Since NBAA in Orlando ...

... much of the news for general aviation aircraft production has been negative. Must be time to put the rose-colored glasses in storage. This year’s annual meeting of the National Business Aviation Association was noticeably downbeat, with an absence of new orders and new aircraft introductions. Since then, the manufacturers have begun to be hit by the turmoil in the financial markets. Mooney Airplane Company of Kerrville, TX has basically shut down its new aircraft production, laying off some 71 percent of its workforce, according to the local Daily Times. Hawker-Beechcraft has announced layoffs, and Cessna is cutting back on plans to expand bizjet production rates. Not all the news is bad. It’s reported that this week’s Middle East Business Aviation show recorded some $1.5 billion in new aircraft orders, and forecasts for that region see the business aviation fleet tripling by 2025. Eclipse Aviation has brought back laid-off employees and is again distributing payroll checks. And, the General Aviation Manufacturers Association reports that a total of 2,977 airplanes were shipped in the first three quarters of 2008, valued at $18.2 billion, compared to 2,918 units valued at $15.1 billion during this same period in 2007. (Piston-powered airplane shipments totaled 1,646 units compared to 1,857 units delivered in the first three quarters of 2007, an 11.4 percent decrease. Turboprop shipments increased from 300 units in the first three quarters last year to 341 units in 2008. Business jet shipments totaled 990 units in the first three quarters of 2008, a 30.1 percent increase over the 761 units delivered during this same period in 2007.) Yet, the latter numbers are really a case of yesterday’s news. Comments GAMA president and CEO Pete Bunce, “Notwithstanding these positive third quarter numbers for turbine-powered aircraft deliveries, our industry is experiencing difficulties due to the weakness of the global economy … [and] the uncertainty of financial markets worldwide is negatively impacting the entire aviation industry." Brian Foley, president of Sparta, NJ-based consultant Brian Foley Associates, cautions, “The record order books will not be as firm as OEMs would like to think, and we’re warning our clients to expect double-digit percentage order cancellations depending on the manufacturer.†He says that due to order cancellations and deferrals, worldwide new aircraft deliveries will peak a full year before others predict.   “For the next few months, OEMs will provide earlier delivery slots to solid contract holders as others cancel or are unable to make progress payments,†says Foley. “This will keep deliveries strong only for the rest of this year and next. Eventually the smart money will opt to keep their out-year delivery slots in hopes that the dust will have settled from the current economic situation by then.†It will get worse before it starts to improve. Used aircraft values are also dropping, and the aviation services sector is experiencing a slowdown. We’ve been here before – the GA sector lived what could be called a depression from 1978 until the mid-90s. But it’s a different industry today, and that fact should help the sector weather the looming economic storm. Thanks for reading. jfi