As the economy lifts, so does the aviation industry
During the past four or five years, one segment of the economy that has been hit hard is the aviation field. When times are tough, businesses cut back on travel, pilots make do with their current airplane or helicopter, and upgrades, repairs, and modifications tend to take a backseat to those fixes that are deemed essential. The aviation industry has recently witnessed an uptick in private plane sales, better fractional ownership demands, and an overall reduction in used airplane inventories (since the all-time high in 2009). This is a terrific sign of a recovering economy as the aviation industry is certainly not the first sector to immediately respond to more favorable economic conditions.
Fractional ownership plans strengthen as the economy lifts
One segment of the aviation industry – the fractional ownership group, is starting to see some additional traction as the world economy strengthens. Fractional ownership refers to a division of the total costs associated with owning an airplane and a distribution of these shares among a group of owners. Those who own a larger share of the airplane receive a bigger flight hour allocation each year. The typical fractional ownership plan begins with 800 hours of flight time per year, and divides this figure into 1/4th, 1/8th, 1/16th, and even 1/32nd shares. Other fractional plans are available, but these are the most common among contemporary aircraft companies. Pilots are charged for actual flying time, as well as the brief taxying portion of the overall trip. The taxi time usually equates to about 12 minutes, on average.
A recent investment by aircraft industry player Directional Aviation points to the strength of the fractional ownership group in the overall aviation sector. By finalizing the purchase of FlexJet for $185 million, Directional Aviation has demonstrated the encouraging trajectory of the aviation field as a whole. FlexJet is a leading fractional ownership group, and is wholly owned by Bombardier aircraft. Directional Aviation is a key player in the fractional ownership area and has invested in several other companies in this space.
While sales of higher end aircraft have not reached the levels that were most prevalent during the mid-2000’s, the overall dollar impact may be almost completely met. Sales of high-end, long-range, and otherwise luxurious aircraft are increasing quickly – especially sales to end users in Brazil, Russia, India, and China. These so-called “BRIC” nations are scooping up airplanes in increasing numbers, as their economies begin to strengthen and diversify. As the global economy strengthens, the demand for private airplanes will continue to rise and provide much-needed movement in this critical industry.