Shutdown brings aviation sales to a halt
10/04/2013 6:43 AM
10/05/2013 3:18 AM
While Congress debates how to end the government shutdown, Wichita general aviation planemakers, brokers and owners of airplanes can’t complete sales of aircraft because of the closure of a key federal office.
The shutdown is also affecting maintenance and repair facilities and other aviation-related businesses. And those in the aviation industry say the effects will get more painful with each passing day.
“If this drags on … we’re going to be in a very difficult position,” Pete Bunce said Thursday. Bunce is president and CEO of the General Aircraft Manufacturers Association, or GAMA, a Washington trade group representing planemakers.
Hundreds of thousands of federal workers were furloughed and offices closed Tuesday when Congress failed to pass legislation to authorize spending after Sept. 30.
Sales of aircraft can’t close because aircraft registrations can no longer be obtained through the Federal Aviation Administration’s Aircraft Registry Branch in Oklahoma City. With the partial shutdown of the FAA, the registry office is closed.
The closure is unprecedented, according to GAMA officials. In previous shutdowns, the registry office was considered an essential function and remained open.
The shutdown is especially troubling because it comes at the start of the busiest time for aircraft deliveries. Traditionally, the last three months of the year account for 35 percent of all annual deliveries, Bunce said.
In a poll of its manufacturing members – which includes Wichita’s three general aviation planemakers – 12 new airplane deliveries scheduled to take place in the first two days of the shutdown were delayed and did not occur, according to GAMA. Over the next couple of weeks, 123 more are scheduled, according to the poll. Those will also be delayed if the registry office is not reopened.
The value of those 135 deliveries is $1.38billion.
Production and delivery of Beechcraft’s business, general aviation and trainer aircraft are being affected by the furloughs at key federal offices and agencies, company spokeswoman Nicole Alexander said in an e-mail Thursday.
Required government inspections on Beechcraft’s T-6 military trainers also can’t occur because inspectors from the Defense Contract Management Agency have been furloughed, Alexander said.
“The company is closely monitoring the situation to determine what actions may be necessary,” Alexander said.
Bombardier is monitoring the situation closely, said spokeswoman Sylvie Gauthier. So far, the company has not been affected, “but it’s not to say it won’t,” she said.
That probably will depend on how long the shutdown lasts.
“We’re preparing and we’re reviewing potential contingency plans (and) trying to keep normal operations as much as possible,” Gauthier said. “We are concerned.”
A Cessna Aircraft spokesman declined comment.
‘Show is stopped’
AIC Title Service in Oklahoma City, which works with airplane buyers and sellers, is seeing the effects first-hand.
“It means we can’t access the aircraft registry records, which means you can’t do a title search; you can’t file documents,” said Chad Stanford, executive vice president and general counsel of AIC Title Service. “… The show is stopped.”
Federal regulations require immediate notification to the FAA each time an airplane changes hands.
“Well, who’s at the FAA to accept that notice? Nobody,” Stanford said.
Aircraft financial lenders also must file simultaneous notice of their security interest in an aircraft, he said.
“If they don’t file, they’re unprotected,” Stanford said. “They are exposed to lose their security interest in that aircraft.
“In my 17 years of doing this, I can’t recall a time when the law imposes steps upon a lender to finalize their security interest in an airplane when the system imposed by law is unavailable to a lender.”
Stanford said his office is fielding a lot of calls.
“It’s like Chicken Little these days,” Stanford said. “With the FAA, no one knows up from down, and everybody thinks the sky is falling.”
Executive Airshare, a regional fractional ownership company founded in Wichita and headquartered in Kansas City, also has felt the impact of the shutdown. It was supposed to close on a share of an airplane with a customer on Tuesday.
“But the lights are off at the FAA,” said Executive Airshare president Keith Plumb.
Executive Airshare took delivery of a new Phenom 300 business jet on Friday and has owners lined up to close on fractional shares of the plane. Without the ability to complete a deal, Executive Airshare is holding the documents and any customer funds in an escrow account.
If the shutdown drags on for another week or two, it will impact the business and its customers, Plumb said.
“They will have concerns,” he said. “… They can’t send money for something they can’t get in return.
“We want some progress on this. It’s already impacted our business, and we don’t have a solution for our sales operation.”
Another concern is the backlog the FAA’s office will have once it reopens. The Oklahoma City office registers aircraft and files the forms for international aircraft registry, helps with the bill of sale, transfers titles, conducts title searches required by lenders, helps with aircraft records, de-registers U.S.-registered aircraft that are being exported and issues temporary authority to operate an aircraft outside the U.S. for the purpose of an aircraft export, according to GAMA.
“We create backlog with each passing hour,” said Bunce, the GAMA president. “Think about how you’re backing up the system with each passing day, not only in the aircraft registry, but out in the field as well.
“It’s having a huge economic effect on businesses small and large. It’s not just isolated to government workers whatsoever.”
He said GAMA is working with the FAA to see whether there is any flexibility.
“The (FAA) administrator is aware of the situation and is doing everything within his power to try to figure out ways to live with this, but living within the direction that he’s getting from his higher ups,” Bunce said. “He’s doing everything he can.”
GAMA also is working on the problem, Bunce said.
“We’ve got the entire staff devoted to try to find solutions,” he said.
So far, the shutdown hasn’t affected Bevan-Rabell, a Wichita avionics and aircraft repair shop.
“But it will pretty quickly,” said company president Kent McIntyre. “We work back and forth (with the FAA) for field approvals and other approvals. We’re working on a couple of airplanes that we’re planning on getting field approvals on. It’s going to affect us before very long.”
For example, ferrying an airplane where the annual inspection has expired requires a ferry permit from the FAA’s Flight Standards office, he said. So does operating an airplane over its approved gross weight, such as when extra fuel tanks are installed so it can be exported.
With the closure, those permits aren’t available.
It also will impact some maintenance and repairs. In some cases, repairs or data in GPS installations that need approval by an FAA inspector can’t be approved, McIntyre said.
FAA testing sites received an e-mail this week stating that aviation knowledge testing can’t be given after Friday, said Dave Tiday, who owns Aviation Testing, which conducts tests for mechanics, pilots, instructors and others.
Student pilots must pass an FAA written test before they can earn a private pilot’s license. Pilots must also pass written tests to earn an instrument, commercial or other types of rating.
Tiday’s company also conducts other kinds of testing.
“We still will be doing a lot of other testing; we just won’t be doing FAA testing,” Tiday said.
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