The Regional Situation

[StopNTSing]

p.s. The reason I've researched this is I've been on negotiating committees before and recently was putting the final touches on a project to convert CRJ-200's to CL-850 business jets but 2 companies beat me to it, putting their business plans out there in December and Jan respectively.

Still working on it from a different angle, but just about every airline will be putting their CRJ-200's to pasture over the next 3-5 years and it makes a great corporate vehicle when retrofitted with aux fuel tanks and a Global interior (fits perfectly). It's a Global with a 3,000-4,200 nm range instead of a Global's 5,000+.

Looking for a donor aircraft right now - those other 2 companies got big $$ funding and snatched up just about every FlyI aircraft and any other sitting CRJ available.

Interesting. I'd been wondering for some time how the corporate jet market might be affected by a glut of cheap RJs.

 

[Lear70]

I got the financials on RJ's together a while back on request from some of the casinos in Tunica, but they didn't like that they'd have to charge pax $300 r/t AND have to kick in an EXTRA $300 per person from the casinos just to get them there. Cheaper to have them fly into MEM on Northwest for $300 then spend $100 to pick them up and bus them in, so I shelved the project.

About the time FlyI went out of business and a few of them got converted into corporate shuttles, I started thinking how hard it would be to convert them into bizjets. The problem I kept running into was the frames that were in the best condition with all ORIGINAL parts, etc, were being snapped up by the Chinese and Japanese carriers.

The idea at the time was to actually run a fractional business with a $10 Million RJ (which is roughly the size of a Global) for about 1/2 the cost of a CL604 or 1/3 the cost of a new Global or about the same thing Flex is charging for a LR45 and NJ is charging for the Sovereign.

Was busy flying for airTran, then had my issues there, finished training on the Lear again, then started back on this project in late Dec. Problem is, the new 135 subpart K requirements for parts is just as stringent as putting it on 135 and, as someone PM'd me, the parts on the existing RJ's have been inter-swapped with other aircraft, etc, and the books for those other planes aren't available.

Was actually looking forward to NWA, CMR, ASA, etc dumping some of their CRJ's as they downsize ASM's, but now the market for RJ's has gone up as 3 other companies have already taken my idea to production, being choosy on which planes are still available, and combining the cost of the parts they'll have to replace into the final purchase price, leaving only high-time airframes or run-out or swapped engine airframes.

That's taken what WAS a $5-7 Million aircraft and bumped the price to $9-11 Million JUST for an airline version that needs retrofit, then another $2-3 Million in retrofit and parts, selling it under the CL-850 designation for around $15-18 Million.

Kind of killed the whole idea, as a good CL604 can be had for $18-19 Million with a LOT less hours on the airframe, so why bother...

Was just putting the finishing touches on the Powerpoint presentation and the business plan, too.

*sigh* Oh well, back to the drawing board.

 

[Andy]

Lear, I expect the corporate jet market (and especially NetJets) to get harder than the 121 carriers on this downturn. I think a lot of those fracs are going to get hammered with membership cancellations and those previously flying on those jets will be back on the major carriers. In F.

 

[Lear70]

Lear, I expect the corporate jet market (and especially NetJets) to get harder than the 121 carriers on this downturn. I think a lot of those fracs are going to get hammered with membership cancellations and those previously flying on those jets will be back on the major carriers. In F.

That would certainly *seem* logical, but the facts aren't following it.

The back-log for new Global, Falcon 2000 EASy, and G450/550/200 deliveries is about 18 months to 2 years.

Logic would dictate that existing orders with delivery slots would be open for purchase but, with the exception of companies who regularly purchase delivery slots then offer them for sale at marked-up prices just a couple months before delivery, there are no slots to be had. Every person who individually ordered the aircraft are keeping them and the brokers are still selling slots at increased prices.

Logic would dictate that new orders would slow down and the wait times for these aircraft would start coming down but,,, they're not. New deliveries are still being ordered, at almost the same pace.

The NJA waiting list is still almost 18 months out for a new owner. No, I'm not kidding. Flex and CShares is right at 12 months, and I'm not certain what it is at Options.

True, some people are suffering. The small private aircraft market is suffering. Exec Controller and others are HUGE, full of older Citations, Hawkers, Lears, and smaller Falcons, but the larger aircraft are holding their value.

The truth is that the REALLY wealthy and affluent saw this downturn coming MONTHS before anyone else (that's why they pay their brokers top dollar), and aren't in as bad a financial position as others.

THOSE are the people who are ordering new jets or large jets, or going to Netjets (which is arguably MUCH more expensive than owning your own aircraft). And they don't seem to be going anywhere...

Interestingly enough, during the downturn that started in early 2001 then kicked into high gear in 2001 and went for 4 years, Netjets nearly doubled in size. Flexjet kept their normal pace of deliveries (they never wanted to be the size of NJA). CShares tripled in size, as did Options.

Flies in the face of logic, but that's the history and what's currently going on in the market. Analysts expect business jet orders to peak in 2009, then taper off for a bit domestically.

Internationally, business jets are taking off at an eye-watering rate. They can't hire current and qualified fast enough... there's over 20 positions available right now everywhere from India to Japan to Europe to the Middle East for brand new Gulfstream and Falcon deliveries and the lag time for initial training for a flight crew is 6-18 months, depending on aircraft.

It's a whole different world.

 

[Andy]

The seizure in the credit markets has not yet filtered down. Look at CAL's latest monthly traffic report. Their cash on hand just dropped 10% due to them being unable to roll over student loan paper. They are far from alone.
A lot of 'smart' guys haven't seen this coming, and many still aren't able to grasp the magnitude of this crisis.
Many of those bizjet orders are going to get cancelled, just as commercial aircraft orders will be cancelled.
I've made financial investments over the last year based on bad times ahead, so perhaps I am just 'talking my book.' However, I've made more money in the markets over the last year than I will in the next decade at United, even if I'm not furloughed. (I'm betting on the furlough).
Things are bad out there in Wall Streetland; I'm now of the opinion that these problems are worse than in the late 20s due to the amount of leverage out there and levels of private, corporate, and government debt. There is no one who can 'spend' us out of the upcoming economic downturn.
We're at the end of the roaring 20s all over again. 'The Great Gatsby' era is closing; get ready for 'Of Mice and Men.'

 

[Lear70]

Can't argue with much of that; it's definitely going to get tight. The middle-class American will suffer the worst - they always do.

Those on welfare and such will be about the same, as government always bails out those who can't be bothered to bail themselves out.

Those in middle-class jobs dependent on small employers will fare the worst. The small businesses will close, and nothing for those employees will be available under the same terms, all while the price of basic food and household items skyrockets because of a worthless dollar.

I agree it's going to be a lot worse than most of us have probably seen in our lifetimes; if you have a good job, stay put!

That said, the credit markets have never looked at larger, newer business jets as a bad investment. Plus the international purchases now with the deflated dollar have gone sky-high, helping bolster the bizjet market.

I don't think you'd see easy credit for an old Lear, but I don't think the major manufacturers for newer aircraft are going to suffer and the smarter credit companies are going to be lending to those customers, as they'll be the ONLY business they are getting for the next 5-7 years...

 

[PCL_128]

I'm now of the opinion that these problems are worse than in the late 20s due to the amount of leverage out there and levels of private, corporate, and government debt.

How do you reconcile your opinion with the fact that almost all respected economists believe this recession will be over within 9-18 months? I think you're taking the doom and gloom a little too far. This will be a tight period, but comparing it to the great depression is a little over the top.

 

[jonjuan]

How do you reconcile your opinion with the fact that almost all respected economists believe this recession will be over within 9-18 months? I think you're taking the doom and gloom a little too far. This will be a tight period, but comparing it to the great depression is a little over the top.

Remember, he also predicted that age 65 would NEVER happen.

 

[Andy]

How do you reconcile your opinion with the fact that almost all respected economists believe this recession will be over within 9-18 months? I think you're taking the doom and gloom a little too far. This will be a tight period, but comparing it to the great depression is a little over the top.

Which economists are you following? The ones that work for brokerages? It's in their best interest to make it sound less worse than it is.

How do you reconcile Greenspan's comments about it being the worst recession since WWII?

A lot of the economists that you refer to were calling bottoms all through the tech wreck. Abbey Joseph Cohen had plenty of other respected economists saying it was over.

Doug Kass is a bull, yet is still calling for it get much worse. Peter Schiff's been calling for the recession to be bad. Even (I hate to bring up his name - he's way too bipolar) Jim Cramer's calling for it to get worse.
Yes, Larry Kudlow's been saying the Goldilocks is still alive, but I'm pretty sure that the big bad wolf ate her a while ago.

Do you consider the housing problem to be over soon?
Do you think that the consumer is going to be able to go back to spending more than they earn soon?
Will the credit markets improve soon?

 

[Andy]

Remember, he also predicted that age 65 would NEVER happen.

Show me where I said NEVER.
I hadn't counted on the betrayal of alpo and their ignoring the majority. Absent their treasonous efforts, the bill would have never left subcommittee. And to make matters worse, they added a clause where two over 60 pilots can fly together domestically. I hope that alpo national enjoys eternity in the ninth circle of hell (see Dante's Divine Comedy).

Post #64: http://forums.flightinfo.com/showthread.php?p=1319295
I was off by a few weeks as to the implementation date.

 

[ualdriver]

I hadn't counted on the betrayal of alpo and their ignoring the majority. Absent their treasonous efforts, the bill would have never left subcommittee. And to make matters worse, they added a clause where two over 60 pilots can fly together domestically. I hope that alpo national enjoys eternity in the ninth circle of hell (see Dante's Divine Comedy).

"ALPA" didn't ignore the majority. Prater has stated numerous times, including to our MEC leaders in open session (contact your MEC reps for more detail) that he met with eight Senate and House aviation leaders and that six of them were FOR the change. The Age 60 change was happening no matter what Prater did.

And before you tell me that Prater cut some back room deal that allowed those members to "change their mind" with some sort of "wink, wink" "nod, nod" back room deal, my MEC rep asked him that question DIRECTLY on a conference call in our MEC's open session a month or two back. Prater absolutely DENIED cutting any sort of back room deal with ANYONE in Washington that allowed the change to happen, and said anyone who said otherwise was lying (paraphrasing).

If you know something that rest of us don't, feel free to share.

 

[Andy]

It was BURIED in subcommittee. Where almost ALL bills die. After alpo's push poll, it got fastracked out of subcommittee and onto the floor for a vote. Absent alpo's interference, it would have died in subcommittee. Perhaps you can explain how it miraculously emerged from subcommittee shortly after prater's push poll?
I was born, just not yesterday.

If prater told you that alpo didn't exert influence to get the bill out of subcommittee, he's lying to you.

 

[PCL_128]

Andy, it's very difficult to take you seriously when you refer to the Association as "alpo." If you'd like a serious discussion, I welcome it, but this doesn't seem like one.

 

[ualdriver]

It was BURIED in subcommittee. Where almost ALL bills die. After alpo's push poll, it got fastracked out of subcommittee and onto the floor for a vote. Absent alpo's interference, it would have died in subcommittee. Perhaps you can explain how it miraculously emerged from subcommittee shortly after prater's push poll?
I was born, just not yesterday.

Yeah, actually I can. I've stated the sequence of events once or twice on this forum and once or twice on the UA ALPA forum, and I'll summarize again:

You can thank Blakely and ICAO and all the various organizations (SWAPA, AARP, tons of pilots over age 60 personally lobbying for the change because their lost theiir pensions and "need more time" to make up the difference, etc., etc.) that were lobbying FOR Age 60 change.

In NOV of '06, ICAO was going to enact the change. In JAN '07, Blakely said they were going to go for the change. Some point after that Prater figured out that the change was going to happen whether ALPA liked it or not we got the poll. We could take part in the process and get some "gets" or continue to fight "to the death" and risk getting nothing AND alienating our political allies who we might need in the future (cabotage, change the PBGC rules in our favor, etc.).

So the polls I think you are referring to came out. Yes, it did reaffirm that the vast majority of ALPA members didn't want a change. But it also asked that if the change was going to happen anyway, whether ALPA wanted it or not, should ALPA "fight to the death" or try to compromise and try to get some things that we want out of it. The majority said they would prefer the latter. And that's what they did. If Prater and the ALPA Executive Council hadn't acted as they did, I personally would have been pissed for fighting a foolish fight that they knew they were going to lose and risk getting nothing in return.

So come June '07, we had our language in there, or what I assume was the best we could get. ALPA dropped it's opposition, and the legislation rapidly passed as I'm pretty sure we were the only organization with any amount of weight holding it up.

Now of course, all the anti-ALPA guys are thinking to themselves, "Ualdriver, ALPA got NOTHING!!" "What did ALPA get for not fighting??!!" Well, feel free to crack open your FEB 08 ALPA magazine open for a summary of the stuff ALPA got. There's also all kinds of stuff in there that actually tells you what ALPA does for the pilot group on a day to day, month to month basis. Nah, never mind. That's asking way too much. We all know ALPA does nothing for us and it's all about the dues.

Anyway, personally one of the MOST important things ALPA got was that if you're already past Age 60 when this thing passes, you can't come back. Think of the damage that would have done if these guys would have been allowed to come back. In fact, I think a group of these 60+ guys is suing in order to have the right to come back as they HATE the language ALPA got put in. Let's hope they lose.

That's why, Andy, I don't think it was a "push" poll and I don't refer to Prater and the EC's councils action as treasonous.

Again, do you know something the rest of us don't know? I'm not sure where you're getting the "treasonous" part from.

 

[ualdriver]

Andy, it's very difficult to take you seriously when you refer to the Association as "alpo." If you'd like a serious discussion, I welcome it, but this doesn't seem like one.

Especially when he's coming back to a carrier that has a contract coming up in DEC '09 and needs EVERYONE pulling on the same end of the ALPA rope, despite the flaws we all know ALPA has.