By: Daniel McCoy
April 12, 2011
Richard Aboulafia, an aviation analyst with Virginia-based The Teal Group, made his second trip the Air Capital to speak to the Wichita Aero Club on Tuesday.
When asked to compare the two trips, he answered quickly.
“It’s much better this time,” Aboulafia says.
He last spoke at the Aero Club in late 2008, at a point when most could see the industry was headed for a decline.
On Tuesday, Aboulafia entitled his presentation “Okay. The Sky Has Fallen. It Will Rise Again.”
What happened in aviation in the more than two years since Aboulafia last spoke to the group – specifically in general aviation – was historic for several reasons, he said.
First, Wichita had the unfortunate luck of being primarily tied to the market that was hit the hardest – the lower half of the business jet market.
What happened in the business jet market was one of the biggest mysteries of the entire downturn, Aboulafia said.
While the bottom half of the market fell off dramatically from 2008-2010, the top half actually grew slightly.
It was this split in the market that made things so hard in Wichita.
In fact, Aboulafia said, aviation as a global industry held on fairly well everywhere else.
“Wichita was the epicenter of all pain,” he said. “Really the only (aviation center) that wasn’t sheltered on the whole globe was Wichita.”
Wichita also had the unfortunate timing of the business jet market’s first new competitor since 1969, Embraer began producing a less expensive product at the same time price became a huge issue because of the downturn.
That said, Aboulafia brought with him a positive analysis of the industry’s future in Wichita.
He, and his firm, are predicting general aviation production to begin to increase in 2012, with a 10 percent compounded annual growth rate for the next six years.
There are still issues to overcome, he said, such as working through the available used inventory and firming up pricing. And, Aboulafia said, the biggest question for Wichita’s general aviation industry moving forward is how the bottom half of the market rebounds.
It now represents the bottom third of the market, but if it rebounds more quickly and gains ground on the higher end Gulfstreams of the world, the industry’s growth rate could be even greater.
Regardless, the industry that is Wichita’s life blood is on the rise, he said.
“This industry is coming back, and Wichita will too,” Aboulafia said.
http://www.bizjournals.com/wichita/blog/2011/04/aboulafia-aviation-will-bounce-back.html
Source: WICHITA BUSINESS JOURNAL
Date: 2011-04-12