We have every reason to be optimistic for the future and with a little help from Adam Smith’s ‘invisible hand’, the markets and market confidence will return strongly as the world economy moves forward

I am sure many of the manufacturers of business aircraft were pleased to see 2009 recede into the distance as 2010 arrived. It was a very difficult year, characterised by the fallout from the October 2008 Lehman Brothers insolvency that sent the world economy into a deep recession. 2010 has been a year when many economies in the West have finally begun making their way out of recession and started to record positive growth. World Bank projections for the growth in world gross domestic product (GDP) are reasonably robust. So, does 2010 provide a better climate for the sale of corporate aircraft? Well, its both yes and no.

True, the economies of the East—China and India in particular—are growing strongly (as indeed is Brazil). However, in our markets these areas (with the exception of Brazil) remain relatively small consumers of our products. World trade has made a progressive comeback, and with that has the need to travel. Airlines, therefore, are enjoying increased demand, although yields remain low. The market more generally is characterised by difficult pricing, whether it be corporate aircraft for charter or bulk shipping rates for commodities. General business confidence is an elusive concept. It is difficult to secure and easily lost. So while 2010 started off hopefully, issues like the European sovereign debt crisis, exemplified by the travails of Greece, Ireland, Spain and Portugal, continue to drain confidence from the markets. One only has to look at the world stock markets to see that. Market volatility, while it may be good for stockbrokers, is not a recipe for solidifying and then growing general confidence in the prospects of the world economy. While more subdued now than previously, fear remains a greater concern than making money. For example, the US private sector is sitting on significant cash reserves but will not spend them, and in fact a significant proportion of those funds are located offshore out of the reach of the US taxman (and therefore not being invested to stimulate the US consumption and employment).

For many years, one of the few good correlations of aircraft demand was corporate profitability graphed against new airplane deliveries, with generally a 6-8 quarter lag from the former to the latter. Corporate profits are indeed up in some cases now, but confidence is not, so buying high-value capital goods like an airplane, in the current climate, is not high on a CEO’s list of things to do. That reluctance to buy is particularly marked when shareholders are apt to consider this type of spending ‘corporate excess’ rather than as we in the industry would strongly argue, corporate good sense to deploy your best assets (your people) in a time-efficient and safe manner all around the world as business opportunities present themselves. Cessna exemplified that approach with the Rise campaign in the US, which was designed to offset the negative publicity the current US Administration at one point supported, in the ‘anti-business jet’ line it was taking with the US financial industry.