AOPA Turbine Pilot Magazine - July 2020 - T-2

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FROM THE EDITOR

Viral downturn

BY THOMAS A. HORNE

Turbine Pilot Editor

How the COVID-19 crisis
has affected GA
ECONOMICS HAS EARNED a title as the
"dismal science," owing principally to the
theories of Thomas Malthus. Malthus
thought man was locked in an impossible
situation: Population would grow geometrically and food production would forever
remain stagnant, with starvation as the inevitable result. That was back in the mid-1800s,
but today's experience with the COVID-19
pandemic can give us an example of today's
variant on a dismal set of interlocking events.
The pandemic has set in motion some
unanticipated dynamics. Staying at home
meant less travel, so demand for airline
travel went south. This meant parked airliners and empty airports. Sales of new general
aviation aircraft stalled, and some manufacturers closed their doors and furloughed their
employees. Some switched to manufacturing
protective face masks. Dallas-based charter
operator JetSuite went bankrupt, grounded
its fleet, and furloughed most of its pilots.
General aviation activity plunged as well,
including turbine aircraft activity. That meant
less business for FBOs-and their lifeblood,
fuel sales. And with fewer airplanes in the sky
and automobiles on the road, demand for fuel
went into the basement. Refiners, stuck with
a sudden surplus, cut production. And then
came a March 2020 fuel price war between
Russia and Saudi Arabia. Saudi Arabia
wanted to cut its oil production to keep prices
up. Russia wanted to keep production up to
hurt Saudi Arabia's market share-and U.S.
shale-oil producers. The price war ensued,
driving fuel prices even lower. Surplus fuel
grew so much that there was no place to store
it, so it languished in oil tankers.
Some airframers fared better than others, at least from this perspective written
in mid-May. Bombardier, burdened by debt
largely incurred in developing its C-series
airliner, sold its remaining interest in that
project to Airbus and the government of
Quebec. Once the owner of de Havilland,
Short Brothers, and a purpose-built amphibious water bomber-as well as a major

T-2 | AOPA PILOT July 2020

manufacturer of rail cars and recreational
vehicles-Bombardier is now focused solely
on business jets, and its Global 7500 longrange jet has helped garner some $4 billion
in revenue in the first quarter of 2020. Airbus
is a beneficiary of Bombardier's plight, having
turned the C-series into its new A220 airliner.
Boeing, laid low by COVID-induced
order cancellations and the grounding of its
737 MAX airliners, was hoping to expand its
reach into the single-aisle airliner market but
pulled out of a $4.2 billion deal with Embraer
that would have given Boeing an 80 percent stake in Embraer's airline division. It's
assumed that Boeing will seek a government
bailout, and it doesn't look good if you spend
money merging with a foreign manufacturer.
Are there bright spots? Yes. For one, supersonic business jet firm Aerion announced it
would set up shop at the Melbourne, Florida,
international airport. This puts them on the
same field as Embraer's executive jets complex, which was not affected by the broken
deal with Boeing. It's a sign that just maybe
the long-anticipated market for truly global,
nonstop supersonic travel could be the next
big thing in business jets.
Maybe it's the unknowns about the
pandemic's course and the nature of any economic recovery that make our predicament
most tense. Conventional knowledge is that
the virus will recur later this year, and then
perhaps once more. As for an economic turnaround, it seems doubtful that there will be a
"V-shape" rapid upswing back to normal, if
"normal" is a pre-COVID record high stock
market. But any recovery will do, as long as it's
not of the dreaded "L" shape. The last time we
had an economic downturn, in 2007-2008, it
took us the better part of 10 years to recover.
What seems more certain is a release of
pent-up demand for GA travel once we're all
done sheltering in place; have a vaccine; and
walk outside, blinking in the sunshine. That
can't come soon enough
AOPA
EMAIL tom.horne@aopa.org

http://www.aopafinance.org/turbine

AOPA Turbine Pilot Magazine - July 2020

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