In tough times leaders push through and set the bar for the rest of the industry. That seems to be the case for the people at Gulfstream. Gulfstream has announced that it will be expanding its headquarters in Savannah. This is good news for the people in Savannah and good news overall for the industry which shows some strength in the business aviation industry.
Apparently the project will include $500 Million in expansion which includes new construction, and renovation of current facilities. The expansion is also inclusive of office and lab facilities at the Gulfstream Research and Development Center in the Crossroads Business Park.
The good news for the local area is that it may create an additional 1,000 Gulfstream jobs. This increases the current workforce of about 5.500 jobs in the area.
Gulfstream President Joe Lombardo, states:
“This expansion is necessary to meet the projected increase for new business-jet aircraft production and the maintenance that will follow,” Lombardo said. “With our own sales trends and market forecasts suggesting an upturn over the next decade, we want to ensure Gulfstream is well positioned to meet the demand. We are already beginning to see signs of a modest recovery. In the third quarter of 2010, we booked more orders than we had in any quarter since the downturn began in mid-2008. Furthermore, as flying hours have increased, Gulfstream service centers have enjoyed a significant increase in service volume.”
Again this is great news for the industry as a whole as leaders begin to gear up for the recovery. Gulfstream has shown that it will continue to lead the industry in their efforts. It can be hoped that this marks the upturn for the remaining players in the market.
I have been watching as people travel this holiday season. We are seeing the issues with the new TSA security measures causing numerous delays of people at airports all over the country. The TSA “pat down” is making news everywhere and it will get worse with the holidays and everyone traveling to get to their holiday destinations. Travel is up and it looks like it will continue to do so through the new year holiday.
Add into the security issues and the volume of travelers and the idea that weather at certain parts of the country will make it even more difficult and it makes private jet travel much more appealing. Think about that most important face-to-face business meeting not occurring as the TSA is making sure that you are safe to travel, or that family of 6 kids all needing special treatment to get through security and Grandma and Grandpa slowing up things as they get to their Christmas holiday party with the grand-kids. They are part of public transportation and could jeopardize your making that meeting. Holiday travel is brutal.
Think about not having to deal with the 2 hour long security line, that missed meeting or being stuck in an airport hoping to get that standby ticket out of an obscure airport because your plane is stuck 500 miles away in a northern city that is buried in snow. That is one of the best reasons I can think of using private aircraft to travel during the holidays. I hope all of you have a safe and fruitful holiday season.
Jet sales are down everywhere and we may have the reason why, jet financing has changed and it may be more difficult to be approved for loans. It was reported by AIN:
With the 2009 credit crisis now abated, banks claim that they’re ready to lend, but business aircraft brokers complain that their clients’ loans are not often approved, according to business aviation analyst Brian Foley. “What every buyer needs to understand,” he said, “is that loans are evaluated very differently now.” Residual values have plummeted, Foley said, “so today’s loans are based more on the borrower’s balance sheet and less on the repossessed asset value of the aircraft, although that continues to play some role. Most banks won’t finance jets more than 20 years old. For some, even 10 years is the cutoff point.” Down payments are also higher, he added. “Gone are the days when a buyer could borrow more than the aircraft’s price–say, 115 percent–with no money down and invest the difference in improvements. Today’s buyer can expect to pay 10 to 20 percent down.” As a result of this tighter lending situation, brokers have told Foley that more than 70 percent of their pre-owned aircraft sales this year have been all-cash, surpassing that of years past. “But with lending more restrictive now, the road to recovery feels like it’s paved with quicksand,” he noted. “Even so, as far as pre-owned buyers are concerned, there is still good financing available, but only to the best credit-risk operators seeking younger, better-quality airplanes.”
It’s good to know your financing arrangements going into the transaction and have a better picture.
In light of the post yesterday where I pontificate about the recovery of the private jet industry, Marc Yahr of L&L International sends me another forecast that he recently read from GlobalAir.com. I love the ending paragraph of the post by David Wyndham:
I’ve seen Richard Aboulafia of the Teal Group present his firm’s aviation sales forecast on several occasions. As he said one time, “If you don’t like my forecast, feel free to make one up on your own.” So don’t worry so much about the future, but just take care of today. If you need a jet, go get one. If you need to sell your current jet, go get a good broker to represent you.
This is great advice from David and we all have our thoughts on the state of the aircraft industry. We are all making up our own forecasts, in some cases to ease our own fears and anxiety and in some cases we actually have some numbers and stats that back up our statements. Like an old lawyer friend of mine used to say, “92% of all stats are made up.” In my case my forecast was based on a gut feeling and the fact that it may be an old lawyer trick of making up the facts that you need in order to be persuasive. Take a moment and read through the post where Wyndham talks about his thoughts.
I don’t suppose we will see this headline in many of the experts’ outbox as they begin to look forward to 2011. In fact, I hesitated writing the title this way in case I might have a chance to jinx the possibility of it actually being the case. It appears that the slide has stopped on many fronts and we have been reporting all the probabilities and possibilities that many companies will begin to see a recovery. The thing about a slide stopping is there is only that next step, the process of recovery.
The probability of a recovery happening quickly is probably not the case here as we see the bottom of the economic woes. The likely scenario will be a plateau of the slide in many cases. Many companies will be taking 2011 to pick up the pieces and begin strategies for recovery. We see changes in the way that many people are traveling. It may be that the government will help with some type of economic stimulus and Wall Street will begin its own recovery. It may be 2012 before we see the real results of the beginning of the recovery, but we can set our sites on business aviation going to the next level.
In the United States this week we celebrate Thanksgiving. Perhaps my point is that if you have made it this far in business aviation, if your in the business of buying and selling private jets and you have made it this far through 2010 you might need to count your blessings and be thankful. In 2011 we have a fresh new year to see if we can begin the climb out of the economic problems we faced in 2010 and make 2011 the year of private jet recovery.
I was reading recently about the trials and tribulations of a the Embraer Legacy 600 that was manufactured in South America, had a mid-air collision with another jet and had to be refurbished in a sense. The jet was reported to be recovered and repaired:
The Legacy 600–now registered as N965LL–was recovered by a mobile repair team from Cleveland-based Constant Aviation, which was hired by the new owners of the Legacy to recover and repair the jet.
This is an extraordinary story about a jet that will be owned by someone and used as a private or business aircraft, but it also brings to mind man questions in my mind. The idea that this damage has occurred to this aircraft makes me wonder what other aircraft had endured over their lifetime. I think it is imperative that when purchasing an aircraft that each potential owner has a clear picture of the maintenance of the aircraft and the repairs that have been made. Not every aircraft has has had the type of history that this Embraer Legacy 600 has had, but it is important to learn about a jet’s history. It is important that you use a company that is trusted in the industry. Some of the repairs that this jet endured were reported:
The Legacy had a damaged left elevator and the left wing was missing its winglet. “Some structural repairs had to be done to get it in a position to where we could fly it,” Maiden said, “even on a ferry permit.” This included replacing the horizontal stabilizer before the Legacy left the airbase.
The humid jungle environment in Brazil was not kind to the airplane, which sat outside for a year-and-a-half after the accident, and all of its Honeywell avionics displays had to be replaced, he said. The fuel tanks were clean and the Rolls-Royce AE3007 engines had been preserved–although they hadn’t been run, they were in good shape. “We did extensive boroscoping and testing to verify the validity of the engines,” he said. The airframe was also free of corrosion. “We had a team of 10 people,” he said, “and we spent three weeks doing testing and analyzing all the systems to make sure it was a safe airplane to put back in the air.”
Not every private aircraft has a story of this one but each previously owned aircraft has a history. Make sure you work with a company that can help you learn about that history, make informed decisions, and of course buyer beware. L&L International has been doing business in this area for a number of years and they can assist you in every facet of your research and can guide your buying process.
The recent elections two weeks ago might have changed the face of business aviation since some advocates of the industry in congress have been unseated or are now moving on to other things. It was recently reported via AIN that the elections changed what we see in business aviation and politics:
With the Republican victories on Tuesday, several prominent backers of general aviation have moved on. The highest-profile loss for aviation as a whole was Rep. James Oberstar (D-Wis.), the chairman of the powerful Transportation and Infrastructure Committee. The 36-year legislator is considered by many as the most knowledgeable lawmaker in Congress on aviation issues. He began advocating satellite navigation many years ago and was always steadfast in opposing user fees for general aviation. The National Air Transportation Association said it will miss the support of Oberstar and Reps. Vernon Ehlers (R-Mich.), who is retiring; Allen Boyd (D-Fla.); Mark Schauer (D-Mich.); and John Boccieri (D-Ohio), “all of whom have been ardent supporters of the general aviation industry and fought for issues important to NATA members.” Oberstar–who was the primary backer of a provision in the pending FAA reauthorization bill involving a labor dispute between UPS and FedEx, one of the reasons that the House has been unable to pass FAA reauthorization this session–said he was swept away by “a national wave” of anger over federal bailouts, stimulus spending and healthcare reform, all of which he supported.
It may not have the effect on business aviation as reported however we can only wait and see how the changes work themselves out. Either way it appears that losing someone that is considered the “most knowledgeable lawmaker in Congress on aviation issues, cannot be a good thing.
I have been giving some thought to the recent brouhaha about the old Speaker of the House using the Air Force for travel needs and the new Speaker of the House indicating that would not happen and that the new Speaker would be taking commercial flights like the rest of the citizens. I am not sure how this can be safe when a potential person who may be the President of the free world would be traveling with the rest of the country in economy class.
Perhaps the privatization of the travel is in order. We have been doing business travel for many years and have become pretty efficient with this type of travel. We can have the competition of working to be most cost effective and being the best company to provide this travel. This takes out of the equation the excess we see with $400 hammers and $1000 toilet seats we see in the military, and creates jobs and other economic benefits for the country.
I doubt this will ever actually happen and frankly the security issues and the other things that would come out of it have not been thought about on my part. I merely believe it would be good for the private jet industry to have this shot in the arm. I know that this is always going to be an issue with travel by our politicians just as it was an issue with the car maker CEO’s during the buyout. What do you think about Speaker of the House traveling around in that latest Citation X?
President Obama is trying to pull out all of the bag of tricks he can for the economic recovery and to that he is now proposing giving small businesses a new boost. He is proposing to make it possible for small businesses to purchase aircraft with the possibility of the tax incentive. Great news for some if the legislature would pass the deal. Business Jet traveler reports more fully:
President Obama has proposed giving small businesses a 100-percent bonus depreciation tax incentive for 2011 that would increase the currently proposed 50-percent bonus depreciation deduction, retroactive to September 8, 2010. This deduction would apply to purchases of business equipment such as vehicles, computers and, of course, business jets. Business aircraft manufacturers are hailing the proposal because it would give businesses added incentive to buy aircraft now. Congress still must pass the measure. Legislation currently pending in the Senate would reinstate the 50-percent depreciation bonus that was in effect in 2008 and 2009 through the end of 2010. Supporters are hopeful that the 100-percent bonus depreciation incentive can be added to this bill.
This is a great deal if it works and we will see if it moves the needle in the current economic crisis we are finding the business aviation industry. It is not yet clear how this might help jet sales.
Catching up on more of the news that came out of the NBAA show last week we hear news that Embraer has news that the new Legacy 650 has now had its certification and is able to begin handling passengers. The Legacy 650 is a large class jet with a a longer range than the current 600 model which is the previous type jet. The new jet has a capacity to fly up to 3900 nautical miles carrying 4 passengers and can accomplish this feat as a result of improvements to the landing gear fuel tanks and the wing system. The jet was launched last year during the down turn according to their representatives and the Legacy 650 is helping them during this downturn.
The Legacy 650 is helping Embraer as a result of the it being a new jet and not having any on the used market which has increased their sales in this area. We are seeing many companies not launching new jets as it is not the best timing during this economic downturn. Embraer representatives are arguing just the opposite. It will be interesting to see how well the Legacy 650 does on the open market in this down economy.
