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Business Aviation Gets A Lift From Improving Economy
July 30, 2010
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  • By Robert Francis

    Reed Pigman, president of Texas Jet, plans to break ground soon on a new hangar at Meacham Airport in Fort Worth.

    “My other hangars are full, so if we’re going to grow, we’re going to need it,” he said.

    Pigman, whose company provides fuel, hangar space and other services to private and corporate aircraft, may be a little more optimistic than many in the aviation business, but others are seeing positive indicators as well.

    “Cautiously optimistic, that’s what I’d say we are,” said Keith Plumb, president and COO of Executive AirShare, a regional fractional aircraft firm based in Kansas City, that bases its Texas operations out of Meacham Airport. “We’re seeing some positive signs, but it’s certainly not back to what it was.”

    Positive signs would be welcome as business aviation ran into stiff headwinds in the current recession. Aircraft sales stalled and demand for private jet service fell. While Detroit got all the headlines, Wichita, Kan., where many business aircraft manufacturers are based, was devastated. At the same time, the inventory of used airplanes hit an all-time high and prices for some planes fell 50 percent, according to Ed Bolen, president and CEO of the National Business Aviation Association in Washington, D.C.

    “Through the first six months of 2010, things have stopped getting worse,” Bolen said. “You can see a recovery if you squint.”

    Bolen said flight hours are up compared with 2009, though still down from 2008.

    “So we can see things are improving, but we’re not back yet,” he said.

    General aviation is big business in north Texas. For example, Meacham International Airport has a $616 million impact on the North Texas economy, according to a 2002 Texas Wesleyan University study.

    Sales of used aircraft also are showing signs of improvement, according to Janine K. Iannarelli, president of Houston-based Par Avion Ltd., a brokerage firm that buys and sells previously-owned business jets.

    “Some used aircraft last year were easy to find,” she said. “Now with some aircraft, like the Gulfstream 5, they can be difficult to find. That’s a very telling sign.”

    Bolen said normally the used aircraft inventory is about 10 percent of all aircraft available for sales. During the recession, that increased to 19 percent.

    “Now, it’s about 12 percent, so it’s moving in the right direction,” he said.

    Iannarelli said sales of used business aircraft will continue to grow as the economy improves because the business case remains strong.

    “It’s a value proposition,” she said. “If your time becomes more valuable than sitting on a plane where your work is limited, companies will start using business jets again. It’s that simple. For entrepreneurs just getting a business off the ground, they can’t afford the downtime of waiting in an airport.”

    Executive AirShare’s Plumb said issues in the commercial airline business are one reason he sees business increasing.

    “The airlines have cut back on the amount of seats available and they’ve cut back on where they’re flying,” he said. “That means people and companies are coming to us to get where they need to be.”

    Bolen said more than 100 communities have either lost or seen substantially reduced airline service since the recession hit.

    “Some of those may come back, some may not, but that means for a time business aviation may be the only viable way to reach those locations,” he said.

    Shale plays around the country also have impacted business travel in this area, said Plumb.

    “We have a lot of customers that are flying to the Marcellus Shale play,” he said. “We see that a strong business for us.”

    Several business groups are hoping the government will help boost business aviation by renewing accelerated depreciation for investments in strategic business assets, including aircraft.

    Bolen testified before Congress on July 14 requesting the extension of accelerated tax depreciation that expired at the end of 2009.

    Accelerated depreciation “has been periodically used to stimulate capital equipment sales during soft economic times,” he said.

    For Pigman, he knows he needs to think ahead to be ready for any economic upturn.

    “I don’t have space in these hangers leased, but I’m full in my other hangers,” he said. “If there’s an upturn, I want to be ready.”

    Date: 2010-07-26