Demand Set to Increase in Jet Charter Bookings and Private Jet Manufacturing
The trends in jet charter demand and in the production of business aviation aircraft are looking positive for 2012. The most recent projections from online portal Avinode show that the demand for air charter is on the rise this month. Avinode’s demand index stood at 114.23 the first week of February–almost 21 points above the month-ago level and more than 14 points above where it was 12 months prior. Avinode’s price index for global operations based on the same data was at 99.29, slightly down from early January but up from a year ago.
The research group’s data for actual average flight hour rates being paid as of early February also pointed toward higher demand for aircraft operators. For example, the average rates for a Bombardier Challenger 604 rose by 1 to 5 percent from three months ago and were up by between 3 and nearly 7 percent from six months ago. Similar trends were apparent for sample Hawker 800 prices and rates for a Cessna Citation Excel, which climbed between 4 and 8 percent in North America. These trends show higher levels of demand and also reinforce our recommendation to clients that booking flights early can provide cost benefits.
On the manufacturing side of business aviation, JPMorgan Investment Research noted in its latest market report (released February 2012) that while they continue to observe some mixed signals from jet manufacturers, they saw pockets of strength in the business jet industry in the fourth quarter of 2011. They “sense an eagerness for a pickup in the business jet market, particularly at the lower end.” The investment research firm predicts an 8-percent rise in business jet deliveries this year, driven by U.S. business. Keeping with recent trends, large-cabin jets will be driving much of this increase, with a “modest pickup for smaller jets” according to JPMorgan.
Other encouraging news within the business jet industry includes the recent completion of the Embraer Executive Jets Global Customer Center at the Melbourne International Airport in Florida, in December 2011. The new 58,000-sq-ft customer center opens adjacent to the Phenom final assembly plant opened in February of 2011, bringing hundreds of jobs to Florida. Customers will come from all over the world to select the options they want for new Phenom, Legacy and Lineage business jet aircraft. Aircraft assemblies and deliveries at the plant will ramp up to 30 Phenom 100s and 300s this year, and 60 of the two light jet models next year. Embraer president and CEO Frederico Curado has also said there is room for expansion at the 80-acre site in Melbourne, leaving open the possibility that more Embraer business jets beyond the Phenoms could eventually be assembled in the U.S.
Each of these pieces of positive news, plus the recent overall growth – albeit modest – of the U.S. economy, has given us encouragement here at Stratos Jets over the state of business aviation and the jet charter industry as a whole. Stratos Jets firmly believes that private jet charter is an engine of growth throughout America, providing absolutely critical assistance to companies and individuals in getting business done – and pursuing their own dreams and aspirations, either in business or in their personal lives.
As a member of the Air Charter Association of North America, the only industry-led organization to promote best practices and ethics, we strive every day to do things the “right way” in the jet charter industry. We are honored that we get to help our clients in the business of rebuilding this nation’s economy every day.
Charter a Private Jet to the 2012 Masters
The Masters Tournament is one of four major championships in professional golf. It is considered by many to be the most prestigious golfing event in North America. Not surprisingly, The Masters attracts a number of Stratos Jets’ clients. Scheduled for the first full week of April, it is the first of the majors to be played each year. Unlike the other majors in golf (U.S. Open, British Open and PGA Championship), the Masters is held every year at the same private golf course — the Augusta National Golf Club — in beautiful Augusta, Georgia. This year, The Masters will be held from April 5 to April 8. Charter your own private jet to and from the Masters Tournament to fly to Augusta in luxury, class and convenience.
As Military Cuts, Global Aviation Files Bankruptcy
Global Aviation Holdings Inc, the largest commercial provider of chartered flights for the U.S. military, has filed for bankruptcy protection, citing the U.S. pullout from Iraq, defense spending cuts, and high debt and labor costs.
The parent of North American Airlines Inc and World Airways Inc filed for Chapter 11 protection in a Brooklyn, New York, bankruptcy court, less than two weeks after the Pentagon outlined a 2013 budget plan to reduce spending by $487 billion over the next decade.
Flying soldiers and cargo make up more than three-fourths of Global Aviation’s revenue. The United States has withdrawn its troops from Iraq, and U.S. Defense Secretary Leon Panetta last week said the United States intends to end combat operations in Afghanistan before the end of 2013.
“Every individual major defense contractor that we work with has been downsizing,” said Wayne Plucker, an aerospace and defense industry analyst at the consulting firm Frost & Sullivan in San Antonio. “That has had an effect on smaller companies: If Boeing catches a cold, others get pneumonia. Services providers will be the hardest hit as larger companies and the Department of Defense itself do more of that work in-house.”
In the nine months ended Sept. 30, Global Aviation lost $60.3 million on revenue of $775.1 million, compared with a year-earlier loss of $6.9 million on revenue of $877 million.
Global Aviation said it has also struggled with excess debt and “unsustainable” labor costs. It said its restructuring effort was “derailed” on Dec. 27 when a federal appeals court in Chicago threw out a $71.3 million award against FedEx Corp , a decision now being appealed.
“While Global Aviation has navigated fluctuations in demand in the past, the current decrease, coupled with high labor and fixed costs, excess aircraft and an overleveraged balance sheet, requires Global Aviation to restructure,” Chief Financial Officer William Garrett said in a court filing.
Based in Peachtree City, Georgia, Global Aviation said it employs 1,782 people. On Sunday it advised 140 workers that they would be let go by April 5. Executive salaries are being cut by 10 percent.
An affiliate of MatlinPatterson Global Advisers LLC holds a 92.5 percent equity stake in Global Aviation; the distressed debt specialist took Global Aviation predecessor ATA Holdings Corp out of bankruptcy in 2006, court filings show.
CUTBACKS ABROAD
Global Aviation and eight affiliates, including North American Airlines and World Airways, filed for protection with the U.S. Bankruptcy Court for the Eastern District of New York.
The company said it had $589.8 million of assets and $493.2 million of debts as of Dec. 31.
North American Airlines is headquartered at John F. Kennedy International Airport in New York City, within the Brooklyn bankruptcy court’s jurisdiction.
Global Aviation said it plans to operate normally during the bankruptcy, and continue to pay vendors and suppliers.
It said it has hired Rothschild Inc for restructuring advice and Kirkland & Ellis as its law firm, and is in talks to obtain financing to help it operate while in bankruptcy.
Global Aviation did not immediately return a request for additional comment.
The company said its roots date to 1948, and that it provided charter services for the presidential campaigns of Barack Obama, George W. Bush, and Secretary of State Hillary Clinton.
ATA Holdings Corp sought bankruptcy protection in October 2004. Global Aviation said it is the main beneficiary of a bankruptcy estate trust for ATA Airlines Inc, which went bankrupt in 2008 and is being liquidated.