One of Europe's biggest business aviation brokers and charter operators has poured doubts on hopes that the sector is on the brink of recovery, despite encouraging signs from manufacturers of an uptick in demand for new aircraft.
UK-based charter and aircraft management specialist Air Partner - one of the few publicly quoted businesses in the sector - issued an interim management statement on 5 June warning that the second half of its financial year, from February to July, was seeing "reduced demand and weak pricing prevailing across all markets" and that profits would be lower than market expectations.
It follows half-year results on 25 March, in which the group reported "difficult trading conditions with reduced visibility and shorter lead times" after a "poor winter".
According to chief executive David Savile, a hoped-for revival in discretionary spending on private aviation by high net-worth individuals at the start of the summer season in May and early June "hasn't materialised". Traditionally this is when European and Middle Eastern multi-millionaires begin to spend short breaks in Mediterranean holiday homes and golfing resorts.
The loss-making segment represents about a quarter of Air Partner's business, with half its revenues coming from corporate clients and governments and the remainder from freight charter.
"Air Partner came late into this downturn - this time last year we were rushed off our feet - but we are deep into it now," says Savile.
The company is in discussion with employees over plans to "significantly reduce costs" at its London Biggin Hill base, where it employs 24 pilots as well as maintenance staff and manages six third-party Bombardier Learjet 45s on its air operator's certificate.
Operating these aircraft represents only about 5% of its business, but Savile says "we can't sell enough on our aircraft and those that we are selling we can't sell at a profit".
Savile says Air Partner - which has enjoyed substantial growth since floating on the London stock market 20 years ago - is secure because it is debt-free, has £18 million ($29 million) in cash and made profits before tax of £3.2 million in the half-year to 31 January.
"I look at a lot of household names. They are having the same problems as us, but they are not sitting on the reserves we are," he says.
Analysts have backed Savile's view, with Oriel Securities saying that it has "no doubt in the longer-term success of Air Partner, which remains profitable and debt free. The management team have a strong track record of manoeuvring the group through recessions and the group's cash position is a significant competitive advantage."
However, Air Partner's pessimism is in contrast to some of the cautiously optimistic statements being made by airframers, which made a slew of redundancies earlier this year as orderbooks and production collapsed. Bombardier says that cancellations of business jets have slowed substantially following 61 cancelled orders its first fiscal quarter ending 30 April.
The Canadian manufacturer suffered about 44 rejected orders in the previous quarter and ended the first quarter with 25 unsold or "whitetail" aircraft. But suggesting that the worst might be over, chief executive Pierre Beaudoin says "the business jet inventory is starting to stabilise and more credit is available to customers".
Cirrus Design - whose SR-22 piston-single is popular with owner-fliers and air taxi operators - is recalling 55 workers to its factories in Minnesota and North Dakota to support an increase in output.
A more accurate picture of the state of the market will emerge from official traffic figures for the second quarter of the year. Eurocontrol statistics showed that business aviation declined by almost one-fifth year on year during the first three months and the organisation predicted that recovery would not take place until spring 2010.
Source: Flight International
