Aviation Analyst Aboulafia Delivers A Dose Of Optimism For Wichita | Aero-News Network
Aero-News Network
RSS icon RSS feed
podcast icon MP3 podcast
Subscribe Aero-News e-mail Newsletter Subscribe

** Airborne 11.26.14 ** HD iPad-Friendly -- Airborne 11.26.14 **
** Airborne 11.24.14 ** HD iPad-Friendly -- Airborne 11.24.14 **
** Airborne 11.21.14 ** HD iPad-Friendly -- Airborne 11.21.14 **

Fri, Apr 15, 2011

Aviation Analyst Aboulafia Delivers A Dose Of Optimism For Wichita

Teal Group Forecaster Says "This Industry Will Come Back, Wichita Will Too"

Aviation analyst Richard Aboulafia was the inaugural speaker when the Wichita Aero Club formed in late 2008. At that time, the industry decline was just beginning. More than two turbulent years later, Aboulafia made a repeat appearance at the organization's monthly luncheon on Tuesday, April 12 and this time his presentation had a different angle.

"In good times, an analyst is a cheerleader," said Aboulafia, a vice president of analysis with Virginia-based The Teal Group. "In bad times, he's a therapist."

In a presentation titled "Okay the sky has fallen, it will rise again," Aboulafia delivered a dose of optimism for Wichita. Among many feel-good messages, he told the audience, "This industry is coming back, and Wichita will too." Aboulafia said The Teal Group forecasts general aviation production to begin to rebound in 2012, and called the firm's prediction of 10 percent compounded annual growth rate for the next six years conservative. He also shared his analysis of the jetliner/regional, defense and rotorcraft markets, but he spent most of his time talking about the business jet market, specifically Wichita's role.

Aboulafia revisited thoughts he'd shared with the WAC in late 2008.

  • There are five great aviation clusters in the world today. Wichita is one of them. Clusters cannot be created; only destroyed. (Still true.)
  • Of these clusters, Wichita has the highest exposure to the business jet market, the fastest growth segment, but with very high cyclicality. (What nobody saw coming was the bifurcation between the top and bottom half. I also thought the business aircraft peak would come in 2009, just after my speech; turned out it was in 2008. I'd also point out that Wichita has the most diverse industrial base of any cluster.)
  • Business jets are well behind the other aviation segments in outsourcing, a possible threat to manufacturing jobs in Wichita. While it's also an opportunity (with Spirit), there's no guarantee that work will be performed here. (Still true.)
  • I'm skeptical about KC-X. But the military overhaul/upgrade market is growing. (Very wrong on the first, right on the second.)
  • São Jose Dos Campos wants some of your business. (Still true.)

Of the five clusters - Wichita; Montreal; Dallas; the Puget Sound area in Washington; and Toulouse, France - Aboulafia said, "Wichita was the epicenter of all pain. Really, the only cluster that wasn't sheltered on the whole globe was Wichita." However, he added, Wichita "is not going to be a destroyed aviation cluster."

The reason Wichita felt so much pain, he said, was a one-two punch of bifurcation and emerging competition. While the upper half of the market - aircraft priced at $25 million and higher - held up during the downturn, he explained, the bottom half of the business jet market saw an unexpected 57 percent drop from 2008-2010. Wichita is most connected to that bottom segment. "This was a profound change on how the industry was structured," he said, adding that nobody could have predicted that kind of split.

The impact of that split was compounded, Aboulafia said, because it coincided with Embraer bringing to market a less expensive product. He noted that this was the business jet market's first new competitor since 1969. "This only happens once," he said. "There are no other Embraers and the entry barriers to the market are still quite high."  Aboulafia also said Embraer seems to be turning its attention away from developing more new business jet models to other areas of its business.

Aboulafia's dose of optimism was tempered with an analysis of key market indicators - aircraft utilization is on the rise; pre-owned business jet inventory is lowering but is still too high; it'll be another six months before pricing rebounds; corporate profits are recovering nicely but there's still a general sense of uncertainty in the economy. "You are seeing a lot of signs of growth that point toward an increase in production in 2012. We don't know how much growth, but we can look at the past upturns and typically they've been double-digit," he said. "So there's a lot of hope moving forward."

FMI: www.tealgroup.com

Advertisement

More News

ANN's Daily Aero-Linx (11.26.14)

FAA Aviation Safety Information Analysis And Sharing System (ASIAS) The Federal Aviation Administration (FAA) promotes the open exchange of safety information in order to continuou>[...]

ANN's Daily Aero-Term (11.26.14): Density Altitude

Pressure altitude corrected for nonstandard temperature. Density altitude is used in computing the performance of an aircraft and its engines.>[...]

Aero-News: Quote Of The Day (11.26.14)

“We hope to never see an event like this again, but, we must be prepared." Source: FAA Administrator Michael Huerta, on the release of the agency's 30 report on the fire at t>[...]

ANN FAQ: It's Alive! ANN REALTIME NewsBug Headlines for YOUR Desktop!

It's For Real! ANN REALTIME NewsBug Released To ANN Readers, Worldwide For those of you using a windows PC (MAC version in the works... we promise), a new REALTIME News Service fro>[...]

Helicopters Still Flying Tourists Over Hudson River

But Activists Continue To Call For A Ban On The Flights A group of activists in New York and New Jersey are still working to have sightseeing flights over New York City and the Hud>[...]

blog comments powered by Disqus



Advertisement

Advertisement

Podcasts

Advertisement

© 2007 - 2014 Web Development & Design by Pauli Systems, LC