Spin it all you like, but the harsh truth is that the post-9/11 economy has dealt general aviation a nasty blow. New and used sales are in the tank, some flightschools are facing extinction and the entire industry is on tenterhooks waiting for the next regulatory shoe to drop.
Nonetheless, from every disaster does opportunity emerge and GAs shot-to-the-shorts has done enough reshifting to unearth some bright spots in the rubble. In fact, the lasting damage may be far less than most of us assume and we suspect that contrarian buyers are already afoot, sniffing for good buys.
New aircraft sales tanked after the attack and used sales are so depressed that some brokers have sold nothing for two months. Nonetheless, stalwarts in buy-now mode are finding first-rate airframes selling below the market value of a year ago.
Thanks to cascading and often arbitrary flight restrictions following the 9/11 attacks, overall GA flight activity took a sharp nosedive but there’s evidence that its nearly recovered, at least in some parts of the country.
Persistent fears about airline travel-or anything related to public travel-may present the GA industry with its best prospect in years to shift some business and elective travel out of Boeings and into Beeches, Cessnas, Cirrus and Lancairs. That is, if the industry is savvy enough to capitalize on what may be a perishable opportunity.
The Current Crisis
As we go to press in early November, the industry was slowly recovering from the massive Class B airspace grab when another shock arrived: temporary flight restrictions over 86 nuclear generating plans, notams which initially closed more than 400 airports.
Within two days, that Draconian shutdown had been whittled down to under 100 airports but the nuke restrictions jangled already tense nerves among GA owners.
Two months into the new reality of flying in the U.S., its not quite business as usual, but nearly so. Of all the Class B areas initially restricted, only three remain under tight lockdown: New York, Washington and Boston. Getting into any of these major burgs via GA ranges from the difficult to the utterly impossible.
Class Bs of lesser stature are once again accessible, although owners are advised to check the nuke TFRs carefully and/or file and fly IFR. Thats no guarantee of routing around the TFRs, incidentally, but at least you’ll be in the communications loop if an F-16 two-ship parks off your wing and the pilots make those funny hand signals.
New Sales: Forget It
With the exception of a couple manufacturers, sales of new GA airplanes have taken a serious plunge, hopefully a short term turn of events for those in the business.
For the three to four weeks following the attacks, new aircraft sales dropped to their lowest monthly totals since the days of the precipitous downturn of the 1980s. One manufacturer, Beechcraft, sold nothing at all for nearly a month.
Currently, Mooney seems hardest hit but its bankruptcy was announced in early August and would have occurred anyway, without help from the terrorists.
Next, at Cessna, between gushing press releases announcing bizjet developments came the unpleasant news that the Independence, Kansas piston-engine plant laid off 175 workers, plus another 50 at a Columbus, Georgia facility, this on top of 250 let go in May. With that news came a sharp scale back in production levels.
Cessna said it hoped to deliver 780 piston aircraft, down from 900 in 2000 and nearly 30 percent less than projected sales for 2001. When it reentered the market five years ago, Cessna projected eventual sales of 2000 singles a year, a volume it has yet to reach.
Meanwhile, in Vero Beach, Piper is also scaling back, although less drastically. A company spokesman reported the workforce at 1250, down from 1450 a year ago in whats described as a economically induced downsizing.
Piper had a good year in 2001. According to General Aviation Manufacturers Association reports, it sold 330 airplanes by the third quarter compared to 299 during the same period the previous year. The increase was due almost entirely to the recently introduced Meridian turboprop, which appears to have displaced the piston Mirage as Pipers leading seller behind the popular Archer. (Piper says it sold 75 Meridians during the first three quarters of 2001.)
The growth success story, of course, continues to be Cirrus Design, which is still increasing production, or trying to. After laying off a portion of its workforce last winter due to a production crunch, Cirrus is calling back some of those workers as production at the companys Duluth, Minnesota plant holds at an airplane a day. Lancair, which had money troubles of its own a year ago, also reports that orders remain solid and that it will hold production levels.
Nonetheless, if a new airplane is your wont, the buying climate couldnt be better. Money is cheap, thanks to the Feds aggressive rate cutting, and one bank we spoke to-Textron Finance-is offering zero percent financing for the first year of a loan on a new Cessna.
Used? No Thanks
Prior to the 9/11 attacks, used aircraft sales were already growing soft and some brokers report they dropped to essentially zero during mid-September. We checked with both Bluebook Price Digest and AeroPrice.com, two companies that track and analyze sales trends. Short-term, the carnage is gruesome.
Bill Hemmel at AeroPrice told us that by early November, sales volume was slowly returning but was still about 40 percent lower than a year ago, a point at which the economy was already beginning to slow. How much of this fall off is due to 9/11 and how much to the underlying economy is impossible to say, says Hemmel.
Sales might have been on the way down before this, says Hemmel, if we had a stable market to begin with, we would know more.
Not that the reasons for the downturn really matter much for a buyer or seller trying to navigate the shoals of the current turbulence. Whats more important to know is whats hot and whats not.
In that regard both Hemmel and Bluebook Price Digest editor Paul Wyatt say there was a brief burst of interest in expensive cabin class twins and turboprops, something we found curious until Hemmel pointed out the reason: For awhile, it looked as though the FAA would sharply limit access to major Class B areas to aircraft flying under Part 135, the perfect bread-and-butter for a piston twin or entry-level turboprop. Were sure many owners had this in mind when they went twin shopping.
But as the FAA eased restrictions and would-be charter operators discovered just how much money and time it takes to get a Part 135 certificate, interest in twins may have waned.
Bluebooks Wyatt says that, surprisingly, interest in singles as a whole has been strong enough to keep prices flat so the market as a whole has lost far less value than many might expect, on the order of 3 percent at most.
Even before the 9/11 events, change of ownership activity-a measure of used sales-was down about 9 percent compared to a year ago.
Hemmel believes both buyers and sellers are waiting out the economy and short-term fears about further regulation. The nervous ones who might otherwise panic sell are sitting tight to keep from taking a bath on perceived soft prices.
But because fewer aircraft are actually on the market-due to the aforementioned reasons-there’s little or no apparent supply-induced price freefall, at least among most models. There are a few fire sales out there, but not as many as we would expect.
Cheap Money
There may be two reasons why the GA market hasnt gone into freefall. For one, the stock market, although battered, is still standing and second, aircraft loans are as cheap as theyve ever been in recent memory and rates may sag yet more.
We surveyed a handful of aircraft lenders and discovered rate drops ranging from the interesting to the spectacular in the words of one bank officer.
Lenders are sometimes reluctant to quote specific rates because the variables are so unpredictable but heres one example: A year ago, U.S. Aviation Finance would loan you $100,000 on a used aircraft at 10.2 percent. This fall, the same loan rate is 7.78 percent and at press time, the Fed was expected to announce yet another rate cut.
How much lower can these rates go, we wonder? As Ive heard someone else say, thats above my pay grade, says U.S. Aviations David Savoie, with a laugh. But at some point, the government is going to start paying people to borrow money. To see comparable rates this low, you have to look back 30 years.
Thats good news for buyers and sellers and even for the mid-term owner. We think any owner would be wise to review a current loan with an eye toward refinancing.
Airline Hell
In his new book Free Flight, author James Fallows, a Cirrus owner, essays skillfully on how congestion, airport delays and irrational ticket prices may drive some passengers out of the airlines and into owner-flown GA aircraft. The current turmoil seems tailor-made to encourage such migration. But is GA nimble enough to capitalize on the opportunity, short term?
Probably not, says Cirrus CEO Alan Klapmeier, who is as close to the leading edge of the small aircraft transportation revolution as anyone.
As an industry, weve been down so long that we don’t have the infrastructure. Where will they [new pilots] go to learn to fly? We don’t have the flightschools; we don’t have the production capacity, says Klapmeier.
Others in the industry think any opportunity emerging from the misfortune of the airlines will be short lived. I flew just last week and Id say confidence in the airlines is coming back, says Bluebooks Wyatt. If there was a pocket of opportunity there, its already passed.
Not that this has kept the industry from trying, however. The alphabet groups have been in high gear, hectoring the FAA to limit flight restrictions while simultaneously spinning any negative fallout for the industry into positive media reports.
Indeed, AOPA and the industrys ongoing Be A Pilot program seem to have achieved unusual success in deflecting damaging news stories in the general press. Be A Pilots Drew Steketee told us that the association monitored news coverage nationwide and found surprisingly few news stories bashing GA.
AOPA pitched the GA story as an economic/business issue-closed flightschools, struggling FBOs, lost fuel sales-rather than an abridgement of pilots rights to fly.
As for the silver lining of siphoning passengers away from the airlines and into little airplanes, that will take a while. Be A Pilots Steketee says flight training activity dropped 70 percent the week after the attacks and as of early November, was down by about 25 percent from a year ago.
I expected worse, he says.
Steketee sees a mixed bag, thus far. Flight training is down but interest in public service flying, corporate flying and charter is up.
The attacks came just as Be A Pilot was completing a fall promotional program on 10 cable networks. The group is now cautiously reconsidering new pilot training promotion but its a tricky sell. Even though some companies clearly want their employees off the airlines and some elective travelers would like to do the same, an ad campaign appearing to capitalize on tragedy could backfire.
Further, industry-wide GA promotion has always been intensely constrained by budget and in that regard, nothing has changed.
What To Do
Given the turmoil in the market, its not a good time to sell an airplane. Demand is off and prices are soft. On the other hand, if youre in the market for a new airplane or a new-to-you used model, the climate is perfect.
Money is cheap, brokers and sales people are flexible and willing to deal and although the market is not flooded with creampuffs, a patient search will unearth opportunities; decent airframes and below recent market values.
For many owners, refinancing an existing loan within the next four to six months may be the best opportunity in years to lower the cost of owning an airplane.
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