Swings and Roundabouts: AN AVIATION INDUSTRY OVERVIEW

By Adam D. West

So, how is the aviation business at the moment?

This is a question I am often asked and, really, it is quite a complex question.

At this point, we are seeing some very interesting points of evolution in the Aviation Industry. Not only on a regional and national basis, but on an International basis also.

So what is going on? Well, to be perfectly honest, that is the million-dollar question, if a person could predict economic trends accurately, well, the world would in effect be their “oyster”. Economic models can give some insight, though there are often too many variables and unpredictable facets that have a compounding influence. Presently, as we all know, the Asian economic situation is affecting the economies of the Western Hemisphere, but to what extent?

From a business standpoint, budgets have to be shaved and costs have to be reduced. We all have to become leaner, fitter and quicker. More importantly, we have to be very careful with expansion in to new areas. The paradox to this is, where specific currency values have fallen, even collapsed, the dollar will buy much more. So investment, in these regions becomes suddenly more attractive. This is applicable in terms from the recreational tourist to corporation buyouts and takeover’s. Travel in this situation becomes more important. The tourist travels more and the executives travel more and additionally have to move quicker, maybe to negotiate and finalize a contract before a competitor.

Although the justification for business jets is essentially quite simple, these items are often the primary considerations in a cost cutting exercise. To shareholders and accountants an executive jet is just an executive toy or a perk. Not so, above all, it is a vital business tool. One deal negotiated and completed because you got there in time and before the competition can pay for the cost of the aircraft. In some economic climates that business tool is also an appreciating asset.

In turn, we have seen recently some companies reducing aircraft fleets and even closing flight departments in favor of other alternatives. Aircraft charter often can bridge the gap between what is viewed as a perk and what is essential.

So would one think that, the effects are starting to show in the Western aviation market? Well, yes. Both in the negative and the positive. As more companies are disposing of and reducing fleets, business aircraft values are still on the increase and deliveries of aircraft and transactions are still increasing year over year.

Air Castle Corporation, for example, has enjoyed its busiest year in the aircraft charter market so far, having broken previously set dispatch records with its aircraft, each year is showing increased hours of operation over the last. Additionally, the aircraft sales and management areas of Air Castle have been equally busy. The company is taking this opportunity to further expand our operations from Los Angeles, New York and Chicago to further afield.

This could essentially be a make or break time for many businesses, not just in the aviation industry. But in many other industries too. It is not only the fittest that survive it the fastest and those with the insight to see the opportunities that survive too.

So, where do we go from here? Isn’t this the question that so many executives ask themselves, probably on a daily basis? As much as I would like to provide the answer to this, I can’t. I can only offer the point that there are no problems, only opportunities. To further emphasize this, bear in mind the point that every time someone loses a billion; someone else makes a billion.

Although we have seen some large and substantial companies suffer huge losses and the associated consequences, others have strengthened and expanded business opportunities.

California has a large number of multi-national companies based within its confines, geographically it is well suited to take advantage of the national and international opportunities available in each of its industry bases. Aviation, aside from being one of the industries, is important to the growth and expansion of others–the potential benefits are great. So could this economic period be vital to us all. I think so.

Adam D. West is Vice President of Sales and Lease Marketing for Air Castle Corporation. For more information, contact Air Castle at 310-899-5250.