General Aviation Industry Hurting During Economic Downturn

Bookmark and Share

When Recession Hits, Importance of General Aviation to America Becomes Even More Visible

March 30, 2009

The U.S. aviation system is critical to the success, strength and growth of the economy. The system is made up of three segments:

  • Scheduled operations, including passenger airlines;
  • Military, and;
  • General Aviation.

General aviation (GA) includes diverse operations, with business uses that range from agriculture, to law enforcement, to fire and rescue services, to varied government, educational, nonprofit and business organizations. 85% of the businesses using a general aviation aircraft for a business purpose are small and mid-sized businesses located across the country.  Servicing and supporting these organizations are FBO's, maintenance technicians, suppliers and service providers.

General aviation is an essential economic generator directly or indirectly employing over 1.26 million people nationwide according a 2006 economic study by Merge Global.  These jobs generate $150 billion in economic activity across the United States, including states like California ($18B), Texas ($11B), Georgia ($9B), and Kansas ($7B). Our industry is continuing to build a strong American manufacturing and employment base that contributes positively to our national balance of trade. Congress recognized just how fundamental general aviation is to our nation's transportation system, rural economies, manufacturing capability, and balance of trade when it passed the General Aviation Revitalization Act a little more than a decade ago.

There's no question that in communities across the country, general aviation means millions of jobs: jobs in aircraft manufacture (the U.S. industry leads the world), jobs for people in small towns (where companies use airplanes to reach new markets), and jobs in flight support (including schedulers, dispatchers, maintenance technicians, pilots, training professionals, and airport employees to name just a few examples).

Unfortunately, the people and businesses in general aviation are weathering one of the worst economic storms anyone has ever seen. The impact of the flagging economy on the companies and communities that rely on general aviation is visible in all parts of the country. Following are some examples:

GA Manufacturing has been hit hard by the economy

The general aviation industry supports highly skilled, well-paying jobs for engineers and manufacturing line workers who design and build aircraft in places like Savannah, Wichita, and Little Rock and for hundreds of component manufacturers such as GE, Honeywell, and Pratt and Whitney that supply them with parts including many small businesses.  GA is an important national industry that contributes greatly to the economy and to local tax bases.  These suppliers also contribute extensively to aircraft produced by foreign companies like Dassault, Embraer, and Bombardier.  The collective direct earnings of general aviation exceed $53 billion.

Layoffs

The industry started feeling the effects of the downturn last fall and since then US members of the General Aviation Manufacturers Association (employing 144,000  people in the U.S.) have laid off over 12,155 people to adjust to the economy with thousands more among suppliers and additional layoffs pending.  In addition, some general aviation manufacturers, including Adam Aircraft and Eclipse Aviation, have declared bankruptcy and ceased production.

Backlog and Loss of Orders

Our industry held a record backlog of $83 billion at the end of the third quarter 2008, but it is rapidly shrinking.  Customers are not placing orders which results in the backlog shrinking by $6-7 billion each quarter.  Customers are also cancelling or delaying orders as they manage their own finances and schedule for capital purchases.

At the same time, the used aircraft market is saturated with inventory levels for business jets reaching over 17%.  Criticism of business aviation risks further flooding the used aircraft market and depressing prices. 

Exports

Our industry is a strong contributor to U.S. exports with a total of 1,161 airplanes exported in 2008. The export billings reached $5.86 billion.  The aggregate aviation industry, including GA has a positive impact on the US trade balance. Our exports accounted for 43.9 percent of the total value of U.S. manufactured general aviation airplanes in 2008. 

GA Flight Activity is in Decline

According to FAA data, overall general aviation traffic volumes in January 2009 are down 23% compared to January 2008.  The same data reports the change in business jet operations is a decline of 28.3 percent for January 2009 compared to January 2008 year-over-year.

Small airports are operating ‘in the red'

There are more than 5,000 public use airports located in communities across the country.  Approximately 470 of these airports have commercial airline service – making general aviation a critical lifeline for smaller communities.  Many of these smaller airports are seeing their revenues plummet as general aviation flight hours decrease. For example, Aviation International News recently reported that: "A decline of nearly 20 percent in jet fuel sales has helped drag the Salina Airport Authority's 2008 budget into the red. The airport authority gets 6.6 cents from every gallon of jet fuel sold at the airport. That surcharge provides almost an eighth of the authority's operating revenue. ‘It confirms that business jet use and travel is down,' said Tim Rogers, executive director."

The bottom line is that the people and businesses in general aviation are subject to the sluggish economy just like everyone else. And all the information available confirms that when a recession hits general aviation, the impact is felt all across America's economy.