Corporate Aviation Management

16. The Future of Corporate Aviation

16 The Future of Corporate Aviation The purpose ofthis chapter is, first, to describe the future ofcorporate aviation through a discussion of related Federal Aviation Administration forecasts . Then a discussion ofa range of important issues affecting the regulation , operation, and management of corporate aviation will be presented. Even though corporate aviation can be considered one of the healthier branches of general aviation, it faces a challenging future in many ways. The Federal Aviation Administration publishes its FAA Aviation Forecasts annually. The latest version, entitled FAA Aviation Forecasts: Fiscal Years 1992-2003 (February 1992), presented some interesting information about corporate and business aviation-related trends as part ofits general aviation forecast. Throughout the 1980s there was a restructuring of general aviation which has affected corporate aviation. This restructuring has to do with declining general aviation new aircraft shipments since the late 1970s. This decline in shipments, shown in table 16.1, has affected both general aviation and corporate aviation aircraft deliveries and has occurred for many reasons: 1. An overproduction of corporate aircraft compared to industry 264 Year 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 Part Four: Conclusions TAULE 16.1. ANNUAL SHIPMENTS OF NEW UNITED STATES GENERAL AVIATION AIRCRAFT, 1981.-1992 Factory Net Billings Units Shipped (in millions) 9,457 1~2,919.9 4,266 $1,999.5 2,691 $1,469.5 2,431 $1,680.7 2,029 $1,430.6 1,495 $1,261.9 1,085 $1,363.5 1,143 $1,918.0 1,535 $1,803.9 1,144 $2,007.5 1,021 $1,968.3 899 $1,836.2 Source: General Aviation Manu£1cturers Association needs in the 1970s, due in part to lower interest rates and better tax advantages available then. 2. The success ofairline deregulation in providingimproved service at stable prices in many domestic hub locations, thus negating some· of the need for corporate aircraft. (Note: This factor has also worked the other way by making it more difficult to reach certain domestic nonhub locations by airline, thus enhancing the need for corporate aircraft in these specific circumstances.) 3. Purchase price cost increases for corporate aircraft. As shown in table 16.2, purchase prices for both key types of corporate aircraft have almost doubled since 1981. 4. Increases in maintenance and operating costs for corporate aircraft . As shown in tables 16.3 and 16.4, the maintenance and operating costs have almost doubled since 1981. 5. Changes in tastes and/or management philosophy relative to owning a corporate aircraft. This may occur due to a change in the management team, the CEO, or some other influential top executive who is influential in such decisions and is not £worably disposed toward corporate aviation (FAA Aviation Forecasts, pp.110-17). These, and other reasons, have provided numerous roadblocks to growth in corporate aviation in the 1980s. Even though this resulted in de- The Future 265 TABLE 16.2. CORPORATE AIRCRAI'T PURCHASE PRICE COST INDICES, 1981-1992 Year 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 Source: Federal Aviation Administration Turboprops 182.7 189.9 204.3 213.0 236.2 247.5 251.8 295.6 318.4 343.1 357..2 380.1 Turbojets 216.7 240.4 251.8 266.2 287.4 299.0 309.3 328.2 326.9 363.9 370.0 411.4 dining annual turbine aircraft (turboprop and turbofan/jet) and turbine helicopter shipments, the overall size of these fleets grew during the 1980s. For example, the turbine-powered aircraft fleet grew from 6,200 aircraft in 1980 to 9,500 aircraft in 1989. This is a net increase of 3,300 aircraft or 53.2 percent. It is also an annual average increase of 5.3 percent in turbine aircraft fleet size during the 1980s. The FAA also notes that there was an average increase of1.1 percent in the use ofgeneral aviation for business (in terms of hours flown) (FAA Aviation Forecasts, pp. 109-19). TABLE 16.3. CORPORATE AIR.CRAFT MAINTENANCE COST INDICES, 1981-1992 Year 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 Source: l'ederal Aviation Administration Turboprops 169.6 180.2 187.5 194.7 201.3 205.3 209.1 215.0 221.3 228.9 236.1 241.6 Turbojets 187.1 198.7 206.7 214.7 221.3...