Business aircraft sales are lagging corporate return to profitability more than usual during the economic recovery, fuelled in part by continued uncertainty in Europe, the General Aviation Manufacturers Association (GAMA) states in its latest annual general aviation shipping and billings report.
"Companies remain in a 'wait and see' mode due to the world economy," said GAMA chairman Caroline Daniels, chief executive of ATP, a provider of safety and compliance information to the global aviation industry. "Europe is still grappling with the aftershock of the economic collapse."
Despite the uncertainty, GAMA said worldwide billings increased 0.4% to $19.1 billion in 2011 compared with 2010. The accounting is not yet fully complete as Hawker Beechcraft will not report its final fourth-quarter deliveries until the end of March because of its owners' disclosure requirements.
"Reasons for optimism are there," said Daniels, noting that a decline in shipments by most manufacturers have dipped to "single-digits", indicating the "trough has been established". She noted that some manufacturers reported "improved" performance.
Overall, original equipment manufacturers (OEMs) shipped 1,865 business jets, turboprops and piston-powered aircraft in 2011, down 3.5% from the 1,932 aircraft delivered in 2010.
"Shipments were down in all industry segments," said Daniels. She noted that large business jets, those weighing more than 22,680kg (50,000lb), were "steady performers throughout the downturn", largely because buyers of the aircraft do not tend to be as reliant on third-party financing as purchasers of smaller aircraft.
That assessment matches the healthy large-cabin activity at Gulfstream, where production rates are being increased to build 102 large-cabin aircraft this year, compared with only 10-15 of its midsize aircraft.
In total, OEMs delivered 681 business jets in 2011, down 6.3% from the 727 delivered in 2010, with the largest decrease in the "lighter end" of the market. Daniels said deliveries for aircraft weighing less than 5,670kg have decreased more than 70% compared with the peak in 2008.
North America continues to be the largest regional market for new business jets, receiving 53% of the shipments for the year. Daniels said US airframers netted $4.3 billion in aircraft export revenue, representing 50.7% of the total value of aircraft produced in the country. The revenue totals do not include engines, avionics and other components.
Strongest growth in business aviation is taking place in the Asia-Pacific region, including China, where the installed base has grown by a factor of three in the past five years. The area received 13.5% of the business jets shipped in 2011. "China demanded larger aircraft and helicopters at first," said Daniels, "but now demand is picking up for medium and light jets and training aircraft."
Turboprop deliveries dipped 2.4% in 2011, down to 324 delivered versus 332 in 2010. Piston-powered aircraft started 2011 with an increase in deliveries compared with the previous year, but ultimately finished the year at 860 deliveries, down 1.5% from 873 deliveries in 2010.
Availability of credit continues to be an issue for light and midsize business jets, said Daniels, and requirements for higher down payments have, in many cases, caused potential owners to delay or cancel purchases. "The used aircraft market and new aircraft sales will pick up once financing improves," she said.
Daniels noted that used aircraft inventories continue to decline, but asking prices are also dropping. For business jets, 13.8% of the active fleet were for sale at year-end, down 1% from 2010, with the average asking price falling by almost 14% compared with 2010.
Turboprops on the resale market are fairing better. Daniels said 9.6% of the active fleet was for sale at year-end, down 1% from 2010, with asking prices dropping 4% compared with 2010. Daniels said only 6.5% of turbine-powered helicopters, which GAMA began tracking this quarter, are for sale on the used aircraft market, down five percentage points from 2010.
A healthy increase in business jet aviation in the USA supports GAMA's assertion that the market has reached its trough and will start to rise. Daniels said flight activity in the sector increased 19% in 2011 and is now only 5% below the peak value set in 2007. She said that if the trend continues, activity will exceed 2007 levels by year-end.
Europe's activity mirrored its slower return to health. Daniels said business aircraft flights increased 3% in 2011 compared with 2010, down 10% compared with the peak in 2007.
Daniels added that the "majority of market fundamentals" are moving in the right direction for better performance this year.