F a c t o r s A f f ec t i n g A v i a t i o n

G e n e r a l

Fundamental changes have taken place in the general aviation industry. Before 1978,changes in the industry mirrored changes in the economy. If the economy was strong andgrowing, so was general aviation; if a slow-down occurred, general aviation lagged aswell. However, since the long and precipitous decline of aircra shipments began in thelate 1970s, this expected relationship has not held.General aviation took o in the 1960s as the economy grew at a rapid pace, fueled by theVietnam War and President Lyndon Johnson¶s ³Great Society´ social programs. Generalaviation manufacturers enjoyed a heyday, introducing new models and producing anaverage of more than 9,000 airplanes per year. Four airplanes in particular that wereintroduced in the 1960s²the Cessna 172, the Piper Cherokee, the Beech King Air 90, andthe Lear 23²proved to be bellwether designs for years to come. The general aviation Àeetalmost doubled during the 1960s, and new-aircra shipments reached a high of 15,768units in 1966.The expansion of all segments of aviation continued into the 1970s, with more airplanessold in this decade than before or since. The general aviation aircra Àeet increased from131,743 to 211,045 aircra , and production hit a high of 17,811 aircra in 1978. New aircra were introduced in record numbers, particularly trainers such as the Piper Cherokee andTomahawk models, the Cessna 150 and 152, and the Beech Sierra and Sundowner, to nameafew.However, some clouds loomed on the horizon. As fuel prices soared during the 1970s,manufacturers began to focus on more fuel-ef¿cient aircra . Airspace congestion wasanother problem that the

Piper decided to operate without the bene¿t of product liability coverage. Even more signi¿cant was theexponential growth in se lements.and four-place aircra . Improved safety notwithstanding. This was more than the selling price of many basictwo. andBeech insured the . no doubt.a key reason for the steep drop in the production of general aviation aircra during the1980s.the number of product liability suits continued to increase.These phenomenal cost increases during the ¿rst ¿ve years of the 1980s came at a timewhen the industry¶s safety record continued to improve. and notsurprisingly. The number of lawsuits and the size of awards were rising. Increasing regulations a ected the personal-pleasurepilot in particular.111in 1972.industry had been studying since the mid-1960s. and legal costs. VOR navigation capability. thecosts exceeded $70.000 per airplane. And terminalcontrol areas (TCAs) were introduced to the country¶s busiest airports. andaltitudereporting transponders. By 1986. As a result.the Airport and Airways Development Act was passed in 1970 to provide the funding toexpand and improve the airport and airway system over a 10-year period. the general aviation industry also began focusing on the issue ofproduct liability. judgments. Cessna Aircra Company decided to drop its piston-aircra production and self-insure up to $100million. so were insurance premiums²from $51 per new airplane in 1962 to $2. these requiredtwo-way communications with air traf¿c control (ATC).029 aircra that year. and based on unit shipments of 2. Product liability insurance costs for the general aviation airframe builders totaledabout $135 million in 1985. This was a sign of things to come for the aircra manufacturers and.During the 1970s.

was bought by Lear-Siegler. But as the airlines concentrated their Àights at hub cities and merger maniastruck the industry in the early 1980s. The use of corporate aircra started torebound. but generalaviation did not.Everything from housing starts to durable goods sales. in turn. executive jet. service to many smaller communities was droppedor severely cut back as competition decreased. and the major manufacturers focused more a ention on turboprops and jets. France¶s Euralair. an air charter. plummeted. the recession ofthe early 1990s and costly liability claims forced the company into Chapter 11 bankruptcy by 1992. Stuart Millar. general aviation followed the rest of the economy into a recession. No doubt the high interest rates of the late 1970sand early 1980s had an . BeechAircra was acquired by Raytheon Company. including autos and generalaviation aircra sales. In 1980. served new markets and competed for customers bylowering fares. Bythis time. Unfortunately. bought Mooney in 1984.¿rst $50 million annual aggregate exposure with its own insurancecompany Other factors were also working against the private business and pleasure Àier. as the aircarriers. Piper¶s owner.and cargo operator. Airlinederegulation in 1978 at ¿rst caused a decrease in the use of business aircra . which. The economy began to recover in 1983. for a number of reasons. was bought by investment banker ForstmannLi le and then in 1987 by entrepreneur M.In the early 1980s. including many new ones.Interest rates were at an all-time high when President Ronald Reagan took of¿ce in 1980. Bangor Punta Corporation. Cessna was acquired by General Dynamicsin 1985 and then sold to Textron in 1991. these manufacturers had been purchased by larger conglomerates.

making itmore expensive for the occasional Àier. even as interest in sports cars and boats seemed topeak. Used aircra were readily available.Another major factor. And changingtastes and preferences among the traditional business and pleasure aircra users may havecontributed to the decline in the 1980s. The level of professionalism required to Ày even a light aircra in today¶s air traf¿cenvironment has grounded many private pleasure Àiers.Another ¿nancial pressure working against aircra ownership resulted from passageof the Tax Reform Act of 1986. The growth in number and availability of regional and commuterairline service to many smaller communities also likely reduced the desirability of usingprivate general aviation aircra when planning business or pleasure trips.which caused the light-aircra manufacturers to concentrate on their higher-priced lineof turbine equipment. which eliminated the 10 percent investment tax credit. discussed previously.and hangar charges. Some of these individuals choseto Ày much less expensive ultralights and kit planes in uncontrolled airspace. includingthose for avionics equipment. despite veryli le change in the design or features of the typical single-engine aircra .e ect at the beginning of the slide. rose sharply during the early to mid-1980s.This was followed by a luxury tax on boats and planes. Acquisition costs. which only exacerbated theproblem of declining new aircra . and insurance²all steadily increased during the 1980s. maintenance. and prospective buyers were reluctant to purchase new equipmentat considerably higher prices. was the sharp rise in product liability claims. Total operating expenses²including fuel.

customers.Meanwhile. market. exports indollar value. U.S. In the1970s. production. imports of general aviation airplanes have exceeded U. due largely to product liability lawsuits. Finally. general aviation aircra manufacturers held a dominant position worldwide. sales of foreign-manufactured business jets accounted foralmost 40 percent of all business jets sold here in the early 1990s. the GARA imposed an 18-year statute of repose. and in 1995.-dominated market in a much bigger way during the 1980s.With some exceptions. The New Piper Aircra Corporationwas formed.-manufactured general aviation aircra continuedto fall.S. .S. limitingproduct liability suits for aircra having fewer than 20 passenger seats not engaged inscheduled passenger-carrying operations.S. and foreignmanufacturers continued to gain an ever-increasing foothold in the U. foreign aircra manufacturers enteredthe traditionally U. Many foreign governments supported their Àedgling aviation industriesthrough subsidization of research. As a result of the industry¶s devastatingdecline. The GARA ushered in a new wave of optimism in thegeneral aviation industry. development. and ¿nancing.sales. shipments of new U. reaching a low of 928 units in 1994. Cessna immediately announced that it wouldresume production of single-engine aircra in 1996. A I R T R A N S P O R T A T I O N 116 Even in the high-end market.S.S. Congress passed the General AviationRevitalization Act (GARA) in 1994. Aircra made abroad accounted for more than 50 percent of all aircra delivered to U.But since 1981.

In response to a similar poll in January 1997. the poll of certi¿cated pilots reported that74. Galaxy Aerospace rolled out its new business jet in the fall of 1996.increased student starts.In January 1997. This renewed optimism among the pilot community. Cirrus Design broke ground on two facilities to support production of the SR 20.Piper announced plans to manufacture the Meridian. Cessna delivered its ¿rst new singleengine piston aircra since 1986. Diamond Aircra . and Mooney also produced new pistonmodels. increased aircra shipments. Lancair International.New manufacturing facilities opened to support expanded production. Sabreliner . and by April 1998.5 percent of its members thought the state of aviation was the same or be er than it had been.general aviation aircra shipments ¿nally increased a er a 17year decline. 51 percentresponded optimistically. According to a poll of Aircra Owners and Pilots Association(AOPA) members conducted in March 1992. Also. Inaddition. a single-engine turboprop which¿rst Àew in 1999. expansion of production facilities. Aerospatialeand Renault joined forces to produce light-aircra piston engines for certi¿cation in 1999. These conditions suggested continued improvement in the general aviationindustry in 1998 and beyond. and record-se ing gains in aircra billings. only 41 percent said that they were optimisticabout the future of general aviation. aircra manufacturers. the optimism so prevalent in the industry since the passage of the GARA wasevidenced by the release of new products and services. and theindustry as a whole could be directly a ributed to the strong economy and the passage ofthe GARA in 1994.In 1997.

fractional ownership programs o ered by Executive Jets¶ NetJets. only a small percentage of this market has beendeveloped. Despite this record growth. celebrities. and Ultra Encore. these ¿ve major fractional ownershipproviders increased their Àeet size and shareholders at average annual rates above 65 C H A P T E R 4 ‡ T H E G E N E R A L A V I A T I O N I N D U S T R Y 1 1 7 percent.Fractional ownership providers . CJ2.Fractional ownership programs are ¿lling the niche for corporations. the BBJ-2. Boeing Business Jets. and businesspeople who do not Ày enough to warrant having their own Àight department. Raytheon announced that it would begin deliveries of itsPremier I. Raytheon¶s Travel Air. Twenty-eight aircra were delivered in 1999. a joint enterprise of Boeing and GeneralElectric. Flight Options. and TAG Aviation grew ata rapid pace. an entry-level jet that features a composite fuselage with metal wings. in 2000.During the 1990s.Sovereign. From 1993 through the end of 1999. Cessna announced plans and orders for the new Citation models²the CJ1. entered the market in 1998 with the longrange BBJ. which was based on a hybridof the 737-700/800 aircra . Airbus andFairchild are also marketing business jets that are based on aircra originally designed forcommercial operations.starteda large expansion program at their Missouri facility.Bombardier¶s Flexjet.Mooney delivered its ¿rst Eagle in 1999.Boeing Business Jets announced its plan to build a larger version of its long-rangecorporate jet.In 1999.

and Mooney Aircra Corporation began production of the Ovation 2.200 to2. Put into perspective. Total billings in 1999 soared35.o er the customer a more ef¿cient use of time by providinga faster point-to-point travel time and the ability to conduct business while Àying. and charterÀights.9 billion. in large part because of strong incremental growthand fractional ownership programs. the Ovation.The 1990s truly represented a revitalization of the industry.6 percent.1 percent over 1998. More .The new millennium started out with a continuation of the 1990s. The last year of the decade also marked the ¿rst time in the GAMA¶s historythat both billings and shipments increased for ¿ve consecutive years.The biggest jump in 1999 sales revenue. reaching $7.9 percent. Inaddition. The decade closed with across-the-board growth ingeneral aviation activity. Much of this record sales valueis for aircra at the higher priced end of the general aviation Àeet²turbine-poweredaircra ²and is likely due in part to the increase in fractional ownership. New manufacturingfacilities were being built and old facilities expanded.504. was in the turbofan aircra segment. It marked the ¿rst fullyear of deliveries of the Cessna 206H Stationair and T206H Turbo Stationair. Sales of general aviation aircra continued to set new records for value of aircra shipped. shareholders of fractional ownership ¿nd the minimum start-up concerns andeasier exiting options of great bene¿t. Deliveries ofthe compositeconstruction Cirrus Design SR 20 began. or 12. similar to 1998. general aviation sales in 1999 were quadruplethose of 1991. fractional programs. and units shipped increased from 2. a faster and more fuel-ef¿cient version of the ¿rm¶s best-selling model. corporate Àight departments. Sales rose 23.

Kansas. largely the result of strong turboprop and jet sales. and the increase in costs related to fuel and liability. such as thetragedy on September 11. clouds were on the horizon. and by 2001 the economy slipped into a recession. Cirrus delivered 95 new four-seat SR 20 models. will bring new challenges to the general aviation industry . Cessna piston deliveriesincreased to 912 units.than900 turbine aircra were delivered in 2000 (see Table 4-2) as production capacity soaredto keep up with record backlogs in manufacturers¶ order books. plant.doubled the number of Excels it delivered and increased Bravo production by 50 percent.Dassault Falcon Jet deliveries reached 73. thetotal number of shipments fell for the ¿rst time in six years. Cessna.However.Piston-aircra shipments grew by almost 11 percent. ¿ve more than in 1999. Even deliveries ofthe venerable Raytheon Hawker 800 XP increased by 22 percent. buoyed by an infusion of newtechnology from Lancair and Cirrus Design and by increased piston deliveries fromCessna¶s Independence. the economic slowdown during the ¿rst three years of thenew millennium. 2001. for example. as in the past. Learjet 45 deliveries were up from 43 in 1999 to 71 in 2000. vividly demonstratethat the future. The year 2000 saw the ¿rst deliveries of Lancair¶sColumbia 3000.While sales reached another high. and its backlog of ordersincreased. Unexpected events.