More often than not we, as professionals in sales for business aviation discuss the specific benefits of our industry on a regular basis. I was asked the other day ,“Is the recent charter sales growth a sign of a budding business year?" Agreeing that charter sales is increasing noticeably, I checked to look at the other sources out there to expand on that answer.
I found there is a single reality that measures the barometer of progress in the General Aviation Industry today and that is full aircraft ownership. In a recent discussion at the Ohio State University School of Aviation, my fellow panelist Michael Smith of Scope Aircraft Finance said,
“Business on our end at Scope has been very strong overall but that’s really due to so many banks dropping out of the market. What seemed like a great loan structure in 2006 resulted in immense losses for the industry as jet values seemed to halve overnight. Lucky for us we have always stuck strong to the philosophy of proper loan structure with a focus on good collateral and a desire to maintain an equity position throughout the loan.”
Smith continues ,“Our target market lies with high performance single pistons to turboprops to light jets, basically $250,000-$5,000,000 in value. Bonanzas, PC-12s, Meridians, King Airs, and Phenom 100s are the real bread and butter. What’s nice about that market is it’s relatively stable value-wise. This past recession nothing was safe however turboprops seemed to be the most stable if you want to call it that. I’d imagine it’s due to the wide range of uses turboprops have overall.”
The business aircraft sales industry is unique because of the depreciation of the aircraft investment. New planes enter the market at a faster rate than ever before, and aging aircraft inventory decreases in value. Smith finds this to be one of the biggest challenges industry-wide.
“Once the old inventory is cleaned up somewhat,” said Smith. “It will help spur demand for the newer units. 2013 signs seem to show the stabilization continuing so far and possibly even modest signs of growth.”
Aircraft ownership by a single, private owner is nearly non-existent these days. Even diplomats and professional sports teams share their aircraft with other passengers and teams, therefore to hear this news by Smith is encouraging.
Fractional and jet card programs seem to be on the rise. Passengers often sleep and eat in their aircraft so why not consider these comforts similar to real estate. Like vacation timeshares, a single party’s use of the aircraft is periodic, infrequent and scheduled. Similar to high-dollar real estate like a Manhattan condo a cooperative investment becomes more secure for all parties involved. The fractional jet program model works like this example in theory, however the myriad of agreements that tie into the fractional web can be confusing and not always as easy as it sounds, yet they are growing and fleet options are expanding.
All in all there are a variety of program selections for business travel to choose from everywhere. It is pleasing to see the General Aviation Industry is slowly rebounding and strengthening every day. I believe 2013 will be an exceptional year!
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