Current trends in the aviation and aerospace industry are giving airline executives cautious optimism on the coming year, according to a December report from the International Air Transport Association (IATA). The IATA represents some 290 airlines, or 82% of total air traffic. The association forecasts a $35.5 billion net profit for the airline industry in 2019, up slightly from this year’s expected $32.3 billion net profit.
Factors influencing 2019’s forecast include lower oil prices and solid, albeit slow, economic growth. Total employment is expected to reach 2.9 million in 2019, up 2.2% from 2018. Productivity is slated to rise by 2.9% to 535,000 available tonne kilometers per employee (a measure of freight carried by a mode of transport). IATA predicts a continued return on investment capital of 8.6% from 2018, increasing industry revenues, as well as higher passenger numbers and cargo tonnage in 2019.
Dan Hubbard, the senior vice president of communications at the National Business Aviation Association (NBAA), said the business side of the industry shares the IATA’s “cautious optimism,” though it remains to be seen whether a recession could occur in 2019. The business aviation sector, which includes general aviation firms not connected to military or scheduled airlines, is typically one of the first industries to be affected by a recession and one of the last to recover. With a shaky stock market closing out December and ongoing trade conflicts between the U.S. and China, Hubbard said there is cause for concern in the coming quarters.
Just before the Great Recession hit in 2008, the industry experienced record highs in aircraft sales, fuel consumption and employment – a high which the industry is only now recovering from. “It does seem now to have come back appreciably in some ways, although it is still not at the high watermark it was at in 2006 and 2007,” Hubbard said.
Job sectors seeing the most growth in the industry include those in the STEM fields – science, technology, engineering and mathematics – Hubbard said. “There’s a lot of that on the manufacturing side. It’s not just airplanes; it’s avionics, propulsion systems, navigation systems.”
One area of concern is the imminent shortage of qualified pilots, Hubbard added. Many experienced pilots are on the verge of retirement, and there are not enough young pilots to take their places. That’s true for both the airline industry and business aviation, he noted.
In general, Hubbard said economic indicators for the business aviation industry are good. Sales of new and used aircraft have firmed up, more people are employed in the industry and the number of hours flown is on the rise.
Vice President/General Manager, Gulfstream Long Beach
Sustainable alternative jet fuel has picked up considerable momentum in the business aviation community since the European Business Aviation Association’s May release of the Business Aviation Guide To the Use of Sustainable Alternative Jet Fuel (SAJF). The most obvious and important benefit of SAJF is the role it plays in protecting our environment by reducing aviation’s carbon footprint.
Gulfstream Aerospace Corp. has been involved with SAJF since June 2011, when a Gulfstream G450 became the first business jet to cross the Atlantic on biofuels. Since then, Gulfstream has taken more steps to support sustainability, including becoming the first business-jet manufacturer with its own dedicated supply of SAJF. The fuel is used by our corporate, demonstration and flight-test fleet at company headquarters in Savannah, Georgia. Company aircraft have already flown approximately 700,000 nautical miles on SAJF, saving more than 750 metric tons of carbon dioxide.
We are now elevating our commitment to sustainability by bringing SAJF to our facility at Long Beach Airport. By mid-2019, Gulfstream will offer SAJF to customers utilizing its Long Beach facility. Gulfstream has used a 30/70 blend of low-carbon, drop-in SAJF and Jet-A in daily operations in Savannah since 2016.
President & CEO, Virgin Orbit
While California as a whole is well-known for its strong tech businesses, Long Beach has always been a rich source of aerospace talent and innovation. 2019 will be a great year for our industry, as spacecraft and launch systems continue a major transformation, creating new businesses and new products. Likewise, investment in space systems will continue to rise, propelled both by private equity and government participation. And most importantly, our LauncherOne system will go to space and move into the production phase this year.
The industry is rebalancing between traditional large rockets and satellites, and smaller systems emerging in Low Earth Orbit. This will cause some businesses to alter and augment long-standing strategies and product lines – offering an excellent opportunity for new enterprises and for local graduates with an eye toward a career in space transportation, utilization and exploration.
President & CEO of Hawaiian Airlines
As travelers have become more savvy and discerning, they are increasingly seeking authentic and tailored experiences that match their price point. The airline industry has responded to this desire by providing a menu of a la carte products guests can choose from based on their needs and preferences. For example, we have invested in a lie-flat First-Class seat, added more of our popular Extra Comfort seating, and we are preparing to unveil a Main Cabin Basic product in late 2019. Our singular mission to be Hawai‘i’s destination airline makes us an outlier in the industry because a Hawaiian vacation holds special significance to our guests who place a premium on value. Everything we do – from our warm Hawaiian hospitality to our complimentary meals and leading on-time performance – is meant to deliver a memorable and authentic experience to our guests.
As we enter 2019, we will stay focused on making travel effortless by improving our airport facilities and enhancing tools such as mobile applications, while remaining dedicated to adopting eco-friendly practices and running an efficient and sustainable operation.
President & Owner, AirServ
From a scheduled air service perspective, 2018 was a mixed bag for Long Beach Airport (LGB). While JetBlue announced significant reductions in April (effective after Labor Day), Hawaiian Airlines started daily service to Honolulu on June 1 (the first ever from LGB) and Southwest added flights. According to Tom Marting of THM consulting, LGB reached a milestone of nearly four million passengers in the period October 2017 to September 2018, though passenger traffic declined in the last quarter due to JetBlue’s reductions.
For 2019, perhaps another mixed bag? JetBlue has discontinued its longstanding Ft. Lauderdale service, but added seasonal service to Bozeman and Steamboat Springs. Southwest has indicated it will take any available slots and expand service to new cities. And though the City of Long Beach will soon embark on “phase two” of its terminal improvement plan, which includes a new passenger check-in facility and baggage claim area, a decision by the city council made nearly two years ago may shape perceptions of LGB in the aviation industry. The council rejected the establishment of F.I.S. (customs) facilities, which had been advocated by JetBlue, in a plan to provide service to Mexico and perhaps Central America. What that airline’s commitment to LGB in 2019 and beyond remains to be seen. They have been our largest carrier for over 15 years, and continue to serve over a dozen destinations from LGB.
Chief Financial Officer, DASCO Engineering Corporation
2018 was a fantastic year for the US Aerospace and Defense markets as a whole. Two main driving forces led to this growth: higher defense domestic defense spending and higher demand for commercial air travel globally. The aerospace manufacturing sector saw significant growth as prime contractors increased production rates on key industry programs. Boeing’s 737 and 737 Max are working through a backlog of orders that goes into the 2020’s and ramped up production to over 65 planes per month. Contractors relied on the supplier base to support the increase demand for capacity or found new sources to feed their production lines.
For 2019, we are expecting this winning streak to continue. For example, the senate approved a defense spending increase of 2.6% over 2018 and commercial build rates are only scheduled to grow. The biggest challenge for the year will be finding the capacity to support this growth. With favorable lending rates and tax incentives, companies are investing in resources and assets to support demand. Dasco’s concerns for 2019 revolve around access to qualified technical employees to support our growth. The industry as a whole saw 1.6% decrease in employment and competition for qualified personnel has never been higher. Southern California is still a hotbed for aerospace manufacturing and we are supporting local colleges and trade programs through the community to drive interest in the industry.