I have been immersing myself into some of the economic statements being made by a number of the business and executive jet manufacturers for their forecasts of 2010 and what they have experienced over the last three years since the slide of the market for corporate jets. Cessna seems to have been hit very hard and in 2009 they had a tough sales cycle. Their CEO Jack Pelton reflected on the last few years and Flight Global reported some of his statements to include:
“Last year was terribly rough for us,” says Cessna president Jack Pelton. “We delivered 275 aircraft compared with 340 the previous year, but our original projection for 2009 [before the downturn struck] was 525 aircraft.” Pelton blames the spending curb on the economic downturn and the destructive negative political and social rhetoric surrounding the use of business aircraft that surfaced in 2009.
“People simply stopped buying aircraft. We were forced to cut production rates across all our models to bring supply in line with demand, and cut 50% of the workforce,” he says.
The plummeting values of used aircraft – particularly in the light and mid-size sectors – also drove down sales. “The prices of pre-owned aircraft were terrible for us. People were asking ‘why buy new when I can get a two-year-old aircraft so much cheaper?”
He says that used inventories are shrinking and that prices are starting to stabilise. “Cessna will ride out 2010,” and will deliver around 225 Citations, Pelton says. “We hope to see recovery in 2011.”
Many of the Cessna peers are also looking ahead to 2011 as a turnaround year. I think the forecast is not that the market will be worse in 2010 and 2011, but remain stable as 2012 sees a turn around in the market to see increased sales. As we see the economy turn around so too will sales of corporate jets. This is a sales cycle that will see better times
There is a how to for just about every single industry out there. That is no different than a simple “How To Buy A Personal Jet“. One of the things that stood out to me was the basics of the “how to” section. For instance it seems pretty simple to pick out the jet you need. All you need to do is find out how many passengers will be using the jet and how far you will be traveling.:
Determine the size and flying range you’ll need. Light jets ($3 million to $8 million) can take 5 to 8 passengers roughly 2,000 miles (3,219 km); midsize executive jets ($9 million to $16 million) can take up to 9 passengers from 2,000 to 3,000 miles (3,219 to 4,828 km); and large executive jets ($17 million to $45 million) can carry 12 passengers more than 4,000 miles (6,437 km). The more popular makers and models are: Learjet, Boeing Business Jet, Cessna, Gulfstream and Dassault Falcon.
Of course there are many more variables to take into consideration when purchasing a corporate jet and we will intend to discuss some of those things here, but I like when they boil things down to the very basic levels. If you are in the market for a corporate jet, a personal use jet or are looking for more information,
contact us. We can also make this a simple process, but the most simple we can make it is to allow us to handle your purchase.
There are many different jet companies that are providing the aircraft for ownership. The differences in the jets available depend on the size and the needs of each individual owner of the aircraft. A private jet can be owned and operated by anyone that finds their needs are met by the ownership of a private jet, but what are some of the hidden costs of ownership.
Fuel: Fuel costs are as volatile as any market. According to the Energy Information Administration, the average nationwide cost of jet fuel across the United States in November of 2009 was $4.24 per gallon. Assuming the average private jet gets three miles per gallon, the fuel cost would be $1.41 per mile. That is much higher than your average vehicle on the road, but you have to remember that time is a factor when taking a private jet over a more traditional road vehicle.
Pilots: A pilot for your aircraft can cost anywhere from $20,000 per year to $120,000 per year. There are factors such as benefits and other costs that factor into hiring a single pilot. The other factor is of course a co-pilot that can also be a part of the crew. Experience and ratings of the pilot are factors that will increase or decrease their salary.
Catering: Catering costs can vary depending on your needs and the number of people or passengers. Some of the management companies out there can provide these services.
Many management companies can put together an overall management package price from $100,000 to $200,000 per year depending on the needs of each individual or company.
It has been a little more than a month now since the EBACE 2010 show occurred last month in Geneva, Switzerland. It was the 10th anniversary of the European Business Aviation Convention & Exhibition, and it was a sold out affair that spanned three days. There were more than 11,000 attendees that showed up to see what was new in the world of business aviation. According to some reports, the exhibitors at the event as well as the attendees themselves were very enthusiastic about where the industry is headed.
Among the attendees at the event were Brian Humphries and Ed Bolen both heads of the European Business Aviation Association and the National Business Aviation Association respectively. They had this to say about the event:
“This was by any standard a very successful anniversary for EBACE and a tremendously successful Convention,” said Humphries. “On the heels of such a difficult period for the aviation industry, this year’s EBACE had a particular excitement surrounding it, and I am encouraged at the possible signs of our industry turning around.”
Bolen agreed, saying “This 10th EBACE was certainly a strong one in all respects. The level of Exhibitor and Attendee participation in this show was a welcome boost to our industry, and demonstrates that business aviation remains highly valued around the world.”
Many of the presenters at the event were also optimistic about the industry although in a cautious sense. The event had 436 exhibitors and 65 aircraft all being shown at the Geneva International Airport. This is the 10th anniversary of the two groups playing host to the event. Next year the event is scheduled to take place in Geneva on May 17-19 2011.
I have been reading a number of articles lately about the pros and cons of owning a corporate jet or why companies should be using corporate jets in their budgets and plans for 2010 and 2011. I am seeing that it seems to be a trend that the bottom has been reached and the slide has stopped. What does this mean for corporate jet manufacturers and private jet users? It means the market will begin to heal.
Kate Sarsfield recently wrote about the lifting of the gloom and reported about The Teal Group study about business aviation:
“Business aircraft have been hit harder by the economic crisis than any other aerospace market,” says Richard Aboulafia, aerospace analyst with the US Teal Group. “After unprecedented growth [in 2006 and 2007], the market fell by 24.3% [in value of deliveries], he says. Aboulafia is confident, however, that the decline is over. “The good news is that the market has stopped falling, and some of the leading indicators offer encouragement.”
With the bottom reached and the outlook about to be stronger, the sales of corporate jets will be on the rise. Looking through more of the Teal Groups report, it appears that the biggest battle is going to be in some of the public perception of the use of corporate jets. The benefits of using a corporate jet is one of the missions of the No Plane No Gain site. I looked through some of the facts that they list for the benefits of using a corporate jet for your company and some of them are not as obvious as benefits. One of the facts that I thought stood out as a reason businesses should consider using private company jets is:
When using a business airplane, employees can meet, plan and work en route. Employees can discuss proprietary information in a secure environment and without fear of eavesdropping, industrial espionage or physical threat.
Many jets can be used as offices in the skies and when on sales trips and meetings or other uses that may not be so obvious to the public. The benefits of using a private corporate jet need to be more evangelized among the companies that are using them and certainly worked into their plans for the future as more and more travel is becoming restrictive. The market it healing. Now while the market is still down is the perfect time to begin thinking of adding a corporate jet to your plans for the future.
I had an opportunity to watch a You Tube video of President Ed Bolen’s discussion of the case for business aviation. This video was done last year on the Fox Business channel. Many corporations came under fire last year when government bailouts helped those companies continue to do business. The citizen auditors were out in full force calling for cutbacks and calling for “luxuries” such as corporate jets to be put aside and cut from the budgets of companies. As is always the case there is another side to the coin that many do not see and I think that this video gives us an idea of what that other side of the coin may look like.
I am going through a business jet report on the forecast of business jet sales and and state of the business put forth by the Teal Group and will be discussing some of the details of that report but this is perhaps a good place to start with reference to how the current state of business aviation has reached we hope the bottom. The No Plane No Gain program is a great source for business aviation industry information and is a good place to bookmark for those in the business of business aviation.
The corporate jet marketing is rapidly growing in China and Gulfstream is adding some support to Deer Jet of China. Deer Jet is one of the largest corproate jet fleets in China and Gulfstream announced in its news release on June 1 that it will be adding a support team to handle the company’s fleet of Gulfstream Jets.
Deer Jet owns three Gulfstream G550s, two Gulfstream GVs, four Gulfstream GIVs and four Gulfstream G200s. The company in China will be getting a maintenance technician, avionics technician and quality-control specialist. In addition, Deer Jet and other regional customers will have access to two Gulfstream interior technicians based in Hong Kong and a Gulfstream field service representative (FSR) based in Beijing. Gulfstream will also be expanding its presence in China to include the positions of a Product Support regional program director, an international distribution manager for parts and materials, an FSR.
This was interesting information from the release:
According to published reports, China’s private-jet market is expected to grow by a world-leading rate of 15.6 percent from 2009 to 2018. A wholly owned subsidiary of Hainan Airlines Group, 16-year-old Deer Jet grew by 32 percent in 2009 and is projected to grow by 60 percent in 2010. Approximately 30 private jets are currently registered to operate on China’s mainland. Including its in-service Gulfstream aircraft, Deer Jet operates 23 corporate jets, three of which are owned by private customers. This year, Deer Jet plans to add at least 10 new jets, all owned by private customers, to its fleet.
China continues to expand and become a great place for businesses to expand their reach and their sales. Gulfstream is one of the leaders in the corporate jet industry and we are glad to see them succeeding not only here in the United States but abroad in China. Congratulations from all of us at L & L International and the Corporate Jet Insider!
It seems today that every company is “going green” and many companies are entering in the world of cause marketing where they align themselves with nonprofit organizations to partner in raising money or helping with campaigns that provide the world with a place better tomorrow than it is today. I am always on the lookout for companies that provide information about what they are doing in the world of corporate responsibility. Bombardier is a company that I wanted to spotlight.
Bombardier is doing some great things in the area of corporate responsibility and their President and CEO Pierre Beaudoin has this to say about their achievements:
Our achievements include reducing our water consumption by 35%, energy consumption by 17% and greenhouse gas emissions by 10% between fiscal 2004 and 2009. In fiscal 2009, we also advanced pioneering products such as our ECO4 energy-saving rail technologies and our CSeries commercial aircraft.
We take pride in our listing, again, on two Dow Jones Sustainability Indexes and, for the second time, on the Carbon Disclosure Project (CDP), the world standard for carbon disclosure methodology and process. The CDP named Bombardier one of the 10 Canadian Climate Disclosure Leaders.
We continue to actively promote the UN Global Compact’s principles of social responsibility and we are in the process of embedding these principles in our Code of Ethics and Business Conduct.
One of the other campaigns I see that they were instrumental in taking part in was the 2010 Vancouver Paralympic Winter Games. Aligning themselves with these types of campaigns will keep that company on track to be a leader in corporate responsibility initiatives. I will be looking to some of the other corporate jet companies to see how they stack up in their own corporate responsibility and how they are joining in the stand to help make this world a better place.
The National Business Aviation Association (NBAA) will be holding a tax seminar in Chicago tomorrow, June 4, 2010, at the Palmer House Hilton. The seminar is described as providing attendees with the following:
Attendees of this NBAA Business Aviation Taxes Seminar will learn how to:
- Maximize business aircraft tax planning while complying with the Federal Aviation Regulations.
- Understand the application of federal excise taxes on business aircraft operations.
- Learn how to deal with many of the unique accounting challenges facing business aviation departments.
- Understand how passive activity rules can limit the utility of aircraft-related deductions.
- Implement strategies for addressing state and local aviation taxes.
- Learn methods for coping with federal deduction disallowance rules.
- Avoid issues related to business aircraft ownership and operation that have arisen in business tax audits.
- Learn to plan ahead regarding tax issues in structuring the purchase and sale of business aircraft.
Knowledge of aviation tax issues is critical for owners and operators of business aircraft to ensure proper planning and compliance. The NBAA Business Aviation Taxes Seminar is designed to help accountants, attorneys, advisors and flight department personnel keep up with the latest tax and legal developments affecting business aviation. After an introduction to the aviation regulatory environment, knowledge of which is essential for proper tax planning, presenters will address a variety of current tax topics at an intermediate-to-advanced level. Ample time will be allowed for questions and answers following each presentation, and speakers will be available to answer additional questions at the end of the seminar.
As members of the NBAA, L&L International supports these initiatives by the organization and would love to know if anyone is attending and how well the seminar provided the above information.
In choosing your corporate jet, it is imperative that you take a look at your wants and needs and the use of your aircraft and balance that with the characteristics that an aircraft has and provide a checklist of your requirements. There are characteristics of each aircraft that might be different than a competitors aircraft that might meet your needs better than any alternatives. A “travel needs” plan is an important factor in finding an aircraft for you or your company. What are the requirements to meet your travel needs? There are so many different choices, you should make sure that the aircraft you buy, is the best of what is available.
Your choices may have to do with the number of flights per year, the miles traveled, the maintenance requirements of that travel schedule and the crew needed. All of these things will help you locate the characteristics you need in making a decision on what aircraft might best fit into your budget, and make the best purchase decision for you. Do you know what your needs are or do you have a history of what your travel entails? This is a good place to start.
Making a list of all of the available aircraft and then making sure each aircraft has a list of pros and cons can make the decision easier when purchasing a corporate jet. If you have a professional that can assist you in finding what is available and then can sit down with you to list out all the characteristics of that aircraft you will come out feeling good about your purchase. This is an investment like any other and to find the proper aircraft for your investment is key. If you would like to find an aircraft that will suit your needs and one that fits into your budget, please contact us.
