Waiting "until the market comes back" strategy looking more doubtful?

Regardless of what other events precipitated the general recession, and there were lots of guilty parties, I think that many of the buyers in the business jet industry, in large part, did it to themselves. People and companies that stayed with airplanes that fit their missions rather than their ego were less hurt. Buyers get SJS too.
 
wabower said:
Many 182s, 210s, Bonanzas, Barons, Cirri, Saratogas, 300-400 series Cessna twins and others are considered Business Airplanes by their owners, the NBAA and the IRS. None have budgets anywhere near those you quoted.
Click to expand...

Even they will still have to follow the economics of business aviation which is not the same as the economics of recreational aviation. They are driven by different basis, however, the planes you quote are often operated by recreationally motivated pilots justifying/rationalizing them with a business application.
 
IMHO -

In terms of bizjets, the changes to corporate governance following the recession & financial crisis has put much more focus on things that are not considered "essential" to the business (meaning perks that don't enhance shareholder value). Bizjets are a business tool and still hold value, but their use is scrutinized to a much higher degree, and companies that are concerned about margins and maximizing value to sharholders tend to focus on items that carry costs out of proportion to returns. Yes, air transportation is critical to business, but businesses that used to spring for first class seats or refundable coach tickets now require travelers to take cheapest coach. If there is airline service that provides transportation at lower cost, it's hard for a company to justify use of a bizjet if an airline seat is reasonably efficient.

Stronger corporate governance has led to lower use of bizjets has led to reduced market valuations.
 
wsuffa said:
IMHO -

In terms of bizjets, the changes to corporate governance following the recession & financial crisis has put much more focus on things that are not considered "essential" to the business (meaning perks that don't enhance shareholder value). Bizjets are a business tool and still hold value, but their use is scrutinized to a much higher degree, and companies that are concerned about margins and maximizing value to sharholders tend to focus on items that carry costs out of proportion to returns. Yes, air transportation is critical to business, but businesses that used to spring for first class seats or refundable coach tickets now require travelers to take cheapest coach. If there is airline service that provides transportation at lower cost, it's hard for a company to justify use of a bizjet if an airline seat is reasonably efficient.

Stronger corporate governance has led to lower use of bizjets has led to reduced market valuations.
Click to expand...
While I would agree with this, I think many of the people who went overboard with their purchases were individual owners or owners of privately held companies who didn't need to answer to others as much.

At least these are this is what happened to the people I'm thinking about.
 
Everskyward said:
While I would agree with this, I think many of the people who went overboard with their purchases were individual owners or owners of privately held companies who didn't need to answer to others as much.

At least these are this is what happened to the people I'm thinking about.
Click to expand...

Oh, I agree. And when margins got squeezed due to the economic slowdown, that kind of luxury was one of the first to go (despite the best efforts of TSA's obnoxiousness airline travel).
 
kyleb said:
Give it a term or so with an administration which places a high priority on economic growth, and I think things can turn around substantially.

Now, whether we ever get that administration, I dunno...
Click to expand...

The deficit and debt numbers don't really support this, sadly. To really help the situation we can't "grow our way out" of the huge debt hole, unless we're going to get 25% GDP growth for about ten years. Not gonna happen. Nor are we likely to get the 50% budget cuts we'd have to *start* with (since 40% of all spending is borrowed, you need 50%+ cuts to even start reducing debt).

I think the new normal is continued decline until the whole house of cards collapses and resets.
 
Mafoo said:
True (and I stay out of that zone on purpose).
Click to expand...

Me too...I have gone from, in my early years, not caring about politics, to, as I got older, throwing myself into every argument, to, just recently deciding I don't want to talk to people about politics because it gets ugly fast. I keep my opinions to myself, and express them with my vote.
 
wabower said:
GA prices have experienced a similar correction over the past four years, and this segment of the industry also faces a significant decrease in the pilot population and an even greater decrease in the number of potential aircraft buyers. If you were asked to write a similar article about the GA segment, how would you characterize its future?
Click to expand...

Like a frog looking out of my own little well, I see recreational and "light business" flying as a mature industry. I don't see many new pilots. Prices for new airplanes seem to select for very wealthy individuals (who have other targets for their spare $800,000), nearly retirees who buy an airplane instead of a motor home, and business owners who try to justify the plane for work. These groups are small so they won't support much of an industry, it seems to me.

The toys that get flown at my local airport are a few LSAs, some old war birds or trainers and some vintage Cessnas and Pipers. The fuel flowage is mostly carried by turboprops and small jets associated with the university or medical transportation.
 
The economic problems we are seeing are mostly due to population growth, more people but no more natural resources. The high price of crude oil is caused by the high demand for it, more people but less reserves. The same happens with food. Manufacturers has found ways to make products with less labor thus increased unemployment. Increased longevity has caused part of the population growth but it also increased the financial dependency on family and government. If this pattern continues it would be common to see 100yr old individuals that have been financially dependant for more than half of their life (birth-22yr + 62-100 = 60 years of financial dependency). To support this financial dependency requires two generations.

As for the GA low new airplanes sales the answer is simple: MARKET SATURATION. Unlike selling diapers or caskets where there is a new customer every day the GA population market is decreasing, mostly due to higher costs on planes, training, fuel and unemployment. To agravate the situation aircraft have a much longer life span than cars. This makes the used plane market highly competitive with the new planes. Why would you buy a new $1M Baron when you can get a good old proven one with 0 time engines for $200K.

I don't see the current situation improving but rather static. I know everybody wants to live 200 years but where would there be space for you. As an example just imagine the Space Station population tripling, with just one toilet where would you go?

José
 
What we are failing to do is invest in new infrastructure technology that will allow us to cope with the rising population and changing climatic conditions. This is mostly because we want to keep reaping profits without reinvesting in the future. We'll run out of water before we run out of space. The best way to deal with it is by switching the energy infrastructure to nuclear->H2-> fuel cell, but apparently nobody wants to make the required investment.
 
Plane expenses are just another series of line items in the travel expense budget and a few more on the balance sheet. Properly-utilized planes can be incredibly productive assets. Others simply serve as a chariot for the boss. OTOH, some company owners and execs fly first class, others ride in the back. Some RON at the Ritz, some at Motel 6.

Sometimes the selection/utilization decisions are easy to justify, sometimes not. Two current consulting-acquisition projects serve as good examples. One group owns a 90-series King Air that flies 250 hours per year, with average leg times of .9 hours and average block speed of ~200 nm/hr. Last year the plane flew on
109 days, primarily to transport sales and service personnel, with very little non-related executive travel. Less than half of the trips exceeded 250 nm (longest was 330 nm) but the company is seeking to expand into more distant markets and would like to achieve shorter trip times on those trips. Cabin loads are expanding as well as more people travel to visit branch locations and make sales calls, and they must now limit the number of people that can fly on certain trips due to seating capacity.

A Citation V or V-Ultra or a King Air B-200 can be purchased for approximately the same price ~($1.5 mil) both with adequate seating for the number of desired pax. The B-200 would be an easy choice for the current trips, since the jet's additional cruise speed isn't significant when flying short legs.

For the (contemplated) longer trips of 700-900 nm, the speed and altitude capabilites of the jet would be desirable, but at significant additional operating cost. Using a jet for the numerous short trips that will continue will be extremely inefficient and expensive.

Another group operates a Citation II and flies mostly short trips for which a King Air would be a perfect fit, but the owners like jets better. Total hours per year are projected at 160-180. They fly a few long trips of 1,100 nm, and prefer the comfort of a stand-up cabin. Accordingly, they are now looking at Citation Excel and XLS prospects. The only justification for such a purchase is that they can afford it.

Henning said:
Even they will still have to follow the economics of business aviation which is not the same as the economics of recreational aviation. They are driven by different basis, however, the planes you quote are often operated by recreationally motivated pilots justifying/rationalizing them with a business application.
Click to expand...
 
So, what will the new normal look like?

we know the auto industry has converted to robotics, and requires less labor to produce. farmers can produce more with less labor, forest industry has gone to automatic mills, gas stations are now self serve. so, will we see a continued 8% unemployment as a normal?

13,000+ on the stock market, gold over 1500 per ounce, is that a new normal?

City after city going bankrupt, thus breaking the retired accounts of the retired.

housing markets at an all time low both in sales and price.

what will a recovery look like?
 
Wayne's numbers surprise me, I'm on track to fly more recreationally in one year than both of those commercial operators.
 
wabower said:
The only justification for such a purchase is that they can afford it.
Click to expand...


Viper: "I like that in a pilot" :D

BTW, Wayne, you are on the short list of people who get my new cell number when I win the lotto!
 
Neither is commercial, both are part 91.

denverpilot said:
Wayne's numbers surprise me, I'm on track to fly more recreationally in one year than both of those commercial operators.
Click to expand...
 
You would probably be surprised by the number of high-dollar planes that fly infrequently. At one time the accepted average for turbines and jets was 400 hours/yr, but that number has dropped significantly.

A friend who is thought to "fly the crap out of his airplane" logged less than 250 hours in his 421 last year.




denverpilot said:
Ah, fair enough. Still, I really meant to say "business use". A little over 100 hours a year doesn't seem all that well utilized.
Click to expand...
 
wabower said:
You would probably be surprised by the number of high-dollar planes that fly infrequently. At one time the accepted average for turbines and jets was 400 hours/yr, but that number has dropped significantly.

A friend who is thought to "fly the crap out of his airplane" logged less than 250 hours in his 421 last year.
Click to expand...
On the other hand, hours on our airplane are increasing. They went from about 400 the first year, dropped to 300, but the last couple years it's been picking up and I think we'll be at about 600.
 
Aren't you 135?

Everskyward said:
On the other hand, hours on our airplane are increasing. They went from about 400 the first year, dropped to 300, but the last couple years it's been picking up and I think we'll be at about 600.
Click to expand...
 
steingar said:
I expect us to become a nation that imports high technology and exports food, weapons, and religion.
Click to expand...

When it gets down to it — talking trade balances here — once we've brain-drained all our technology into other countries, once things have evened out, they're making cars in Bolivia and microwave ovens in Tadzhikistan and selling them here — once our edge in natural resources has been made irrelevant by giant Hong Kong ships and dirigibles that can ship North Dakota all the way to New Zealand for a nickel — once the Invisible Hand has taken away all those historical inequities and smeared them out into a broad global layer of what a Pakistani brickmaker would consider to be prosperity — y'know what? There's only four things we do better than anyone else:

Music
Movies
Microcode (software)
High-speed pizza delivery

(Neal Stephenson, "Snow Crash", 1992)
 
I'll watch the news.

Just sign here, press hard, third copy's yours.

PS: Don't forget to buy a ticket.


catmandu said:
Viper: "I like that in a pilot" :D

BTW, Wayne, you are on the short list of people who get my new cell number when I win the lotto!
Click to expand...
 
wabower said:
Plane expenses are just another series of line items in the travel expense budget and a few more on the balance sheet. Properly-utilized planes can be incredibly productive assets. Others simply serve as a chariot for the boss. OTOH, some company owners and execs fly first class, others ride in the back. Some RON at the Ritz, some at Motel 6.

Sometimes the selection/utilization decisions are easy to justify, sometimes not. Two current consulting-acquisition projects serve as good examples. One group owns a 90-series King Air that flies 250 hours per year, with average leg times of .9 hours and average block speed of ~200 nm/hr. Last year the plane flew on
109 days, primarily to transport sales and service personnel, with very little non-related executive travel. Less than half of the trips exceeded 250 nm (longest was 330 nm) but the company is seeking to expand into more distant markets and would like to achieve shorter trip times on those trips. Cabin loads are expanding as well as more people travel to visit branch locations and make sales calls, and they must now limit the number of people that can fly on certain trips due to seating capacity.

A Citation V or V-Ultra or a King Air B-200 can be purchased for approximately the same price ~($1.5 mil) both with adequate seating for the number of desired pax. The B-200 would be an easy choice for the current trips, since the jet's additional cruise speed isn't significant when flying short legs.

For the (contemplated) longer trips of 700-900 nm, the speed and altitude capabilites of the jet would be desirable, but at significant additional operating cost. Using a jet for the numerous short trips that will continue will be extremely inefficient and expensive.

Another group operates a Citation II and flies mostly short trips for which a King Air would be a perfect fit, but the owners like jets better. Total hours per year are projected at 160-180. They fly a few long trips of 1,100 nm, and prefer the comfort of a stand-up cabin. Accordingly, they are now looking at Citation Excel and XLS prospects. The only justification for such a purchase is that they can afford it.
Click to expand...

I agree with your assessment of BA, no doubt. There are way's that it can be $$$ sensible, at that point it is following the new more austere set of public perception rules that exist at most publically traded companies now than before the RE derivatives scam. It's the 'chariots' at publically traded companies that have disappeared as well as many of the older less fuel efficient models.
 
slacktide said:
y'know what? There's only four things we do better than anyone else:

Music
Movies
Microcode (software)
High-speed pizza delivery

(Neal Stephenson, "Snow Crash", 1992)
Click to expand...

I must violently disagree. We can do one thing no group in history could accomplish. We can think outside the box.

Our American culture embraces individuality to the detriment of groupthink. In America the lone outsider is the hero, the sheep in the crowd the one to be pitied. Do you think the denizens of any other nation complain about "the sheeple"?

This allows us to accomplish things not seen anywhere else. From a heavily armed populace to the men on the moon, we accomplish the impossible because to us nothing is impossible.

Thus we are far better than anyone at technological innovation. Sadly, such innovation depends on a trained and talented cadre of technocrats, with the savvy to understand the cutting edge and the imagination to push it farther. The days of a stalwart American technical corps are done, and I fear we'll never see them again.
 
I attended a talk by the chief economist at AIG last month and he said the same thing... this is the "new normal" and that interest rates will remain low, at least relatively speaking, for decades to come. Folks have been saying that the post-WWII economy was exceptional for decades, and the exception rarely becomes the rule.

I'm not necessarily sold either way yet, but "plan for the worst and hope for the best" applies. It will be interesting to see how the next 10 years unfold.
 
How many good paying jobs in this country have been lost from the company moving manufacturing to China. Many lately coming from the aircraft industry.
In America, politicians, large company owners and upper management feel they are worth way too much. Now that sales and profits are falling they need to find a way to maintain that big salary/bonus. It has hit the hvac industry hard. The equipment is junk, customer service sucks, but they sure don't forget that price increase every chance they get. My total sales have dropped 30% in one year and I am not alone. The only way I could afford a dependable 160 kt four place airplane for family travel was to build it myself.
 
steingar said:
I must violently disagree. We can do one thing no group in history could accomplish. We can think outside the box.

Our American culture embraces individuality to the detriment of groupthink. In America the lone outsider is the hero, the sheep in the crowd the one to be pitied. Do you think the denizens of any other nation complain about "the sheeple"?

This allows us to accomplish things not seen anywhere else. From a heavily armed populace to the men on the moon, we accomplish the impossible because to us nothing is impossible.

Thus we are far better than anyone at technological innovation. Sadly, such innovation depends on a trained and talented cadre of technocrats, with the savvy to understand the cutting edge and the imagination to push it farther. The days of a stalwart American technical corps are done, and I fear we'll never see them again.
Click to expand...

You, sir, are correct.

I fear losing this as we increasingly have a society which is "programmed" to rely upon bureaucracies (public or private, both exist) to tend to them. Doesn't work.
 
steingar said:
I must violently disagree. We can do one thing no group in history could accomplish. We can think outside the box.

Our American culture embraces individuality to the detriment of groupthink. In America the lone outsider is the hero, the sheep in the crowd the one to be pitied. Do you think the denizens of any other nation complain about "the sheeple"?

This allows us to accomplish things not seen anywhere else. From a heavily armed populace to the men on the moon, we accomplish the impossible because to us nothing is impossible.

Thus we are far better than anyone at technological innovation. Sadly, such innovation depends on a trained and talented cadre of technocrats, with the savvy to understand the cutting edge and the imagination to push it farther. The days of a stalwart American technical corps are done, and I fear we'll never see them again.
Click to expand...

Can we still think outside the box? The people who made it to the moon did it 40+ years ago. At the end of December, it'll be 40 years since any man has walked on the moon.
 
SCCutler said:
You, sir, are correct.

I fear losing this as we increasingly have a society which is "programmed" to rely upon bureaucracies (public or private, both exist) to tend to them. Doesn't work.
Click to expand...

Yea, I remember listening to an older guy on the radio talk about this very thing. He said he grew up lower middle class. He father worked in a factory, and he lived in a blue color town.

Down the road about 10 miles was a white color town. Well one day his town got wind that a policy was going to go into place that would subsidize him family, by taxing the guys down the road a little more.

He said he can remember his dad going off at the kitchen table with rants like "Where do those rich guys get off thinking I need there stupid money. I work hard, and know how to take care of my family. They can take there charity and stick it up there..."

He said the entire town thought this way. Today when something like that goes into effect, people think they deserve it.

That single change in mindset, is going to be the downfall of this country.
 
Andrew Sego said:
I attended a talk by the chief economist at AIG last month and he said the same thing... this is the "new normal" and that interest rates will remain low, at least relatively speaking, for decades to come. Folks have been saying that the post-WWII economy was exceptional for decades, and the exception rarely becomes the rule.
Click to expand...

Focus on interest rate alone, at your peril. Inflation also factors in.

If loans stay the same price, but the price of the goods goes up... same Net effect on your bottom-line.

To counter that, wages must rise to match prices. That is not happening.

Growth in most companies is not "trickling down" to borrow a phrase, not trying to make a political statement. Most of it is going to pay for increased COGS, a vicious cycle. The rest is siphoned off to cover executive compensation.

Most of the places I've worked for since 2001 have had either outright pay freezes (you're losing money, since your personal costs are rising with inflation), or have wage increases that barely meet inflation (you're not getting ahead, but at least you have a job), and manage their cash flow by rounds of layoffs.

That's a decade of zero return other than maintaining personal cash flow for the staff of all of those companies, which is telling.

The interest rate games are a symptom. You can't make new loans to people who aren't earning more this year than they did last year, no matter how cheap you make the loan.

People underwater in housing, for example, are ecstatic when housing prices rise. My thought when I see that is the opposite, because I know wages did not increase to counter that. So something else must be driving that increase, and usually it's devaluation of the currency, today.

At the core, what America has always exported more than anything else, is optimism. With Americans un-optimistic, the world financial system wonders "WTF?". Americans generally are optimistic still, but they're not dreaming big. There's more people holding on to old airplanes hoping (optimistically) that they won't take a bath on selling them, than say... trying hard to "step up" to the next bigger/faster/fancier model. Same with housing, cars, etc.

The younger generations are mirroring this by not being very materialistic at all. They've not seen a world where some hard work could triple one's personal income in a single job interview. They go for the sure-thing, not the Moon, if you catch my drift there.
 
Bob Noel said:
Can we still think outside the box? The people who made it to the moon did it 40+ years ago. At the end of December, it'll be 40 years since any man has walked on the moon.
Click to expand...

We have not done it, because there is no reason to. Not because we can't.

I think the US has done it's fair share of progressing inovation forward in the last 40 years.

We are only 5% of the world population, but account for far more in advances in science.
 
Mafoo said:
We have not done it, because there is no reason to. Not because we can't.
Click to expand...

"No reason to"... that right there, the profound and disturbing lack of vision, is why we can't do it today.
 
Bob Noel said:
"No reason to"... that right there, the profound and disturbing lack of vision, is why we can't do it today.
Click to expand...

Lack of vision? Why think so small? Mars is where we need to go.

Small ideas, is why we can't do it today ;)
 
steingar said:
I must violently disagree. We can do one thing no group in history could accomplish. We can think outside the box.

Our American culture embraces individuality to the detriment of groupthink. In America the lone outsider is the hero, the sheep in the crowd the one to be pitied. Do you think the denizens of any other nation complain about "the sheeple"?

This allows us to accomplish things not seen anywhere else. From a heavily armed populace to the men on the moon, we accomplish the impossible because to us nothing is impossible.

Thus we are far better than anyone at technological innovation. Sadly, such innovation depends on a trained and talented cadre of technocrats, with the savvy to understand the cutting edge and the imagination to push it farther. The days of a stalwart American technical corps are done, and I fear we'll never see them again.
Click to expand...


I would also like to add: That no country in the world can project and sustain the combat power that the USA can. We have a monopoly on death and destruction.
 
We export it. How many of those wars are using good ol' 'Merican killing devices?
 
denverpilot said:
We export it. How many of those wars are using good ol' 'Merican killing devices?
Click to expand...

Not as many as you would think. Russian arms are cheeper, and easier to maintain.

Plus, selling someone a weapon, and them having a reason to use it is not the same thing. If that was the case, Colt murdered a lot of people.
 
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