Story ID: 
Bizav shines brightly in FAA’s crystal ball
By: AIN Staff
Caption: Business aviation continues to be a bright spot in the FAA’s annual aviation forecast, with top executives of two business jet manufacturers and the leadin
Word Count: 1257
Business aviation continues to be a bright spot in the FAA’s annual aviation forecast, with top executives of two business jet manufacturers and the leading fractional ownership provider presenting generally upbeat assessments at the agency’s Aviation Forecast Conference in Washington, D.C., in late March.The FAA concurred. In its forecast for fiscal years 2004 to 2015, the agency said that despite a slowdown over the past several years, the business/corporate aviation segment continues to be the one that offers the greatest potential for future growth for the industry. Hopefully, the increased growth in fractional-ownership companies and corporate flying will expand the market for jet aircraft, the forecast said.Cessna Aircraft chairman Russ Meyer told attendees that the accelerated depreciation bonus for new business jets has boosted orders by between 50 and 60 percent, and extending the deadline for placing such new jets into service “will literally save our bacon.” There is “a very good chance” to push back the Jan. 1, 2005 deadline to put a new jet into service with an amendment to a Senate bill, according to Meyer. Without the extension, he added, “You can take every forecast for 2005 and put it in the wastebasket.”Even with the bonus depreciation, John Rosanvallon, president of Dassault Falcon Jet, described last year as a “tough year for business aviation.” He expects Falcon deliveries to rebound from 49 aircraft last year to about 60 this year.“We are reasonably cautious about 2005,” he said, noting that the company hopes to deliver about 60 Falcons next year. “I think the worst is behind us,” said Rosanvallon. “My crystal ball is even more optimistic over the next five years.”NetJets president Bill Boisture said the fractional-ownership provider this year will add almost 20 airplanes to its 43-strong European fleet. Approximately a similar number of aircraft will be placed into its U.S. operation.Meanwhile, NetJets will begin renewing its fleet by retiring some older aircraft. Boisture believes this will result in a new dynamic in the used aircraft marketplace, because–despite the high number of hours– they have been “carefully maintained for the last 10 years.”The FAA forecast report pointed out that the steep rise in the price of aviation fuel and the general weakness of the U.S. economic recovery have combined to reduce the demand for general aviation products and services, in particular the high-end business jets. In addition, some of the adverse effects of 9/11 also continue to affect the industry, most notably the restriction of GA aircraft at Ronald Reagan Washington National Airport (DCA).For the industry as a whole, the FAA believes that the numbers are slowly but steadily swinging in favor of aviation. The U.S. and international economies will expand rapidly over the next two years, it predicted, and moderate growth can then be anticipated through 2015.That marks a 12-year pendulum that is sure to carry aviation with it. The large and regional airlines will grow at an annual rate of 4.3 percent over the forecast period, while passenger demand is expected to return to pre-9/11 levels next year. However, the number of passengers carried annually will not climb beyond one billion until 2014, about four years later than predicted before 9/11.The FAA forecast said international and domestic markets will recover strongly over the next two years, while the growth of regional airline passenger traffic in the U.S. will continue to outpace that of its larger domestic counterparts–6.4 percent compared with 3.6 percent annually. “We expect that low-cost carriers and regionals could account for more than half of all domestic passengers by the end of the 12-year forecast period,” the FAA analysts said.Despite the optimistic picture, the agency acknowledged that terrorism and fuel prices remain a concern, and that the profitability of commercial aviation hinges on business travel returning sufficiently to boost revenue.According to the FAA, in the seven years before 9/11 the aviation community achieved a period of unprecedented growth in both the demand for aviation services and profitability. The effect of the terrorist attacks on airlines, travel markets and economic growth was immediate, significant and worldwide, although the greatest disruption occurred in the U.S. “While the U.S. and world aviation industries have both begun to recover, for various reasons there are differing levels of [improvement] around the world,” the forecast stated.In the U.S., what started as a strong recovery in the demand for aviation services began to wane in the second quarter of FY 2003. Sluggish travel demand, coupled with increased competition from the low-cost carriers for the high-end business traveler, forced the major airlines to continue discounting to fill empty seats, thus continuing the industry’s poor financial performance for the third consecutive year.At the same time, the general aviation industry recorded its third consecutive annual decline in shipments and second straight year of decreased billings. The decline was particularly evident in the market for business jets, where increasing numbers of used business jets for sale at bargain prices, combined with new aircraft order cancellations and weakening fractional sales, reduced not only the number of aircraft sold but also put significant pressure on pricing as well.Despite the slowdown in the demand for business jets, the current forecast assumes that business use of general aviation aircraft will expand at a more rapid pace than that for personal/sport use. FAA economists said the business/corporate side of general aviation should continue to benefit from the safety concerns of air travelers.“These safety concerns, combined with increased processing times at some U.S. airports, have made fractional, corporate and on-demand charter flights viable alternatives to travel on commercial flights,” the forecasters said. “In addition, the bonus-depreciation provision of the President’s economic stimulus package should also help spur business jet sales, especially during the latter months of 2004.”The active general aviation fleet is projected to increase at an average annual rate of 1.3 percent over the 12-year forecast period, growing from an estimated 211,190 last year to 246,415 aircraft in 2015. But this includes the addition of a new aircraft category–light sport aircraft– that is expected to enter the active fleet this year and to account for 20,915 aircraft by 2015. And this figure includes the approximately 15,500 existing ultralights not currently included in the FAA’s aircraft registry count.It is assumed that more than 400 newly manufactured light sport aircraft will enter the active fleet annually beginning in 2006. Excluding these aircraft, growth averages only 0.5 percent over the 13 years.The FAA observed that there appear to be two separate GA economies: jet aircraft follow one market pattern, while piston, turboprop, rotorcraft and experimental aircraft follow a separate “growth” pattern.The FAA expects the turbine-powered fleet to grow at an average annual rate of 3.5 percent over the forecast period, with jets responsible for most of the growth. These aircraft are expected to jump from 8,335 last year to 15,510 in 2015, an average annual increase of 5.1 percent. The number of turboprop aircraft is expected to increase from 6,841 last year to 8,120 in 2015, which represents an average annual growth rate of 1.3 percent. These forecasts assume that the turboprop fleet grows by approximately 100 aircraft per year, counting new production and attrition.The rotorcraft fleet is forecast to grow by only 0.6 percent annually over the period, from 6,648 last year to 7,210 in 2015. The turbine fleet is projected to grow at an annual rate of 0.4 percent, while the smaller piston fleet size is expected to grow at an annual rate of 1.1 percent.“The current forecast assumes the introduction of the low-priced Eclipse jet (or similar type aircraft) in 2006, with the market for this or similar aircraft totaling 4,600 by 2015,” the FAA soothsayers said.