Business aviation moving ahead despite challenges

LAS VEGAS — Wichita business jetmakers, suppliers and others involved in the city's aviation industry are heading to Las Vegas this week for the world's largest business aviation show.

The National Business Aviation Association's 64th annual meeting and convention opens amid a sluggish economy and a host of policy issues that threaten the business aviation industry, such as user fees and aircraft depreciation.

Contraction in the business jet market during the economic downturn was the worst since the Great Depression, said Ed Bolen, president and CEO of NBAA, based in Washington, D.C.

"But we're a resilient group," Bolen said. "I think everybody is adapting to this environment and moving ahead." This year's convention is expected to attract more than 1,000 exhibitors, more than 100 aircraft on static display and more than 25,000 attendees — numbers that exceed last year's convention, Bolen said. And last year was a good show. "To see that (the numbers) ticking up a little bit is something that has us enthused," Bolen said. Companies will showcase new products coming to market at the convention. "And you'll sense and feel a lot of passion from everybody there," Bolen said.

The convention opens Monday and runs through Wednesday at the Las Vegas Convention Center. Aircraft will be on static display at the Henderson Executive Airport. For the first time, a smaller number of aircraft also will be on display next to the convention center. It's an important event, said Shawn Vick, Hawker Beechcraft executive vice president.

"Our ability as a U.S.-based manufacturer to take airplanes and put them on display in a world-class facility... obviously means we get a lot of exposure to lots of people who, if they're not thinking about buying an airplane today, will certainly start thinking about buying an airplane tomorrow," Vick said. "It's an efficient way to have those conversations." Cessna Aircraft also is expecting a good show, despite the flat economy. "I just think the level of energy we're bringing to the show is so much higher," said Brad Thress, Cessna Aircraft senior vice president of business jets. "We just announced a new product (the M2). I think we're just engaged."

The market

"The market for business jets isn't any worse than it was a year ago, but it isn't appreciably better either," said Wayne Plucker, senior industry analyst at Frost & Sullivan's Aerospace and Defense Group. "We're just kind of treading water." Delivery numbers aren't anywhere near the record levels of 2006 and 2007, but they're OK, he said. "There's enough to keep companies in business," Plucker said. Experts and analysts expect recovery to take time. "We're in this (slower) marketplace for a while yet," said Vick of Hawker Beechcraft. Still, the company's order intake during the third quarter was good, he said. "It was better than we had expected," Vick said.

The market is still tough, said Cessna's Thress. "We have to work hard in every deal," he said. "Overall, I think we're satisfied and pleased with where we are year to date. But it's not been an easy task."

The percentage of used Citations on the market has fallen below the industry average. And that has helped boost the sale of new planes. "It's modest, but it's certainly in the right direction," Thress said. Ralph Acs, Bombardier Learjet vice president and general manager of the Wichita site, called the market a challenge. "There is more conversation going on in the market, which is good," Acs said. "You need many, many conversations. It's all about listening; it's all about helping the customer." Although the market is tough, "we're doing really cool things at Learjet," Acs said. "I can't control (the market). I can control what goes on at Learjet."

A year ago, the industry expected a more robust recovery by now, said Pete Bunce, president and CEO of the General Aviation Manufacturers Association. At that time, there were indications the recession had ended and strong growth was ahead, Bunce said. "There is growth, but the growth is not strong," Bunce said. The mood Bunce calls the mood heading into this year's NBAA "realistic." "For one, everyone accepts the reality and knows the industry is under attack," Bunce said. "Two, the fortunes of the collective industry as a whole are tied to the economy." There is promising activity in Latin America and the Asia Pacific region where the economies are stronger, Bunce said. But in the U.S., the uncertainty surrounding the country's debt reduction and what will happen with corporate taxes hurts the industry, he said.

"Customers are wary," Bunce said. "If you don't know what the future's going to hold, what the tax structure will look like, or what things are going to cost, people hold off making acquisitions." The sooner the economy gets rolling, the sooner there will be recovery in the industry, he said. "It's no secret what the (Obama) administration has done with user fees and the depreciation schedule for aircraft," Bunce said. "Various other policy issues at play are big issues that hurt the industry in one way or the other.

"... We've never seen so many issues churning at one time." During a news conference in June, President Obama mentioned corporate jets six times, using jet owners as an example of a group who should pay more taxes to help reduce debt. Business jets also received a black eye in 2008 after the CEOs of the nation's Big Three automakers flew them to the Capitol to ask for stimulus money. Shareholders of companies no longer accept their use as much as they once did, Plucker said. Now, flight departments have to go to upper management to prove the costs and why they need to change equipment, he said, "something five years ago nobody batted an eyelash at." The reality is that in difficult economic times, business aviation is more important than ever, said NBAA's Bolen. "It allows companies to do more with less, (visit) more cities in less time, meet more customers. It's invaluable." That's been proven by studies and surveys, he said. Despite the challenges facing the industry, the aviation community is a forward-thinking group, Bolen said.

"I think you will see that kind of positive attitude coming out of Las Vegas," he said.

Read more: http://www.kansas.com/2011/10/09/2054747/business-aviation-moving-ahead.html#ixzz1aON1Gpwy