation Skyshield will have its 50th anniversary tomorrow on September 10, 2010. Only the World Trade Center attacks has resulted in the entire North American continent being shut down to all aircraft since the tests that were run by the U.S. and Canadian governments in Operation Skyshield. In an attempt to test the effectiveness of air defense systems, all aircraft were first grounded on September 10, 1960. The governments did this as merely a test and those results have never been shared. The operation was one of the largest air drills in aviation history and has not been done but three other times in the 60’s. Today’s air traffic is much more exponential than it was in the 60’s which would cause much more difficulties as a result. No other drills have been conducted in modern times.
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After reading about Avtrak in some aviation news I had a look at there operation. They are here close to me in my area and I wanted to get familiar with their operation. AIN reports that Avtrak is expanding its operations in Mexico and is soon growing beyond its capacity at its current location and will be moving its headquarters to Centennial Airport in Colorado. This is good news for companies in the aviation industry and it shows that this company is working hard to get ahead during down times. Their VP of marketing, Dennis Steinbeck, echos that sentiment in his statement to AIN, “We are one of the fortunate companies that have been expanding during one of the worst times in our industry.”
Avtrak is a maintenance tracking company and from their site they state:
Avtrak’s easy to use, web based services are recognized as the preferred maintenance tracking service by maintenance professionals worldwide. Avtrak’s services are considered the perfect blend of technology and highly qualified support people.
It is good to see that there are companies still expanding and growing and taking advantage of their hard work during this time of difficulty in the economy. If they can do it, I am positive we can all benefit from some hard work and some hustle.
I wanted to highlight the fact that we take for granted the “no frills” flights of commercial airlines and many people only dream of being able to have the best possible experience with first class flights, if they can afford what that ticket will cost them. I get a chance to see first hand some of the interiors of corporate jets and they are far above anything that even first class commercial flights can provide. I was reading recently at AirlineTrends.com that Virgin America is stepping up its game with in flight entertainment or “IFE”. The article states:
Virgin America has upgraded its ‘Red’ in-flight entertainment system with a number of innovative features, including the first ever seatback digital shopping platform, an open tab service, and Google Maps with terrain view. Already on Virgin America, passengers can use the IFE system to watch live satellite television, chat with other passengers, play 3D games such as Doom, and offset carbon emissions for their flight. Passengers can also purchase snacks, meals, and alcoholic beverages from their seats via Red. Flight attendants receive the orders via a tablet PC and bring the ordered items to the seat.
I love that commercial airlines are trying to make the experience of flying that much better for those that don’t have the use of their corporate private jets. I wonder when we will have headsets with a virtual screen where we can wear a helmet and get the feel of flying in a Gulstream or a or that Dassault Falcon while sitting in the back of the plane listening to soft music while the child behinds us screams because their ears hurt. Until that time, I will let companies like Virgin America try to keep up with the world of luxury flights.
It sounds like the people at Gulfstream are in for a better 2010 than they had in 2009. Jay Johnson the CEO and chairman of General Dynamics which is the parent company of Gulfstream stated, “We’re seeing a gradual improvement in the business jet market.” This was stated during the company’s second-quarter financial conference held yesterday. Johnson went on to state, “Gulfstream flying activity is up and we’re seeing a 16-percent increase in aircraft service sales…The industry has turned the corner.”
Gulfstream often seen as the leader in the business aviation space and one of the stronger markets in the industry is a good indicator of where the business of jet aviation is headed. Most of the numbers for Gulfstream are up in most of its orders in all categories. It was stated that Johnson expects sales to rise by “low to mid single digits” this year, with “steady growth” in revenues next year as G250 and G650 deliveries start in the second half.
Gulfstream numbers are not reflective on the entire industry but it is good to hear that corporate jets and jet aviation is beginning to “turn the corner”. We at Corporate Jet Insider believe it to be about time.
Many people ask what the options are to more traditional travel of commercial airlines. We know that on a commercial airline flight there are different classes of travel, be it coach, or business class or first class, but what are the options if you want to fly via a private jet? There are 4 options outside of commercial air travel that should be discussed. The options are listed as:
Each of these four types of corporate travel come with their own unique opportunities but none of them can be argued as the best option than outright ownership. I listed private ownership as the top spot here because that is what makes most sense if your travel extends beyond those of normal passengers in the business sector. I like the chart and discussion that was put together in the Wheels Up article written by Jeremy R.C. Cox. This is a great analysis of four types of of corporate travel listed above. He has listed out the annual costs associated with each option by using a Cessna Citation X and the Pilatus PC12. The Cessna Citation X is becoming one of my favorites in that category and it was interesting to note his analysis using that model.
The conclusions drawn by Cox in the article state:
“The Magic Formula: After analyzing the numbers listed above, you will see that there is a magic formula that comes in-to-play when you are deciding whether you should rent, or lease, or own. In this case we learn that you will have the lowest operating cost, per flight-hour ‘overall’, if you own your aircraft when your annual utilization is above 240 hours of flight-time.”
Having this type of analysis is crucial to the process of determining your own type of corporate or personal private jet usage. The analysis includes other costs that are not necessarily included in this formula such as your region, the type of travel you are doing and the Direct Operating Costs (DOC). This can be discussed at the time you decide on your own corporate jet purchase.
I was reading an article sent by a friend that indicates that studies have shown that corporate jet use is up and the month of June showed the increase as well. That means more and more companies are using their corporate jets for more travel and I am sure that personal use is up as companies and their executives use the aircraft for personal use associated with vacations. This increased use of the aircraft also means a possibility that you will have a higher maintenance budget. If you have budgeted for an amount certain for 2010, and that amount increases at all that may mean that your business aircraft or private personal jet may now be up for an inspection and those costs will be added to the yearly maintenance budget.
If your usage of your corporate jet increases over the year and it changes either your maintenance schedule or inspection, this can have a large effect on the annual budget you have for the use of that aircraft. You need to stay on top of that usage and the budget associated with the use so that it will not change your bottom line at the end of your fiscal year. Keep someone on top of the business use and the personal use and keep up to date with the maintenance of your aircraft. With the use of corporate jets increasing for both the business use and personal use it may be marking another indicator that the slide is over in this industry. It is good to hear that corporate jets may be on the rise.
There is always a number of people buzzing in the technology community when Apple comes out with a new product or there is a new press conference about its latest news. The Apple community is very loyal and they have a very sought after following in the mobile market. I am an Apple user in their laptops and computers, but I have not yet adopted the iPhone. It has to do with the service I use, but I still look forward to seeing what is the latest in the world of Apple. On Friday, Steve Jobs the leader of Apple held a press conference on the latest iPhone4 and I was one of the ones that paid attention to what was being said. The conference ended and they opened it up for questions and right out of the box, the first question asked Jobs how he was feeling and about his health. He responded by saying he felt better last week while he was on vacation in Hawaii and not working. This made me think about the way he travels.
Steve Jobs has been known for his salary of $1 per year, but he also has a number of things that are required under his compensation agreement. Part of that is his corporate travel. Steve Jobs chooses to travel on a corporate jet owned by the Apple company and I assume his latest trip to Hawaii was no different. What business jet does Steve Jobs use? He travels around in a well publicized Gulfstream V. The Gulfstream which is pictured here is top of its class and a great way for the Apple executive to get around on his many travels.
Jobs no doubt has many reasons to travel on the Gulfstream and security is probably a main component of that idea. With the secrecy of what goes on in Apple and the number of corporations looking to beg, borrow or steal from the innovations and for journalists looking to get the scoop on what is going on at Apple, I can bet that security is a big decision why Gulfstream is sailing through the skies with this top executive. You too can own a Gulfstream V for your corporation.
[Photo via John R. Beckman at Airliners.net]
