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Signs that general aviation is brightening

There’s some  good news on the general aviation front. The outlook  is brightening.

Brian Foley with Brian Foley Associates notes some key evidence that there will be measurable signs of recovery by mid-2010.

For example, Foley notes that  the U.S. Treasury yield curve is widening to a record, which signals recovery, and the U.S. Gross Domestic Product climbed 2.2 percent in the third quarter of 2009, the fastest pace since 2007. A 3 percent growth in GDP indicates a favorable aircraft sales environment, Foley says.

In addition, stock markets around the world have rebounded, and the dollar value is low.

“With their strong local currencies and faster healing economies, it’s our thesis that non-U.S. buyers will deplete the most desirable pre-owned inventory, forcing still-recovering U.S. buyers to lead the new aircraft recovery later,” Foley said.

Inflation isn’t a problem yet, he says, but some people may hedge by buying high-value assets like an airplane at today’s depressed prices and low interest rates.  And pent-up demand for aircraft “can’t be overlooked” he said.

“Just as some individual investors regret having sold their stocks at a market low, there’s likely a degree of remorse among one-time buyers who canceled orders prematurely,” Foley said.

Lastly, a typical general aviation cycle lasts around six years, but this down cycle was compressed into a short period of time — which forced it to trough in a mater of months, not years.

“With that catastrophic event largely behind us, we’ve likely already embarked on what will hopefully be a full six-year upswing,” Foley said.