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

[wabower]

Industry analyst Brian Foley now refers to the past four years as an "epic correction" in the business airplane market and warns that instead of waiting for an uptick, the industry should view the current situation as the "new normal" and adapt accordingly (emphasis his). "The pessimest in me says that we'll be in something of a steady-state situation for the foreseeable future, with occasional setbacks balanced out by spots of growth" Foley says.

The business airplane market generally includes aircraft with some transportation value, as opposed to those that are primarily used for recreational activities.

______________

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?

 

[kyleb]

I'm not exactly surprised...

 

[write-stuff]

Yeah, I think a lot of things about the old economy won't be returning, at least not in my lifetime.

 

[Everskyward]

Back in about 2008 or so someone asked me what I thought the next bubble was going to be. I jokingly said "business jets". I knew that people were buying positions on aircraft not yet built with the hopes of selling them for a premium in the future. I thought it was crazy. It obviously was. I think sanity has returned to the market now, which isn't necessarily a bad thing.

 

[Mafoo]

Yeah, I think a lot of things about the old economy won't be returning, at least not in my lifetime.

 

[kyleb]

Yeah, I think a lot of things about the old economy won't be returning, at least not in my lifetime.

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...

 

[Mafoo]

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...

Not to turn this into a political discussion, but the problem is we were overinflated. The solution is not to get back to where we were, but to get the economy growing at a much better click.

Once that's done (if we ever do it), it's going to take decades to get us back to where we were (as it should).

 

[Tom-D]

Not to turn this into a political discussion, but the problem is we were overinflated. The solution is not to get back to where we were, but to get the economy growing at a much better click.

Once that's done (if we ever do it), it's going to take decades to get us back to where we were (as it should).

What we need is a new industry that can't be off shored that will put people back to work, widen the tax base, and pay down the national debt.

 

[write-stuff]

As long as we're waxing political, I put the burdon not on a single administration. We've been living in a Ponzi Scheme economy for decades. We keep shoving the problem off into the future, but I'm not sure that can continue that for much longer.

 

[poadeleted21]

Gulfstream seems to be doing just fine.

 

[Henning]

Industry analyst Brian Foley now refers to the past four years as an "epic correction" in the business airplane market and warns that instead of waiting for an uptick, the industry should view the current situation as the "new normal" and adapt accordingly (emphasis his). "The pessimest in me says that we'll be in something of a steady-state situation for the foreseeable future, with occasional setbacks balanced out by spots of growth" Foley says.

The business airplane market generally includes aircraft with some transportation value, as opposed to those that are primarily used for recreational activities.

______________

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?

"Uncertain". As you point out, the business market is completely different from the leisure/entertainment market which is what most of GA is. BA has to be able to justify 7 and 8 figure annual budgets financially by showing how it makes a return or at least is a warranted bonus. Not so for leisure/entertainment flying, all that is required there is desire. What people are finding is that they can't find the equipment they desire at the price they think they should be paying. So these people are left with just a few options: pay the price tag on the quality of craft they desire, buy at the price they desire and fly a plane not of the quality they desire and then spend more than the difference over the next couple of years keeping it flying, or forgo their desire altogether.

 

[Mafoo]

As long as we're waxing political, I put the burdon not on a single administration. We've been living in a Ponzi Scheme economy for decades. We keep shoving the problem off into the future, but I'm not sure that can continue that for much longer.

Again, head of nail has been hit.

You and I seem to think a lot alike.

 

[Henning]

What we need is a new industry that can't be off shored that will put people back to work, widen the tax base, and pay down the national debt.

Pot...

 

[Mafoo]

As you point out, the business market is completely different from the leisure/entertainment market which is what most of GA is.

I agree, however it's interesting that Apple just became the largest company that ever existed, and they don't sell a single thing anyone needs.

They are 100% an entertainment company.

 

[wabower]

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.

"Uncertain". As you point out, the business market is completely different from the leisure/entertainment market which is what most of GA is. BA has to be able to justify 7 and 8 figure annual budgets financially by showing how it makes a return or at least is a warranted bonus. Not so for leisure/entertainment flying, all that is required there is desire. What people are finding is that they can't find the equipment they desire at the price they think they should be paying. So these people are left with just a few options: pay the price tag on the quality of craft they desire, buy at the price they desire and fly a plane not of the quality they desire and then spend more than the difference over the next couple of years keeping it flying, or forgo their desire altogether.

 

[Henning]

I agree, however it's interesting that Apple just became the largest company that ever existed, and they don't sell a single thing anyone needs.

They are 100% an entertainment company.

Exactly, when the general economy recovers then 'desires' become more important for people to fill. GA planes are 'toys' not 'investments' with very few exceptions.

 

[poadeleted21]

"Uncertain". As you point out, the business market is completely different from the leisure/entertainment market which is what most of GA is. BA has to be able to justify 7 and 8 figure annual budgets financially by showing how it makes a return or at least is a warranted bonus. Not so for leisure/entertainment flying, all that is required there is desire. What people are finding is that they can't find the equipment they desire at the price they think they should be paying. So these people are left with just a few options: pay the price tag on the quality of craft they desire, buy at the price they desire and fly a plane not of the quality they desire and then spend more than the difference over the next couple of years keeping it flying, or forgo their desire altogether.

I think you're a little pessimistic on the buyer's market. It's a buyer's market maybe not as much as most people think. Sure you're not going to get G650 for $45K like a lot of people think. But I can tell you good planes are selling at for least 75% of what they would have 5-6 years ago and bad ones are selling at pennies on the dollar or they're not selling. Lots of closeouts on junk and good discounts on the good stuff but the good stuff priced right are few and far between and not sitting around long. But they have to be priced right or people keep looking for the one that is.

Another thing to think about is our little planes are in a global market, I've seen quite a few planes selling and heading to South America, dunno why that is. Brazil seems to be a recurring theme I'm detecting.

 

[Tom-D]

Pot...

That is a really great idea, we spend more fighting the drug war than buying the whole crop and giving it away.

I rather see a Homestead act and give a 1/4 section of worthless west texas government owned sage brush, to any one that will grow algae.

Work it on a dairy farm business model, you grow a product to sell to the refineries to make gas, Algae will sequester Co, replenish the Worlds O2 supply, and lower gas prices, add to the tax base, and put a lot of people to work.

 

[Henning]

That is a really great idea, we spend more fighting the drug war than buying the whole crop and giving it away.

I rather see a Homestead act and give a 1/4 section of worthless west texas government owned sage brush, to any one that will grow algae.

Work it on a dairy farm business model, you grow a product to see to the refineries to make gas, Algae will sequester Co, replenish the Worlds O2 supply, and lower gas prices, add to the tax base, and put a lot of people to work.

Hell, I brought up hydrogen production which would revolutionize the energy industry but everyone said it's impossible. We already have a crap load of energy production bought and paid for but again, all anyone wanted to do was tell me it can't work. Why the hell bother with anything at all? Nobody wants it, F-em all, the world can rot in hell for all I give a **** anymore, I'll just take care of myself.

 

[Tom-D]

Again, head of nail has been hit.

You and I seem to think a lot alike.

Yes it's called 100 years of progressivism, it worked in an ever increasing economy, but when the bottom fell out we resulted in having a 16 trillion dollar debt.

 

[Mafoo]

Yes it's called 100 years of progressivism, it worked in an ever increasing economy, but when the bottom fell out we resulted in having a 16 trillion dollar debt.

Yep. However the real "nail in the coffin" was in 1971, when for the first time, the dollar was worth whatever we wanted to say it was worth.

 

[Tom-D]

Yep. However the real "nail in the coffin" was in 1971, when for the first time, the dollar was worth whatever we wanted to say it was worth.

What ever you say, but the here and now says we spend more than we take in, the root cause of this is debatable but the answer is either taking in more or spending less or both.

And the 535 folks with in the beltway don't seen to be able to fix that.

I fix no blame to either party, But I do say they both had a hand in getting us here.

The biggest problem we have is the stupid voter who will vote for the candidate who lies to them best.

 

[wabower]

We all vote our pocketbook.

What ever you say, but the here and now says we spend more than we take in, the root cause of this is debatable but the answer is either taking in more or spending less or both.

And the 535 folks with in the beltway don't seen to be able to fix that.

I fix no blame to either party, But I do say they both had a hand in getting us here.

The biggest problem we have is the stupid voter who will vote for the candidate who lies to them best.

 

[masloki]

What ever you say, but the here and now says we spend more than we take in, the root cause of this is debatable but the answer is either taking in more or spending less or both.

And the 535 folks with in the beltway don't seen to be able to fix that.

I fix no blame to either party, But I do say they both had a hand in getting us here.

The biggest problem we have is the stupid voter who will vote for the candidate who lies to them best.

Term limits. At least get some new congress folks. Plus it will drive the corporations nuts because they will have to buy a whole new crop out. Erm, support party platform remodernization efforts.

 

[BurtM]

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.

But once the AC gets depreciated, then what?

I think a lot of the 1970s GA activity was due to economic expansion and GI bill training money. I think Cessna's 1980s market hiatus was more due to money than liability, too.

Anyway, there's a long history of really cool aircraft being sent to salvage yards based on economics - Jetstreams, various forms of Saberliners and so on. There are lots of newer jets and turboprops that fall into that category, too.

I think that most of us low-level aircraft owners (me, not you) need to face the eventuality that we're either going to fly our PA-28s and C172s to the salvage yard or pay someone else to do it. Some people that financed will let MBNA take it, some of us that paid cash for our toys will look at it like putting down a pet.

 

[Everskyward]

I don't think the bubble in aircraft prices had anything to do with politics. It had to do with people who, for whatever reason, bought more airplane than they really needed and others who tried to game the rising prices.

 

[Henning]

We all vote our pocketbook.

I voted for TARP? When did I vote for anyone in the Fed?

 

[BurtM]

Term limits. At least get some new congress folks. Plus it will drive the corporations nuts because they will have to buy a whole new crop out. Erm, support party platform remodernization efforts.

Every election is a test of term limits.

Most people don't realize that the 25th Amendment concerning Presidential succession wasn't ratified until 18 months after President Kennedy was assassinated. And after JFK was assassinated, we went from November, 1963 to January, 1965 without a Vice President.

So maybe all the current VP candidate selection histrionics are just that.

 

[Mafoo]

I don't think the bubble in aircraft prices had anything to do with politics. It had to do with people who, for whatever reason, bought more airplane than they really needed and others who tried to game the rising prices.

I disagree.

Everything that's expensive, and a luxury item has taken a hit. Boats, Planes, Summer homes, RV's, etc.

If you are in the income bracket where you buy those kinds of things, your just not as sure right now as you used to be as to how much disposable income you really have.

This I think, is a problem created by our government.

 

[Everskyward]

I disagree.

Everything that's expensive, and a luxury item has taken a hit. Boats, Planes, Summer homes, RV's, etc.

If you are in the income bracket where you buy those kinds of things, your just not as sure right now as you used to be as to how much disposable income you really have.

People with money are still spending it. Charter hours are up. As someone else mentioned, Gulfstream isn't doing badly.

 

[Tom-D]

I don't think the bubble in aircraft prices had anything to do with politics. It had to do with people who, for whatever reason, bought more airplane than they really needed and others who tried to game the rising prices.

I believe the aircraft pricing is attached to the economy, the economy is a highly political subject.

 

[Everskyward]

I believe the aircraft pricing is attached to the economy, the economy is a highly political subject.

If we want to discuss politics we need to move this to the Spin Zone.

 

[Mafoo]

If we want to discuss politics we need to move this to the Spin Zone.

True (and I stay out of that zone on purpose).

However politically charged threads tend to be Republican vs Democrat type of stuff. This thread has really just been general government involvement, with no individual parties discussed.

 

[Everskyward]

True (and I stay out of that zone on purpose).

However politically charged threads tend to be Republican vs Democrat type of stuff. This thread has really just been general government involvement, with no individual parties discussed.

Let's keep it that way.

 

[wabower]

The sub-prime mortgage crash that triggered the credit and equity market melt-down was largely due to the government's inaccurate assessment of the impact of home ownership in creating a populace with "skin in the game."

Many agencies and branches were involved in creating the mess, and many private-sector firms jumped on the opportunities created. By coincidence I was attending an appraisers conference/seminar during the first week of October when TSHTF and remember watching the breaking news on TV and telling fellow attendees that "whatever we thought these airplanes were worth when we arrived, they're going to be worth a hell of a lot less when we leave." And they were.

I don't think the bubble in aircraft prices had anything to do with politics. It had to do with people who, for whatever reason, bought more airplane than they really needed and others who tried to game the rising prices.

 

[Henning]

The sub-prime mortgage crash that triggered the credit and equity market melt-down was largely due to the government's inaccurate assessment of the impact of home ownership in creating a populace with "skin in the game."

Many agencies and branches were involved in creating the mess, and many private-sector firms jumped on the opportunities created. By coincidence I was attending an appraisers conference/seminar during the first week of October when TSHTF and remember watching the breaking news on TV and telling fellow attendees that "whatever we thought these airplanes were worth when we arrived, they're going to be worth a hell of a lot less when we leave." And they were.

No, they inaccurately assessed the banking industry's desire and ability to take advantage of the situation and hard sell mortgages to turn into derivatives by calling homeowners every evening offering to refi them over and over while offering them 25% over the appraised value. The problem was the same as always and why the mortgage rules were written to begin with, the greedy taking advantage of the stupid. The problem was that we bailed out the greedy. We should have let Wall Street fall. We should do away with the Fed as well, they function under bad precepts.

 

[BurtM]

No, they inaccurately assessed the banking industry's desire and ability to take advantage of the situation and hard sell mortgages to turn into derivatives by calling homeowners every evening offering to refi them over and over while offering them 25% over the appraised value. The problem was the same as always and why the mortgage rules were written to begin with, the greedy taking advantage of the stupid. The problem was that we bailed out the greedy. We should have let Wall Street fall. We should do away with the Fed as well, they function under bad precepts.

...aka counting the bodies after they've been buried...

 

[Mafoo]

The sub-prime mortgage crash that triggered the credit and equity market melt-down was largely due to the government's inaccurate assessment of the impact of home ownership in creating a populace with "skin in the game."

It was very accurately assessed, and explained to them. They just chose to not utilize the information given.

 

[rpadula]

I agree, however it's interesting that Apple just became the largest company that ever existed, and they don't sell a single thing anyone needs.

They are 100% an entertainment company.

Wut? I thought over in the Nexus 7 thread you said you bought your iMac to get serious work done.

 

[steingar]

What we need is a new industry that can't be off shored that will put people back to work, widen the tax base, and pay down the national debt.

Our former model, that worked really, really well, was to develop cutting edge technology in this country, manufacture it, and sell it to the world. Once it wasn't cutting edge technology anymore the manufacturing would shift overseas to inexpensive labor markets, while we'd develop the next great thing. A ripple from the space program, when we were as a nation awash in engineers and physicists. Another phenomenon I don't expect to see returning in my lifetime. I expect us to become a nation that imports high technology and exports food, weapons, and religion.