Due to the strengthening economy, businesses and households have found themselves with more discretionary income, which is directly translating to increased sales and passenger numbers for commercial and general aviation, according to industry experts.
“What has historically been the case is business aviation, as an industry, is very closely tied to the economy,” Dan Hubbard, senior vice president of the National Business Aviation Association, said. “When the economy is growing, you usually see some incremental growth in business aviation. If the economy is sliding into a recession, business aviation is usually one of the first industries you see impacted.”
During the Great Recession, Hubbard explained that the sale of new airplanes dropped about 50%, annual flight hours decreased around 40% and available pre-owned aircraft reached their highest level since that data has been tracked. However, since the economy has rebounded over the last couple of years, he said used aircraft are hard to come by, the sales of new aircraft are stronger and flight hours are back up, though not to the historic highs of 2006-2007.
Increased business and sales translates to the need for additional hiring; however, Hubbard noted that the aviation industry is having a difficult time finding employees. He explained that the older generation of aviation and aerospace employees is reaching retirement age and that fewer people are entering the field – particularly pilots and maintenance specialists.Looking to the future, this workforce challenge is likely to persist, he added.
Commercial airlines anticipate three million passengers departing from the U.S. daily, an all-time high and up 3.3% year over year, according to Airlines For America (A4A), a trade association representing some of the largest airlines.
“As the economy grows along with household net worth, passengers are taking advantage of persistently low airfares for their summer travel plans,” A4A Vice President and Chief Economist John Heimlich said.
For nine publicly traded U.S. passenger airlines, earnings peaked in 2015 and have decreased every year since due to expenses, including ever-increasing fuel prices, according to A4A data. Revenues during the first quarter of 2018 rose 7% year over year but were outpaced by a 9.9% increase of expenses in the same time period. Pre-tax earnings were down to $1.9 billion from $2.5 billion one year ago. The decrease was caused, in large part, to a 23.3% increase in fuel prices and a 6.8% increase in labor costs.
Real airfares are at historically low levels, according to A4A, with rates still 19% below 2000 levels adjusted for inflation. The average domestic airfare in 2017 was $384, the lowest annual inflation-adjusted fare in 23 years, according to the U.S. Bureau of Transportation.
Despite challenges, A4A said airlines are making significant investments in new technology and an improved customer experience. Some areas of investment include new or refurbished aircraft, expanded destinations and schedules, improved facilities and amenities, automated security screening, mobile technology, reliability, and enhanced tools and training for customer-contact employees.
“This fall we will celebrate 40 years since the passage of the Airline Deregulation Act,” Heimlich said. “[The act] has enabled business and leisure travelers alike to reap the benefits of the nation’s safest form of transportation, while enjoying historically low airfares, increased in-flight amenities and modern technology throughout the flight experience.”
Vice President and General Manager, Gulfstream Long Beach
We are optimistic about the business aviation market and the company’s sales activity in the second half of 2018. Our optimism is based on the growing Gulfstream G650 and flagship G650ER fleet, which is at more than 300 worldwide, and our all-new Gulfstream G500 and G600, which offer the most optimized combination of speed, range, technology and efficiency in our industry. The G500 is scheduled to earn type certification from the Federal Aviation Administration this summer, and deliveries to customers will begin later this year. G600 certification is expected in the second half of 2018, with deliveries to begin in 2019.
At Gulfstream Long Beach, the hub of the enterprise’s West Coast operations, our business comprises customer support and completions for the G650 and G650ER. The customer support business has been brisk, as our maintenance hangars have averaged full capacity during the first half of 2018. Completions-wise, we are just as busy. There is demand for the G650ER and G650, which offer the fastest speed, largest cabin and most advanced cockpit of any in-service business jet.
It’s a competitive environment for aerospace industry personnel in Southern California, but we have added more than 60 employees this year and plan to continue to add to our workforce of nearly 870. Our recruiting efforts are also focused on Gulfstream’s new Van Nuys facility, which will open in 2019. This site will focus on line maintenance and serve as the new base of operations for our mobile response unit. Operators whose aircraft require heavier maintenance will continue to use Gulfstream Long Beach.
President and Chief Executive Officer, Aeroplex/Aerolease Group
Business aviation in 2018 is thought to be a “reset year,” with business aircraft deliveries expected to be flat and an anticipated upward growth track projected for 2019. Long Beach Airport is a vital business and general aviation airport, and the diversity and balance it provides is undervalued locally and in the region.
Business aircraft manufacturers are planning for flat deliveries in 2018, except for the new model introductions in the Cessna, Gulfstream and Bombardier aircraft that are offsetting declines from older legacy products. These newer aircraft expect to see higher deliveries this year. Smaller jet and single-engine turbine aircraft deliveries are slightly lower this year.
Beyond the delivery numbers, optimism continues to rise in the industry. The latest UBS Business Jet Market Index was 10% higher than its prior survey and back to its post-U.S. election high. Business aviation proponents believe that the industry is now past the low point from past years.
Clearly there is optimism due to a strengthening economy in the U.S., the largest business aviation market, as well as in Europe and other regions. Giving an extra jolt to the U.S. business aviation market is expected tax reform, which many in the industry believe will spur more business aircraft sales. This equates to positive economic impacts in many sectors, especially job creation, including in the Los Angeles/Long Beach region.
Growth does come at a cost and United States is feeling the pinch in not being able to find enough skilled workers to keep pace with the requirements for pilots and mechanics for our business aircraft fleets. As a result, the environment is ripe for innovation and Long Beach could benefit by creating linkages and synergies to improve aviation workforce development.
Site Director, Boeing Long Beach
You may have noticed a lot of activity over the past year at the Boeing Long Beach site at Carson and Lakewood. We’ve been moving folks around to make room for new teammates and the site is nearing full capacity.
While the core capability continues to be Boeing Commercial Airplanes Engineering, other parts of Boeing also are represented. These include Boeing Global Services (BGS), which is focused on providing integrated service solutions to commercial, defense and space customers. Also setting up shop are teammates supporting our vertical integration strategy, which is designed to strengthen Boeing’s internal capabilities and customer knowledge. And we will soon have back with us the C-17 Services team, also part of BGS, that temporarily moved to Huntington Beach as part of a Defense, Space & Security site consolidation effort. This team provides support to our Air Force customer flying the C-17s built at the former manufacturing facility on the other side of the airport.
Overall, Boeing in Long Beach is an active, very busy location. As is the case with our satellite business teammates in El Segundo, we are actually hiring in the engineering skills arena for Boeing Commercial Airplanes at both Long Beach and Seal Beach.
I want to emphasize that, as always, we continue our strong and vibrant partnership with the community of Long Beach through volunteerism, outreach to local non-profits and academic organizations, as well as local government. We’re extremely proud of our deep and rich heritage here in Long Beach and look forward to a bright future.
Director, Long Beach Airport
Aviation and aerospace industries are on a positive trajectory. Long Beach Airport (LGB), host to UPS, FedEx, Virgin Orbit, Gulfstream, and several general aviation companies, expects a slight increase in passenger activity through the end of the year. Currently, five passenger air carriers serve LGB – American Airlines, Delta Air Lines, Hawaiian Airlines, JetBlue Airways, and Southwest Airlines. In 2017, LGB served 3,783,805 passengers, a 33 percent increase over 2016.
According to the International Air Transport Association, air travel continued to grow above-trend in the first quarter of 2018. The industry’s financial position is likely to remain robust for a fourth consecutive year. Consumers can expect a substantial increase in the value they derive from air transport. Airlines are expecting to accelerate hiring over the next 12 months, as capacity and traffic are projected to grow. The jobs being created are not just productive for airline employers, they are also highly productive for the economies they serve.
Locally, aimed at elevating the customer experience, Long Beach Airport will begin the Phase II Terminal Area Improvements Project later this year. Work will begin in the fall. Airport staff has estimated that $32 million in airport funds will be utilized in the first year of the three-year project. This will allow the design-builder to start work on design for the whole project and for the construction of the first three project elements, which are: a ticketing lobby, a consolidated baggage claim area, and a checked baggage inspection system facility. These elements are the highest priority because they will have the greatest positive impact on the passenger experience. Upon completion, the improvements will substantially improve the functional flow from curb to gate, enhance traveling passenger convenience and reduce vehicle congestion in the terminal loop.