While this negative publicity is keeping the industry’s alphabet soup trade groups busy, it is certainly not helping the industry recover anytime soon. For the 3rd consecutive month, charter operators reported a double digit percentage drop in activity vs. 2010. And the fractional players continue to try to adapt to the turbulent times with creative financing approaches.

While such rhetoric might play well with cash strapped constituents, it has the long-term potential to hit these same people in the wallets – i.e. lost domestic jobs. The U.S. currently leads the world in business-jet manufacturing with 80% of global sales, and 60% of what’s produced by these companies is exported overseas.

In China, perhaps the biggest potential growth market for business jets, 2 U.S. companies currently hold the lead – Gulfstream and Cessna. While still small (the first business jet hangar just opened in Beijing last month), the Chinese market is expected to grow by 50% annually as the government slowly loosens restrictions on general aviation. In a nod to the importance of this market, Gulfstream just renamed their G250 model to G280 (the number ’8′ sounds similar to the Chinese word meaning “prosper” or “wealth”).

Foreign business jet manufacturers are even creating jobs in the U.S. to take advantage of a skilled workforce and diverse supplier base. Honda has invested $100M in its Greensboro, NC, manufacturing facility and recently announced plans to grow its employee ranks from 300 to 1,000 people next year. Embraer started work on its first U.S. assembled Phenom 100 at its Melbourne, FL, assembly plant in July and plans to hire 100 more workers in 2012, many of them former NASA employees.

Besides foreign market opportunities, political leaders need to be mindful of the domestic market – still the largest by far but still suffering through a stubborn recovery. More voices need to speak up for business aviation (thankfully, Warren Buffet made a compelling case on MSNBC) since the industry provides a substantial source of jobs and is one of the few net exporting manufacturing industries in the U.S.. One wonders if the media and political leaders will ever “get it” with regards to this important industry.

Safe and productive travels.

(Excerpted from the July, 2011, Igojet e-newsletter. To receive future e-newsletters directly to your Inbox, please click here and sign up)

Firstly, Congress passed a record 20th FAA reauthorization bill extension, further delaying regulatory certainty about airspace fees, fuel taxes, aircraft navigation technology direction (NEXTGen), and flight plan privacy (BARR). These are just a few of the provisions contained in the proposed bill that will greatly affect both the general and commercial aviation industries. And just this week, President Obama called into question general aviation’s tax depreciation schedules.

On the foreign investment front, Cirrus finalized its merger plans with China Aviation Industry General Aircraft (CAIGA). Without this foreign investment, it’s unlikely Cirrus, maker of the most popular single engine piston aircraft in the world, would have continued to invest in its Vision Jet program. Similarly, Diamond Aircraft received an injection from an unnamed investor (my bet is it’s a foreign entity) to continue their D-JET program, a single turbine personal jet development project.

As for domestic business aviation activity, the picture remains quite muddled with JPMorgan saying that a “decisive recovery remains elusive”. Business aviation flight activity from May further illustrates this uncertainty as overall flights were up 2.7% over one year ago while Part 135 (traditional charter) fell almost 6%. Business jet flight activity is still 10% off the 2008 peak and is showing gradual signs of improvement.

Meanwhile, resentment of the corporate & individual elite was further exacerbated by several articles in the Wall Street Journal this month. The WSJ found through its analysis of recently released business jet activity that public corporations made, on average, 30% of their private jet flights to or from resort destinations. The wealthy’s immunity to such economic cycles (see large cabin flight activity from May’s ARGUS report…up 10+%) and the growing disparity between socio-economic classes is further contributing to this angst. Case in point: while vacation travelers are revolting against further commercial fare increases, predicted to hit $430 on average for round-trip domestic ticket, there was a story of a wealthy businessman who enthusiastically plunked down $1 million to enjoy 100 hours of flights, primarily to get to his favorite vacation spots.

Luckily, resentment hasn’t spilled over against business aviation providers like it has in the commercial space (for a chuckle, watch Conan O’Brien mock interview with a Delta Airlines executive)…yet.

The good news is that there continues to be evidence of innovation within the bizav space. Some with near-term relevancy, like JetSuite’s opening a new office complex and Sikorsky’s public support of Eclipse’s growth plans. Some with future ramifications like the solar plane, Impulse, that made a demonstration flight at this month’s Paris Air Show. However, there appears to be no game-changing technologies that will solve the industry’s macro economic challenges anytime soon.

(Excerpted from the June, 2011, Igojet e-newsletter. To receive future e-newsletters directly to your Inbox, please click here and sign up)

However, the predicted revolution in charter business models (per-seat, shared, etc.) that many predicted would accompany the introduction of these efficient aircraft and bring prices down to commercial rates have yet to materialize. Traditional charter sales and aircraft management, a well proven business model, is still the norm for current VLJ ‘air-taxi’ companies.

Yet a new business model entrant, Social Flights, will be an excellent proving ground for new alternatives. And an even more efficient jet, the Cirrus Jet, continues apace with development and flew several fly-bys at Cirrus’ annual gathering this month.

For sure, weakness in charter demand and disappointing delivery statistics for the quarter continues to challenge the industry. Plus, it will be interesting to see if the DOT’s recent decision to eliminate the BARR (Blocked Aircraft Registration Request) program, thus exposing all private jet activity to the public, will affect demand. The Wall Street Journal published an excellent accounting of private jet activity from 2007-2010, much to the chagrin of the industry, yet of no seeming concern to Mark Cuban (go figure!). Perhaps the Fractionals will continue to lead the industry back to health as they can best offer identity privacy.

Regardless, private aircraft operators can count on commercial airlines’ lessening public appeal to regain lost business from the recession. Less flight availability due to airline consolidation, inconvenient security procedures, and ancillary fee madness (up to $22B in 2010, doubling since 2008) makes traditional commercial service a ripe target.

(Excerpted from the May, 2011, Igojet e-newsletter. To receive future e-newsletters directly to your Inbox, please click here and sign up)

Complicating already inefficient travel on the airlines are higher fuel prices. Airlines are cutting capacity on less profitable routes and raising fares, with fares expecting to rise another 8-12% in 2011. Some airlines are responding but generally are focusing their efforts on premium class travelers, a disproportionate source of profits. For example, US Airways decided this month to add first class seating to 110 regional jets. While JetBlue plans to add fast-track security for its premium paying customers.

Meanwhile, business aviation continues its uneven recovery to pre-recession levels. Overall volume in March was up a meager 4.7% vs. a year ago, while charter business was down 3.5% over the past year. Per recent trends, business aviation use at the upper end (executives’ biz jet perks show no signs of abating and the fractional sector is rebounding) while softness in used light and mid-size jet prices indicates a struggle to regain the non-ultra-rich-C-level segment.

Encouraging news, perhaps fueled by optimism about future entry level charter demand, includes Honda’s on-going push to get its jet to market and PiperJet suppliers‘ ramping up production. There was even news this month that the Adam 500 Piston Twin may be revived, an aircraft whose jet sibling was at the center of may air-taxi discussions from a few years ago.

So, while I’m afraid that the disparity between business jet and commercial airline traveler demographics is as wide as ever, we can’t count out the entrepreneurial will of those in the biz av sector to bridge that gap. Keep it up!

(Excerpted from the April, 2011, Igojet e-newsletter. To receive future e-newsletters directly to your Inbox, please click here and sign up)

Not surprisingly, several manufacturers reported that 60-70% of their 2010 orders were from international markets where more large cabin jets are generally sold. The stark contrast is seen in orders for super large jets (think jumbos) where both Airbus and Boeing sell a vast majority to overseas operators. NetJets’ order for 120 long-range aircraft (Globals) from Bombardier this month signals that the global leader in business aviation sees greater market potential within the large cabin segment as well.

This is certainly welcome news for aircraft manufacturers since domestic business jet travel continues to be a mixed bag, up overall just 0.5% over last year, still well below pre-recession levels. Furthermore, bloated domestic inventory levels continue to depress aircraft prices (much to the delight of some corporations looking to take advantage) and a recovery is not expected until 2013 or 2014.

There are ominous signs of this growing disparity growing between the top and bottom segments of the U.S. business aviation industry. Following last November’s announcement by Hawker that its 400XP production would be stopped, Cessna announced that it will no longer produce the CJ1+ light jet. Cirrus (a single engine prop manufacturer) announced its potential sale to a Chinese company and Diamond Aircraft just suspended their single engine jet program. Finally, future production of the VLJ pioneer, Eclipse 500, remains uncertain.

The continued strength in international and large cabin segments may be good for manufacturers , but will they be good for U.S. travelers? For those seeking business aviation alternatives? For high income travelers who are increasingly frustrated with commercial air travel? It probably will have little effect. The disparity between commercial air travel costs, even with those ever-increasing fees, and business aviation travel remains too wide. However, I hope that advancements and profits from these segments will translate into investment in innovative, lower cost alternatives in the future.

(Excerpted from the March, 2011, Igojet e-newsletter. To receive future e-newsletters directly to your Inbox, please click here and sign up)

Those positioned in the large-cabin segment are faring the best (Gulfstream & Bombardier). While Cessna and Hawker Beechcraft, focused more in light and mid-sized jets, reported encouraging signs of turnaround. Incredibly, Embraer continued its remarkable ascension in 2010 – growing from delivering just 3% of jets in 2008 to an astounding 19% in 2010. This month Embraer opened a brand new assembly plant in Florida to handle expected growth – a much welcomed 200 new jobs for the industry.

Even the government is doing its part. The imminent passage of the FAA Re-authorization Bill will help allay cost uncertainties, though it raises general aviation fuel taxes to 35.9 cents per gallon from 21.9 cents. And the FAA lent credibility to this increasing optimism by predicting robust growth in the long-term outlook for business aviation (4% annual flight hour increases vs. 2.5% domestic commercial passenger enplanement increases over the next 20 years).

So what does all this mean for travelers? My feeling is that increased confidence will translate into a more vibrant array of service offerings and aircraft upgrades in 2011. For example, NetJets’ 2010 turnaround already prompted a modernization of their fleet. XOJet invested in WiFi access in all their aircraft while announcing a new frequent flier program (i.e. volume discount program) called, “Coast2Coast”. Meanwhile, Sabre partnered with a charter broker, JetUs, to provide easier charter booking access to the corporate travel community. And FlyRuby launched a site to provide sophisticated search and booking capabilities for jet charter.

Let’s hope this innovative activity continues.

(Excerpted from the February, 2011, Igojet e-newsletter. To receive future e-newsletters directly to your Inbox, please click here and sign up)

Unfortunately, the commercial airline industry doesn’t appear to be planning to make life any easier in 2011. On top of security hassles and more ancillary fees (if you’re interested, here are predictions for 11 new ones), most are planning to keep a close eye on capacity, restricting flight times and limiting alternatives for stranded travelers. In fact, there’s been particularly strong local resistance to Southwest‘s and Delta‘s short haul cuts, the ones most attractive for work related day trips.

Along with these trends, industry consolidation and rising gas prices practically guarantee that higher fares are ahead. When airlines say they’re raising prices, however, they’re generally talking about an average increase of $10-$20 each way. While news like this certainly can get corporate travel managers in a tizzy, they hardly send business travelers scrambling to comparison shop for $100,000 jet cards (an entry level product).

So how can business aviation vendors capitalize on these continuing trends? Innovate, sell against the cost of wasted time and simplify the travel buying process. These strategies appear to be working for companies like XOJet, whose fixed point-to-point charter pricing keyed 50% growth in 2010, and JetSuite with their all inclusive hourly rates for charter. Meanwhile, lower cost alternatives continue to attract greater numbers of fliers: ARGUS ‘ year over year results indicate the turbo-prop fractional group (a relatively lower cost business aviation alternative) led growth; while Embraer’s Phenom 100 light jet led the entire industry in unit sales in 2010.

With excess capacity persisting in the industry, business aviation seekers will find aggressive pricing. However, it will be the Innovative business aviation companies that will figure out how to leverage new strategies and current industry conditions to gain market share.

(Excerpted from the January, 2011, Igojet e-newsletter. To receive future e-newsletters directly to your Inbox, please click here and sign up)

While travelers are increasingly resigning themselves to such hassles, they also seek ways to gain convenience and time savings. In fact, a recent Orbitz for Business survey revealed that top five most used airline ancillary services are all convenience and flexibility related, as opposed to baggage check related which usually garners most of the attention (and the $7.8B in 2009 ancillary revenue). Furthermore, there is continued pressure by business travel industry groups to reinstate a ‘trusted traveler’ program. They estimate that business travelers would take 2-3 more trips per year if hassles could be reduced.

The bright side of these airline travel hassles appears to be benefiting the business aviation industry. While November 2010 business flight activity was up a nominal 6.3% vs. last year, there have been anecdotal reports of a December surge in demand due to weather and airport chaos.

While holiday related upticks in business aviation demand is certainly positive (industry trade group NATA’s President stressed in his end of year message that “there’s nothing more important for general aviation than to increase flight activity”), high business aviation prices continue to be a major deterrent. Fortunately, there were a few developments this month that bode well for the future of lower priced alternatives.

The HondaJet completed its first official flight (though deliveries won’t start until 2012), JetSuite expanded its low cost Phenom 100 service to 4 Texas cities, and Executive AirShares launched an innovative simultaneous usage option for its fractional customers. As well, Eclipse Aerospace continues to show promising signs of a turn-around.

With air travel decisions, it’s typically a time saving vs. cost calculation. If a few December airline hassles (causing lengthened average trip time) can shift a little demand to business aviation, just think what a lower cost business aviation alternative could do.

(Excerpted from the December, 2010, igojet e-newsletter. To receive future e-newsletters directly to your Inbox, please click here and sign up)

Similarly, the upper end of business aviation, large cabin class jets, appears to be doing just fine while the market for mid-size and light jets recovers slowly. Perhaps most telling is Gulfstream’s strong 3rd quarter results along with the company’s announcement of an additional $500M in spending and 1,000 new jobs to meet expected large cabin demand. So, while the Fortune 200 return to business aviation (punctuated by GM’s first private jet use since the U.S. government take-over), the rest of the industry eagerly awaits remaining business demand to pick-up.

Finally, while strengthened commercial airliners exert renewed price pressure on business travelers, business aviation operators are conversely feeling price pressure. Increasingly savvy buyers are driving prices downward (eliminating such pricing tactics as 2 hour minimums) while point-to-point, pre-quoted, and per-seat pricing are being offered by operators and brokers alike. In addition to these creative measures, the industry continues to adapt during its lagging recovery. NetJets acquired MarquisJet (consolidation), Hawker Beechcraft temporarily suspended 400XP production (rationing), and European VLJ operators downplayed prior air-taxi forecasts (strategy re-alignment).

However, hopeful signs of recovery were evident over the Thanksgiving weekend. As the economy continues to strengthen, business aviation will surely emerge stronger from the adaptations now taking place.

(Excerpted from the November, 2010, igojet e-newsletter. To receive future e-newsletters by email as well as the latest version with links to industry articles used for this article, please click here).

Unfortunately, this bounce in business travel is having limited impact on the private jet aviation sector (where 80% of demand is typically attributed to business purposes). Most don’t expect a return to pre-recession levels until at least 2012 with opinions on the current situation generally mixed. One major operator CEO called the market horrible while the New York Times’ Joe Sharkey characterized NBAA chief Ed Bolen’s pronouncement of industry stability as follows: “Of course, the captain of the Titanic might accurately have said the same once the ship settled on the ocean floor.”

Nevertheless, business aviation providers are responding. NetJets plans a fleet purchase of more economical aircraft, JetSuite pursues aggressive charter pricing on popular routes, and Executive Airshares offers a hybrid charter/fractional plan. Manufacturers are not standing idly by either with Sikorsky investing in Eclipse and Piper revamping their entry-level jet for the corporate market.

Whether these actions can move the needle downward on price – which Allen Howell of Corporate Flight Management rightly argues is the industry’s biggest obstacle to improving demand – remains to be seen. I believe an offering that successfully does (lower the price) stands to capitalize on the estimated $16.7B in estimated annual passenger costs caused by commercial flight inefficiencies.

(Excerpted from the October, 2010, igojet e-newsletter. To receive future e-newsletters by email as well as the latest version with links to industry articles used for this entry, please click here.