Slow, difficult, and sustainable
This may be a great decade after the worst recovery start ever.
While the business jet market isn’t as white-hot today as it was in 2022, it’s still in very good shape. Utilization, used jet availability rates, book-to-bill ratios, and new and used pricing all remain well above 2019 levels. Most of all, thanks to the very favorable demand environment seen in 2021 and 2022, backlogs are larger than they’ve been in more than 15 years. And, for most manufacturers, these backlogs would cover 18–24 months of production at current output rates.
Yet, despite this very strong post-2020 demand recovery, output is astonishingly flat. Deliveries in 2023 were almost exactly the same by value as in 2022, and a mere 5% by value above 2020 levels (in constant dollars). And 2020 was, inevitably, a dreadful year, thanks to the Covid-19 pandemic and associated economic fears and production disruptions. Deliveries that year fell 15% by value from 2019. There has been no serious production recovery since then.
It may be useful to compare this upturn (or perhaps the upturn that wasn’t) with previous occurrences. Our chart compares the past few years with previous upturns, with output indexed to the first year in which growth began. As the chart shows, past market surges saw double-digit annual output increases. The remarkable transformation of the market in the second half of the 1990s saw output double in just 3 years – a remarkable achievement. Even the “false start” recovery of 2012–14 saw an impressive, although short-lived, 20% increase in deliveries.
Today’s sluggish upturn may be attributed in part to fears of overproduction. After all, the 2003–07 upturn clearly resulted in overcapacity, which exacerbated the downturn we saw when the Great Recession hit in 2008. And, of course, the 2012–14 upturn wasn’t sustainable at all. Looking at history, there’s a strong argument to be made for caution, particularly since restrained output generally leads to higher prices, for both new and used aircraft.
Yet, there’s more going on here. Business jet manufacturers and their suppliers express disappointment at not being able to meet ramp-up plans. There is almost universal agreement that demand is not being met in all segments of the aerospace market. Jetliner production issues at Airbus and Boeing are well known. Strong demand for combat aircraft, missiles, and other defense equipment is not being satisfied, most notably with regard to artillery shells.
This is also the first aerospace recovery where the first year of the recovery – 2021 – was actually worse than the starting point. That year’s miserable output was attributable to pandemic-related supply chain disruptions, even if demand was actually higher than in 2020.
It’s also notable that this time, compared with previous business jet market upturns, all the other segments of the industry are also demanding production resources, particularly labor. Defense is very strong right now, with record US defense budgets and record world levels of spending. Defense contracts are often cost-plus, meaning they can pay top dollar for people and material.
When the business jet market more than doubled in the second half of the 1990s, it was in part because defense spending collapsed when the Cold War ended, freeing up people and industrial capacity at both prime contractors and their supplier companies. And those other previous business jet output surges also took place in a backdrop
of weak defense demand. Again, today’s defense outlook is very different, and places far greater demands on resources.
Yet, the full explanation for sluggish business jet output growth is likely bigger than the aerospace industry. According to Mohamed El-Erian, former CEO of PIMCO, an investment management company, much of the world is facing a highly unusual situation: for the first time since the 1960s, the defining problem for the economy is not inadequate demand, but inadequate supply. Whether it’s cars, houses, or aircraft, output is increasingly determined by supply chain, work force, and other industrial capacity limitations. The result has been inflation and disappointing output.
This strange condition is particularly true for aviation. Demand is strong enough to justify faster growth than we’re seeing, but supply chain delays and other production problems are suppressing output. Hopefully, lower inflation presages an improving supply picture for aviation and for other sectors of the economy.
This comparison of today’s situation with past surges might just point to a possible silver lining. In most civil segments, market booms have tended to end with market busts. The reason for this is simple – it’s tough to know when to stop. Whether it’s small and midsize business jets in 2007–08, widebody jetliners in the middle 2010s, or large civil helicopters in the first half of the 2010s, manufacturers have a tendency to make hay while the sun shines, and to ignore warning signals that they should reduce output. The result tends to be overcapacity, followed inevitably by a demand collapse.
This time, there is no serious risk of overcapacity. While manufacturers do plan on increasing output, and while they’d probably like to build down those backlogs, supply chain problems will almost certainly hamper the industry for at least the next 18 months – and probably longer. By then, market signals will likely tell a different story. As a result, the rest of the 2020s might just see continued relatively slow growth, but it will likely prove more sustainable than previous recoveries.
In addition, this disconnect between supply and demand has meant that the backlogged orders are generally well-priced from a producer standpoint. The steady growth we see in the coming years should also be profitable, even adjusted for inflation.
A lot of possible developments can disrupt this positive outlook. After all, backlogs were quite high going into 2008, but this meant nothing when the Great Recession hit equity markets and corporate profits, resulting in collapsed demand for small- and medium-cabin business jets. But if the world economy, led by the US, stays on its current positive path, where the worst scenario is a relatively mild recession or a soft landing, then business jet markets should enjoy good times.
Adapting leadership to generational change
Leadership in today’s flight departments has changed. Generationally, we are experiencing a “changing of the guard” as this new cohort supplants the ranks of seasoned airmen. Because they are different, we face new challenges from the past – specifically, adaptation.
Gen Z and Millennials were attracted to aviation for the same reasons as everyone else – travel, technology, excitement, and exploring new destinations. But they are facing this occupation differently than the “dinosaurs” they are working with.
Earlier generations of airmen faced significant problems with airplane failures, poor global communications, and, until recently, lack of Internet and tools like iPads and ForeFlight. We were skeptical of wind and weather forecasts, did not trust the fuel burns offered by either the manufacturer or the service provider(s), and suffered through the North Atlantic crossings with early INS units that drifted considerably and used VolMet on high frequency (HF) for long-distance weather updates.
Today’s generation has these tools and more. Airplanes just don’t break much any more, while the proliferation of Wi-Fi and global Internet makes flight planning and coordination with handlers in any part of the world as easy as in the US. We may have worked harder, but the efforts paid off handsomely.
Current flight department leadership must adapt to these new team members and take advantage of their strengths. They most likely have computer science degrees or at least a high level of proficiency. This makes them prime candidates for being the “computer guru” among the group. They will need to learn the importance of continuity – things like training and enrichment courses (Go No–Go, energy management) and passenger service. Attention to detail needs to be taught generationally, not just now. But it’s our responsibility to hand over the reins properly.
Our industry has already benefitted from this changing of the guard. Quality-of-life issues are to the forefront, as are days off and pay. We have all profited. For those of us planning our final flights and easing from the workplace, I’m certain we can rest well assured we are leaving this in good hands. Accepting a cultural change is good leadership at its finest.
Vertical aviation – serving the public good
Powered-lift aircraft – and the people who build, fly, maintain, and supply them – are special. More than in most industries, the people who work in vertical aviation are driven by their passion to serve. While airlines fly routes, our operators mostly fly missions that serve the greater public good.
In commemorating HAI’s 75th anniversary on December 13, 2023, we compiled a list of 44 distinct missions that helicopters perform. While several include moving passengers from one point to another, most missions feature rotary-wing aircraft performing more complex missions that serve a far greater and more important purpose.
Igor Sikorsky, the helicopter industry pioneer, famously said, “If you are in trouble anywhere in the world, an airplane can fly over and drop flowers, but a helicopter can land and save your life.” Powered-lift aircraft can do things and go places other aircraft cannot. They can take off from and land almost anywhere, requiring no infrastructure.
Given these unique qualities, it is no wonder that helicopters are used for a variety of public-service missions. Search and rescue (SAR) and air ambulance operations come to mind, as do forest and urban firefighting and law enforcement (LE).
But did you know that helicopters are used for installing, inspecting, and maintaining sections of the power grid? Or that helicopters help farmers put food on your dinner table? Helos are also used to control mosquito populations, prevent avalanche casualties, and explore other planets, an example being NASA’s Ingenuity Mars helicopter. There are many ways in which our industry contributes to our modern world.
Today, we are in the early stages of the next evolution of aviation. Many innovative airframe and powerplant designs are progressing through certification and headed for tomorrow’s flight line, and most are focused on the missions of moving people short and medium distances. However, the full spectrum of powered-lift aircraft (ie, helicopters, tiltrotors, and eVTOLs) will be needed to meet the full potential of vertical aviation and all that it offers to our society.
This exciting, dynamic era means that many changes will occur, and HAI is evolving with them. If you can join us at HAI’s Heli-Expo 2024 in Anaheim CA from February 26–29 (exhibits open from February 27–29), you will be among the first to learn how we too are evolving.
The concept of vertical flight is changing, evolving, and – most importantly – expanding. As these new aircraft become available to the flying public, we will see an even greater role for powered-lift aircraft.
Aviation mental health programs
It takes a remarkable and well-publicized incident to draw NTSB’s attention. Indeed, the NTSB Mental Health Seminar of Dec 6, 2023, which I attended, was a response to the deadheading Alaska Airlines pilot who attempted to shut down both engines of an aircraft in midair, endangering passengers and crew.
At the seminar, there was uniform agreement that the current medical certification system discourages pilots and air traffic controllers from admitting to a mental problem. Often they do not seek needed treatment that would require FAA notification. A pilot who admits to a mental condition has to undergo extensive and expensive consultations and testing to convince FAA that certification is warranted. The process takes months (or even years). It is not well structured, and the outcome is often unpredictable.
I recommend FAA to create a aviation mental health program (AMP) that parallels the highly successful Human Interventional Motivation Study (HIMS) program for pilots with alcohol and drug issues. Since its inception in 1975, 85% of pilots who have participated in the HIMS program have recovered and regained airman certification. The program works because there is a formal structure to evaluate a pilot, which then provides a clear path for ongoing treatment, assistance, and monitoring.
Let’s look at the elements of such a program applied to mental conditions. For example, a pilot who admits to having a mental condition is referred immediately to an FAA-trained AMP aviation medical examiner (AME) for management – parallel to current HIMS-trained AMEs. The pilot will be evaluated appropriately by the AMP AME and referred to a board-certified (preferably FAA-trained) psychiatrist, which is a current certification requirement. Pilots need to be provided diagnoses well supported clinically, as may not be the case if provided by primary care providers or counselors.
If a mental condition is confirmed, the pilot should enter the AMP immediately. This should include weekly meetings with a mental care counselor, weekly group meetings directed by a mental care practitioner, and quarterly psychiatric follow-up visits. In addition, the pilot should choose sponsors (other pilots with mental conditions, supervisors, or friends) with whom he/she will be in contact weekly, and provide monthly reports to the AMP AME.
Participating pilots and controllers would be required to attend group meetings structured on those of Alcoholics Anonymous and Narcotics Anonymous. The 12 steps would be paraphrased to address mental conditions. Pilots would need to admit verbally that they have a mental condition – one that is affecting them, their family, friends, and career. They would be required to take responsibility for their condition, and ultimately assist other pilots with mental conditions as sponsors.
Appropriate psychotropic medications should be considered, with the FAA list of acceptable medication expanded from the current 5 regarded as compatible with flying. However, a “disqualifying” medication may be considered during treatment with the expectation it will be discontinued prior to return the cockpit. The AMP AME should formally re-evaluate the pilot every 6 months and forward detailed information to FAA. Within 60 days, FAA should advise its opinion as to recovery, and provide guidance for special issuance certification.
Once a special issuance has been granted, the pilot would remain in the AMP, initially with no change, and then might be eligible for a step-down in requirements, similar to that of the HIMS program.
By providing a clear pathway to return to the cockpit, an AMP would encourage pilots to address their mental conditions. We are unlikely to see improvement in pilots’ mental health without such an effort.