Editor's Desk: December 2008 - January 2009

Business Jet Traveler » December 2008
Monday, December 1, 2008 - 4:00am

News is 95 percent negative. I just made that up, but I'd bet my 401(k) that I'm within the statistical margin of error. Not that my 401(k) is worth close to what it was two months ago. At this rate I'll be working until I'm 90.



We have all been pummeled, really pummeled, by bad news this quarter. What makes it worse is that news is so addictive-and that technology has made getting a fix so easy. As I write this, I make a quick jog to OnlineWSJ to check the Dow. Yikes, down again! Yesterday it went up 100, 200, 400 points-pick a number-today it's down twice that. Read the paper while eating breakfast, listen to the radio in the car, check the BlackBerry in line at Starbucks, watch the cable news shows in the deli, the barbershop, the bank, at home, everywhere. Every reporter, anchor, analyst, weatherperson and traffic maven has an opinion about the stock market. A spoof of Joe the Plumber finds him concerned because the mortgage mess has clogged the pipes, backed up credit and put the economy in the toilet.

I can't let it go. I've never even heard of 95 percent of the TV shows that won Emmys this year, but in seconds, I can find all the news channels with the clicker. I'd escape by taking a yoga class, but there's a wide-screen, high-def TV tuned to MSNBC in the locker room.



Deep breath. Deep breath. Deep breath. Deep breath. Deep breath.



My parents were children of the Great Depression, which makes me a grandson of the Great Depression. Woven into my DNA is the belief that "this too shall pass" and we'll all be the better for it. And so will the business aviation industry.



Rise and Fall

Actually, business aviation is more like a conglomerate than a stand-alone industry, like the chicken industry. Business aviation is transportation, it's manufacturing, it's maintenance and repair, it's fuel selling, it's new aircraft sales, it's used aircraft sales, it's interior design, it's restaurants, it's insurance, it's finance. Sure, the parts are all interconnected, and as John F. Kennedy said, "A rising tide lifts all boats." But when you look closely, the boats don't all rise, or fall, at the same time.



A common axiom states that business aviation lags the economy-or the stock market or corporate earnings-by one to two years. This refers mainly to new aircraft deliveries (not sales), and is more or less true. Normally, it takes about two years from the time a business aircraft manufacturer logs a firm sale until the day the customer takes delivery of the aircraft.



Obviously, when manufacturers book a great number of sales, their backlogs build and if they don't increase their production rates, their sale-to-delivery times increase. For the last year or so, increasing sales outside the U.S. ballooned the manufacturers' backlogs even as the sub-prime mortgage problems put a damper on the U.S. economy. Cracks are now appearing, but total deliveries this year (including VLJs and bizliners) will likely top 1,400-a record-and 2009 deliveries could reach 1,600. Further out, things begin to look murky, but deliveries could still top 1,500 in 2010 and 2011, before increasing again. Deliveries of new aircraft lift business at completion centers, which are dealing with their own bulging backlogs.



However, many charter operators are reporting a reduction in flight time this year and so are some private owners. Less flying means less fuel sold by FBOs, less maintenance and repair (since this is based on flight time), less catering and eventually the loss of jobs for those in operations.



With operational demand dropping, the aircraft sales market shrinks and we're seeing an increase in the used aircraft inventory and a decrease in sales of new aircraft. Tight credit and increasing interest rates put skids on transactions that would have slid through in a looser financial environment.



But there are silver linings. Some buyers looking for new aircraft may find the lower prices of used aircraft more attractive. Some fractional users may opt for jet cards instead of renewing their shares. Some jet card and block charter buyers may decide that ad hoc charter is the better option for them. Call it business aviation Reaganomics.



Where do the ad hoc charter users go? The next step down economically is to the airlines, which are coping with their own problems by cutting out flights at big airports, removing service completely at smaller airports, eliminating first and business classes and generally making their product less and less attractive to more and more people. Will committed business aviation travelers go back to the airlines? You be the judge.



Here's the 5 percent good news: Business aviation will come out of this cycle stronger than ever. The industry will survive and thrive, as will the overall economy. I'm betting my 401(k) on it.

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“"How many leaders actively seek out and encourage views alien and at odds with their own? All too few...Who in your organization serves as your Challenger In Chief? Interrogating the choices you are considering making? Making you consider the uncontemplated, the unimaginable and that which contradicts or refutes your position? And also challenging you?"”

-Noreena Hertz, author of Eyes Wide Open: How To Make Smart Decisions in a Confusing World