Going Direct: Aircraft Sales And The 2016 Presidential Election—A Troubling Combination

There’s nothing but bad and often disturbing news these days when it comes to the 2016 United States presidential race; neither major party candidate is exempt here. My question is at face value a simple one: What kind of effect will the election have on aircraft sales?

The sales figures for the second quarter of the year are out and the news is not good. According to our friends at the General Aviation Manufacturers Association (GAMA), the numbers of new airplanes delivered declined by 4.5 percent in the first half of 2016 and the dollar figure manufacturers took in (referred to as “billings”) declined by nearly three-quarters of a billion dollars, from $2.1 billion to $1.4 billion. Helicopters were hardest hit, no doubt as a result of the rock-bottom price of oil these days—many helicopters are used to transport workers to offshore rigs, and with revenues down for the oil companies, they weren’t in a helicopter-buying mood, apparently.

As far as airplane sales are concerned, the figures are really deceiving. The huge decline in billings has to do almost entirely with the decline in deliveries of very expensive business jets, many of which have a value well north of $20 million, and in a few cases, well north of $50 million. The billings associated with the piston fixed-wing market—that is, everything that Cirrus and Mooney and Diamond produce—is a tiny fraction of the big number generated by even one big bizjet maker.

The numbers for piston planes don’t look bad when broken out and away from the turbine business. The piston manufacturers that GAMA includes in its report, which is almost all of them, delivered 443 airplanes in the first half of 2016. GAMA said the billings were right around $275 million. My only point is that the sale of three Gulfstream G650s roughly equals the entire billing figure of the piston aircraft-manufacturing sector during the first half of 2016. Just a little perspective.

The effects of a slower market can be tough on makers of small airplanes, who almost without exception depend on sales to keep people employed and assembly lines moving. So there’s genuine cause for concern if this slowdown continues.

There’s additional cause for concern because this is a presidential election year in the United States, and not just any run-of-the-mill one. The fourth quarter of the year is typically the best period for all airplane makers, so we’d usually expect that the slower than expected but not catastrophic numbers for piston manufacturers would rebound nicely by the end of the year.

The other less than hopeful note is that elections, especially really contentious ones, cause a great deal of uncertainty among consumers of high-end products, especially ones that are largely discretionary. Typically, the end of the election cycle in November will bring an upswing in purchases, many of which are for airplanes the customer will pick up before the end of the calendar year, for tax reasons, of course.

This election cycle is an extraordinary one, though, so my optimism is tempered. I’m guessing that I’m not the only one worried that this year the uncertainty might drag on for a bit longer than early November, as there’s widespread concern on both sides of the race about the financial implications of electing either candidate. Fingers crossed I’m worried for nothing, but I’m still plenty worried.

One thought on “Going Direct: Aircraft Sales And The 2016 Presidential Election—A Troubling Combination

  1. It’s easier to predict the “used” airplane market; launched by recent “reauthorization” law. The inventory of “planes parked in hangers” that have been idled by older pilots worried about passing a health physical must be huge. I see a run on those used planes and I know of brokers who are looking for them. A general assumption is that many of the older pilots are retired with discretionary income and the time to fly.
    Another factor driving General Aviation is the demand for more pilots. Aviation schools will be able to enroll more want-to-be commercial pilots to get them started on the career path–something that has not happened since the end of WWII and the GI Bill.

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