I just returned from our nation’s capital in Washington DC. I was recently attending the Points of Light Institutes’s Tribute for President George HW Bush and landing at Dulles I noticed the lack of many corporate jets. It seems that the economy makes it difficult to find the leaders of the country using private business aircraft. It may be the location that I landed or it may be that they are all traveling in other places or it could be that corporate jets are not welcome in that part of the world.
We all of course remember the tongue lashing the leadership of the car makers received when they took their private business aircraft to the capital when they were asking for the bailouts they received when the economy headed down. It may be that corporate jets are still a black mark or not well received. The National Business Aviation Association continues to combat these types of thoughts. It would be interesting to see if the trend continues or if we will see more private jets at airports in and around our nation’s capital.
There did seem to be no shortage of private helicopters flying in and around the city. I think it may be related to the way the traffic patterns are in the DC. I for one would have loved not to be caught in traffic on the highways and in the city.
The whole country was watching the 83rd annual Oscars last night in Los Angeles and I was curious if there was an increase in the number of private jets or corporate jets that flew in or out of the city. It seems that many private jet charter companies increase their advertising and their offerings for stars and VIP and executives that wanted to fly into the event in style. The issue there is most of those that are nominated or are attending the event already reside in the area.
There are some that are reporting that many stars that attended are now green since they didn’t charter private jets and didn’t upgrade their travel in and out of the show. Not much traffic at the local airports for them and that goes without saying since they are again living in the area. Many of those reported that are now more green for not flying in and out of Los Angeles didn’t report about their attending the Super Bowl festivities a few weeks ago. Congratulations to all the winners last night and now everyone will be headed home or to the next event, so perhaps corporate jet use will rise here in the next few days from the Hollywood area.
In a report a week ago JP Morgan North American Equity Research analyst Joseph Nadol III indicated that there is a “significant overhang” of pre-owned jets available at attractive prices. This makes for bad news for new jet sales which he described as “anemic”. He indicated that new aircraft sales were continuing to decline and stated:
“We see potential for further rate cuts if orders do not pick up. However, there are reasons for optimism. Global corporate profits were up an estimated 46 percent in 2010, and they have historically been correlated with bizjet deliveries, though there is a one- to two-year lag.”
The report revealed that used business jets have trended down since the middle of 2009 and are now 3 points off of the peak sales. The trend included a .4% drop from 11.7% to 11.3% last month. Nadol stated, “The bad news is that even after this decline, inventories remain at a level identical to the 2001 peak.” This does not bode well for new business jet sales but if the trend continues it could mean a turnaround. The growth for 2012 is forecast at 20% and JPMorgan opines that if the demand picks up, that the industry could meet that figure. If orders do not continue to increase or do not pick up, the forecast of recovery may be longer than the next two years and will be longer. The report said, “If orders do not start coming in, the recovery will get pushed out.”
For those of us selling pre-owned business aircraft this report was not necessarily bad news but for the manufacturers looking for new jet sales, they are probably “cautiously optimistic”, but yet only if the amount of pre-owned jets drop.
The new Florida governor is keeping a promise to residents of Florida and is selling off the private jets owned by the state. The newly elected Rick Scott has directed his staff to liquidate the two business jets owned, a 2000 Beechcraft King Air 350, and a 2003 Cessna Bravo. This is seen as a political move that will obviously be seen as a way for the state to cut back on costs and will add to the difficulties faced by the business aviation industry to not be seen as a perk business for others. Florida’s governor stated:
“The privilege of using a state-owned aircraft is an unnecessary burden to taxpayers, especially when lower-cost travel options exist.”
An interesting understory to the issue is that the governor used his own private aircraft during the campaign trail to be elected to the governor’s spot. According to the Florida Aviation Trade Association executive director, Paula Raeburn, the governor knows about the benefits of using the business aircraft as a business tool as she stated:
“Scott used his own corporate aircraft extensively during his campaign, so he knows what a resource and business tool an aircraft is.”
The business aircraft will be sold at auction on February 9, and experts are believing that the bids on the aircraft will begin at about $2M. The average of the cost of the aircraft is about 2.75M according to reports. It will be interesting to note if the new governor will use his own aircraft and bill the state for its use or asked to be reimbursed for the use of his own aircraft.
Many people increase their travel in and around the holidays. This means good news not only for the commercial travel industry but for the private and business aviation as well. The travel increase means that for most charter companies that provide jet travel saw an increase in their booked flights and saw prices increase a little. Now that the holiday season is over and we are going back to the status quo in the world of private travel, In fact it has been reported that private charter flights are now down 50% from this time last month. Charter flights are down and the bookings of that type of travel has gone back to pre-holiday levels. It is nice to know that people are still booking at the previous level.
Further good news is that prices are not only staying current but might have had some of an upswing in charter jet prices. The global price index was stated by Avinode at 97.37 and that is up almost a point from this time last month. We here in the North American market may not have the same increase s prices for charter flights were seen as “softened”. Hopefully, we will see increased usage of private jet across the industry in the future.
I talked earlier about the fact that the holidays were over for charter jet companies, however, it does seem that at least one wholly owned company in the charter jet world is seeing growth over this time last year. XOJet, based out of Brisbane and California, is reporting that they are up 50% over the same time last year and in fact they are increasing their fleet to meet the demand. They are adding to their fleet to meet the demands of customers by adding a Bombardier Challenger 300 series and has added last month its first ever Challenger 605. The company is reporting that it plans to add additional jets in its fleet in the future in 2011.
As a company they have increased its numbers by 50% but in the large market cities of Los Angeles, New York and San Francisco it has seen larger numbers. The commercial operations leader of the company, Brad Stewart has stated:
“Our growth in New York, Los Angeles and San Francisco continues to accelerate, with all three markets growing more than 70 percent in recent months and exceeding 80 percent overall growth in November.”
I hope XOJet continues to see the growth in its industry and they continue to be a leader in chartered jets.
JetNet provided some good news for those selling pre-owned business jets in recent time. According to their report, from January through October 31, business jet sales transactions climbed by 16 percent, followed by turbine helicopters (up 15.2 percent) and turboprops (up 4.5 percent). The report from JetNet went on to state that, pre-owned inventory went down over the same period last year for all but turbine helicopters, which rose slightly by 0.4 points, to 7.2 percent of the in-service fleet–but still below the 10-percent mark that delineates a seller’s market (inventory below 10 percent) from a buyer’s market (inventory above 10 percent).
Finally, pre-owned business jet inventory went down slowly but steadily to 15.2 percent at the end of last month, compared with 16.7 percent a year ago. Turboprop inventory decreased by 0.7 points, to 10.7 percent, edging closer to the 10-percent market equilibrium. Despite increased transactions and lower inventories as stated, the report from JetNet said aircraft are selling more slowly now than they did a year ago, ranging from 41 to 93 more days on the market, and in turn asking prices are down by double digits for jets and turbine helicopters–by -12.6 percent and -11.6 percent, respectively. JetNet reported that turboprop asking prices were 2.6 percent lower year-over-year.
These are numbers that might spell good news for corporate jet sales and will perhaps show the climb from current trends in the business aviation industry and private jets.
Inventory of used corporate jets is an indicator of the market and the inventories of used aircraft has fallen off last month which changes what the trend has been over the last three months. The demand for that used aircraft still remains low however. JPMorgan aerospace analyst Joseph Nadol III said in the monthly business jet report released last week that:
“While we expect gradual downward movement to remain the trend, it should be some time before enough used inventory clears to spark new demand if this pace does not pick up materially.”
The report went on to indicate that average asking prices decreased 1.1 percent, to $10.8 million, and that the new aircraft sales, the investment firm noted that third-quarter deliveries declined 32 percent from a year ago. Apparently, heavy jet indicators “remained strong,” with deliveries down only 5 percent. Light jet deliveries fell 54 percent, while midsize jets were down 41 percent. Cessna and Hawker were the hardest hit, with year-over-year deliveries down 62 and 60 percent, respectively, while Gulfstream was the only manufacturer to post an increase, with deliveries up 35 percent.
These indicators are not great news of the industry but they are well received as manufacturers and sellers and others are looking for any signs that the industry is looking to change its current slide and the trend of poor performance in business aviation sales.
There has been a jump in the use of private jets in charter flights this holiday season according to reports. Charter flights are being booked at a higher rate. The prices for charter jet prices seems to be decreasing somewhat in the US and increasing in Europe. AIN reported the following numbers from Avinode:
An early takeoff for seasonal holiday-driven traffic provoked a steep spike in demand for private charter flights. According to the latest forward-looking index from online charter portal Avinode, projected demand for this month was more than 75 points up on the November 1 level at 167.35. The December 1 index was almost 80 points above that recorded on the same day last year. There was more continuity in Avinode’s price index, which shows rates marginally up globally and in Europe, and very slightly down in the U.S. market. In North America, the average flight hour price for a Cessna Citation Excel stood at €2,428 ($3,180); Hawker 800, €2,530 ($3,314); and Challenger 604, €3,753 ($4,916). In international markets, the average rates for these types were €2,749 ($3,601), €3,260 ($4,270) and €4,836 ($6,335), respectively.
This is a bit of good news for those in the charter business and those wanting to get home for the holidays and traveling safely and in style for the holiday season.
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.
