I was reading recently a report that talked about the summer numbers and how we have been doing here in the United States in the business aviation market and the numbers don;t look as great as we would like them, but they are stabilizing a bit in this crushing economic downturn. The sales of some of the companies out there are non-existent and some are actually having a decent year overall considering what they are dealing with around them. The reports point to an ever increasing strength of the US Dollar. This does not necessarily translate into better news for the industry overall.
Part of the problem with the industry is not the fact that the dollar has been weak and that we are seeing difficulties here, the problem can also be attributed to the slide in the economy and tough market indicators in Europe. In certain market segments, the number of European-owned aircraft available
greatly exceeds the number of American-owned available aircraft. The slowing European economy has a bigger impact on the business jet
market than the strong dollar and this is a growing trend. We will have to see how they react to the economic slide and how that will change how we do business here in the United States.
The doom and gloom of the economy and the business aviation industry seems to only get worse as we hear of other problems with Hawker Beechcraft and their latest news of layoffs as stated by AIN:
“While there are pockets of growth in the global economy, the market for new production aircraft has stagnated at a very low level,” Hawker Beechcraft chairman and CEO Bill Boisture said in a memo to employees on Friday. In the letter, he said the company plans to “reduce the size of our salaried (non-hourly) work force by approximately 350.”
The report went on to state that this does not involve possibly involving union workers it may soon include them:
Although this latest round of layoffs does not affect hourly union workers, Boisture made it clear that future reductions in force might do so. “While we do not see a large-scale layoff of hourly employees at this time, small reductions or short furloughs may be required to modulate production line output in an attempt to reduce unsold aircraft inventory.”
Hawker is currently in talks to renew its contract with union workers and they are currently negotiating that contract. Apparently the current contract has one more year left, and union officials are expecting that Hawker is going to provide them with a contract to vote upon by October 9, next week. This is going to be an up or down vote for the union and there will either be an acceptance or a rejection of the offer and there will not be a strike as part of the process.
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.
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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.
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]
The NBAA will be holding its annual convention and meeting in Atlanta, GA on October 19-21, 2010. The Georgia World Congress Center will be host to the vent for exhibitors, speakers and attendees, and there will be a static display of aircraft at the DeKalb Peachtree Airport. This is the 63rd Annual meeting for the conference and they hope to have 25,000 attendees in the business aviation industry attend the event, all looking for the newest and best in the world of business aviation. You can register for the event at the NBAA site. The description is stated:
NBAA2010 is the premier annual meeting place for the business aviation community. This event brings together business leaders, government officials, manufacturers, corporate aviation department personnel and all manner of people involved in nearly all aspects of business aviation.
This event should give us a good look at whether the industry as everyone is stating is making a comeback from an economic downturn. I expect that since we are seeing record numbers at other events for this event to be well attended and many professionals all looking to see the future of the business aviation industry. Let us know if you plan to attend the event and whether you too have the same outlook that 2010 marks the year of the comeback in corporate and business aviation.
I have been doing some research on the idea behind CEOs and other executives that are receiving compensation from their companies that includes the use of a private company jet or the corporate jet. There has been a shift in public perceptions of C-level executive compensation since the down turn of the economy. As companies downsize their work force and they tighten their belts, many C-levels employees are scrutinized on their pay and any perks received. Part of the perceived perks in a company is the use of the company or corporate jet.
Many companies state that their C-Level employees’ use of corporate jets are to “ensure security” to “enable privacy” or other reasons stated. This seems to fall on infertile ground as it relates to the debate. Many see corporate jet use as a mere added benefit to the already soaring executive level pay. Reading through a recent article by Alison Grant of The Plain Dealer, she cited a recent study performed by The Corporate Library wherein they identified nearly 400 corporations that listed aircraft expenses. Of the companies that she looked at in the Northeast Ohio area many of them reduced their aircraft or eliminated them completely.
Many companies continue to use corporate jets for their executives and many of them cite the use of the jet as a security precaution. The fact that they are using the personal use of the company aircraft as compensation will continue to come under scrutiny as we wade through these tough economic times. I am curious about how the taxation of personal use is changing and how it is impacting the private use of the corporate jet. More to come as I continue to research this issue.
We are continuing to see more and more commercial airline companies teaming up with private jet charter companies to offer different opportunities in travel. The most recent company to join the private jet charter market is British Airways.
British Airways has teamed up with CitationAir to offer the latest in no frills private jet charters. AirlineTrends.com recently reported:
British Airways has teamed up with CitationAir, the private jet charter subsidiary of Cessna Aircraft, to offer its passengers a private jet connection within North America and the Caribbean. The new PrivateConnect service pitches itself as a ‘no-frills’ private jet service.
It is also stated in the article that:
“The service is available to anyone who has flown with BA in the past 12 months, members of BA’s frequent flyer programme, as well as employees of the airline’s corporate clients. BA customers can also use PrivateConnect to fly within North America if they haven’t arrived on or are due to depart onto another flight. Costs range from USD6,000 to USD10,000 per jet per hour depending on the type of aircraft. Chauffeured transport will be on hand after clearing customs to drive customers between their British Airways flight and CitationAir private jet. BA currently flies to 19 destinations in America.”
British Airways is joining Korean Air who recently joined with FlexJet and they join of course Delta and Lufthansa who has been partnering with private jet companies since 2008 to offer the service. As stated in their report, private jet companies, due to the current economic issues and industry decline are finding other distribution channels for their services. This also offers up ways for some of the larger commercial airlines to offer ways for their premium customers to find ways to expand their ability to land at airports where the larger commercial airlines are not able. This allows some of the passengers to go to destinations that were not available to them in previous bookings. This does make sense for the private jet companies, the airlines, and the luxury passengers.
Today at the Air Transport World 3rd Annual Eco-Aviation Conference, J Randolph Babbitt spoke about the environment and how the FAA is working to make it better. He states that over the last three decades aviation has done an exceptional job of reducing the noise and emissions of aircraft. He gave us an example of that reduction by stating that a fully loaded 787 flying from San Francisco to Kennedy yields fuel efficiency that’s similar to a 2010 Honda Accord at almost 10 times the speed. Very impressive statistic being that we are moving 3 times the amount of passengers as the 80’s.
In addition to the remarks about how well the industry has done over the last thirty years, Babbitt stated that the FAA is launching the CLEEN program. The CLEEN program, Continuous Lower Energy, Emissions and Noise, will award $125 million in contracts today to five separate companies to develop and demonstrate technologies that will reduce commercial aviation jet fuel consumption, emissions and noise. These five year contracts are going to: Boeing, General Electric, Honeywell, Pratt and Whitney, and Rolls Royce. Babbitt stated:
“The bottom line here is that we want engine and aircraft technologies that can be incorporated into the U.S. fleets by 2015 and will produce a 33 percent reduction in fuel burn regardless of the aircraft class. We want to cut nitrogen oxide emissions by 60 percent. And we want to make a cumulative reduction in aircraft noise levels by 32 decibels. These are ambitious goals, but they are achievable goals.”
Babbitt stated that this new technology could be seen in commercial aircraft as soon as 2015. This seems to be a new strategy for everyone as we begin to see how we can become more eco-friendly in out industry and how we can make our world a better place. These companies and the FAA seem to be leading that new directive well.
If you’d like more information about GE Aviation’s commitment to reduced emissions and fuel consumption, visit their website: www.geaviation.com
