Will Business Jets Fly High Again?
From the Print Edition:
Jim Nantz, May/June 2011
When the heads of GM, Ford and Chrysler appeared before Congress in November 2008 asking for $25 billion in loans to keep their companies from sinking into bankruptcy, Representative Brad Sherman asked the trio to raise their hands if they flew there by commercial airlines. “Let the record show, no hands went up,” pronounced Sherman. He then asked for a show of hands “[If] you are planning to sell your jet in place now and fly back commercial.” Again, no hands rose. Congress was outraged. Pundits were outraged. The average Joe Sixpack was outraged. Pretty much everyone was outraged, even the business jet industry. But not for the same reason. The industry was already suffering severe chest pain, and that moment would mark the beginning of the tailspin in the business of business jets. Only now are there signs that the bizjet biz has pulled out of that spin.
As Brian Foley of Brian Foley Associates, a business aviation advisory firm, recently explained, “The auto folks were chastised when the government has the largest fleet of [business jets] and needs it just as much as a corporation does.” In August 2009, less than a year after the scathing lecture heard around the world, Congress voted to buy eight new bizjets to add to the fleet of nearly two dozen it already owns.
Maybe by buying those eight jets, the Government was only attempting to apologize for dogging business jets, or trying to help one struggling industry while chastising the other. Just one month before the big purchase, in July 2009, the number of both new and used jets on the market hit an all-time high. It was rough on manufacturers, fuel companies, operators of fractional ownership programs and insurance companies that sell policies on bizjets. Operations dropped 35 percent, charters plunged 40 to 45 percent. FlightSafety International, the premier jet training school in the U.S., laid off instructors for the first time ever.
“For a while there were so many used jets on the market people were canceling orders for new jets,” says Mary Grady, an editor of avweb.com, an aviation news website. “As far as I can tell now it definitely tanked the past two years.” Buying business jets was the least the Government could do.
For a while there it seemed that Congress—which had quickly bailed out those too-big-to-fail banks to the tune of $700 billion—would allow auto manufacturers to collapse because they owned and flew business jets. The banks also had bizjets, though no one thought to question them over that. (In fact, J. P. Morgan Chase, which received $25 billion in TARP bailout money, bought a couple of business jets just months after cashing that huge check, plus the company refurbished their hangars.)
Yet, here’s the rub. Pundits lament the decline in U.S. manufacturing, of the auto industry moving offshore to places like Japan, Germany, South Korea, and even China. America used to make things, remember! But, like the auto industry, American companies actually build and outfit business jets, train the flight crews, educate the mechanics, work on the engines, fill the fuel tanks, stock the pantries—yes, essentially manufacture and service things.
But it’s unlikely that our elected officials made their jet purchases because they’d read up on the devastation felt by that particular segment of industry. More likely our legislative representatives simply wanted to fly around the world on fact-finding missions, without the hassle of airlines. Smooth move, Congress.
“It’s been tough across the board. You see some models of used airplanes sell by 30, 40 percent of their value,” says Ed Bolen, president and CEO of the National Business Aviation Association, aka the NBAA. Even somewhat closer to the trenches, Frank Frazier, president of Nashville Charter Jets, says, “Business aviation is tanking. It’s the first thing to go and the last thing to come back.” Yeah, it’s the economy, stupid, and Frazier knows firsthand: Two years ago Nashville Charter Jets employed 50; it’s down to 5.
“This industry is driven by wealthy individuals and wealthy corporations,” Frazier adds. “The corporations and the individuals are suffering, and there’s an image problem in general aviation as well.” You know: Only the super-rich fly, and for some reason general aviation is divorced from the economy.
“I think the thing that’s interesting,” explains Bolen, “is there are tens of thousands of companies in the U.S. that rely on airplanes for some portion of their transportation.” Bolen says that 85 percent of the companies that use business aircraft are small or midsize firms, and the majority of the times that these bizjets are in use the CEO or president isn’t on board; instead they are flying engineers, technical teams and salespeople. “So it’s often a little bit at odds with the public perception,” he says.
You must be logged in to post a comment.