Contents. 2 National Air Transportation Association 3 Air Services Council 4 The General Aviation Fleet

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2 Contents May National Air Transportation Association 3 Air Services Council 4 The General Aviation Fleet Global Fixed-Wing Market Trends Business Jets Very Light Jets Turboprops Piston-Engine Aircraft Rotorcraft Global Turbine Rotorcraft Market Experimental Aircraft Light Sport Aircraft 10 Fixed Base Operators 11 Special Aviation Service Organizations 11 Fuel 14 On-Demand Charter Regional Air Cargo Charter Aeromedical Services 16 Fractional Ownership Companies Long-Range Impact of Fractional Ownership Plans 19 Pilots and Flight Training General Aviation Industry Compensation 23 Airports 26 Maintenance and Repair Stations 27 Air Tour Operators 27 Agricultural Aviation 28 Corporate Aviation 28 Firefighting 29 Law Enforcement 30 Aircraft Brokers, Dealers and Distributors 30 Safety 35 Government Agencies that Regulate General Aviation Animal Plant and Health Inspection Service (APHIS) United States Citizenship and Immigration Services Department of Homeland Security Department of Transportation (DOT) Federal Aviation Administration (FAA) Environmental Protection Agency (EPA) Internal Revenue Service (IRS) National Transportation Safety Board (NTSB) Occupational Safety and Health Administration (OSHA) Small Business Administration (SBA) Transportation Security Administration (TSA) United States Customs and Border Protection (CBP) 37 Other Sources of Information NATA Associate Members NATA Compliance Services NATA Publications Writers: Paul Seidenman and David J. Spanovich

3 2009 General Aviation Businesses & Services General Aviation Businesses and Services has been produced by the National Air Transportation Association (NATA) for its members, the media, government, and the general public to illustrate general aviation s importance to the U.S. transportation system and economy. T he term general aviation refers to all aspects of the aviation industry except scheduled passenger and cargo airline operations and military flying. General aviation includes businesses engaged in on-demand passenger or cargo charter flying; corporate flight departments; owner-flown aircraft; flight schools; companies offering aircraft fuel, storage, maintenance and parts; and aircraft sales, brokerage and rental firms. Some companies classified as general aviation businesses also serve the scheduled airline industry by providing line service, fueling, cabin cleaning, catering and baggage handling. The support of military aviation through fueling contracts and other ground-handling activities is another vital service provided by some general aviation companies. According to the latest available data furnished by the General Aviation Manufacturers Association (GAMA), the general aviation industry contributes an estimated $150 billion annually to the U.S. economy, accounting for 1.2 million jobs. General aviation aircraft fly to approximately 4,000 airports in the U.S. with paved runways. (The number of similar airports served by commercial airlines is under 600). The GAMA data also shows that general aviation aircraft fly approximately 166 million passengers some 27 million flight hours each year. Approximately 67 percent of those flights are for business purposes. 1

4 National Air Transportation Association Founded in 1940 and based in Alexandria, Virginia, the National Air Transportation Association (NATA) is the public policy group that represents the interests of the general aviation business community before Congress and federal, state and local government agencies. NATA s nearly 2,000 members provide a broad range of services to general aviation, the airlines and the military. These member companies directly serve the traveling public by providing fuel, on-demand passenger and cargo air charter, aircraft rental, tie-down and storage, and flight training. Other services include aircraft maintenance, parts sales, airline baggage and cargo handling; and line support as well as individual business aircraft or fractional ownership fleet management. Still other member companies sell or market new and used general aviation aircraft. While large firms, such as international FBO chains, are among its members, NATA has always been the advocate for smaller, single-location operators that depend exclusively on general aviation for their livelihood. In fact, these smaller companies account for the majority of NATA s membership. As a representative of the general aviation business industry, NATA interfaces with Congress, as well as major federal government agencies whose policy-making authority directly impacts aviation. These include the Federal Aviation Administration (FAA), the Department of Homeland Security (DHS), the Transportation Security Administration (TSA), the Environmental Protection Agency (EPA), the Internal Revenue Service (IRS), the Department of Transportation (DOT), the Occupational Safety and Health Administration (OSHA), U.S. Customs and Border Protection (CBP), and National Transportation Safety Board (NTSB). In addition to giving the association s constituents a voice in Washington, D.C., NATA membership offers a number of ancillary benefits including its annual FBO Leadership Conference and Air Charter Summit and its highly regarded Safety 1st Professional Line Service Training (PLST) program. Considered the industry standard line service training program, PLST has instructed thousands of employees, at more than 900 FBOs, in safe aircraft ground handling procedures over the past nine years. In 2008, NATA updated PLST and transitioned it from a video to an on-line course, making it available to trainees at any location with Internet access. At a time of increased security awareness, NATA Compliance Services provides drug testing, background screening, and fingerprinting for employees of aviation-related businesses in accordance with all current FAA and TSA regulations. With an increased focus on aviation's role in mitigating climate change, NATA established its Environmental Committee to develop programs to aid the industry on issues of global warming and the support of a more sustainable environment. Along with this, NATA has added an Environmental Compliance Seminar, specifically for FBO and general aviation airport representatives. General aviation continues to face formidable challenges, including ongoing threats to airport access. Conflicts between local communities and small general aviation airports over noise continue to generate proposals to close and redevelop some facilities for non-aviation use. To counter these actions, NATA allocates considerable resources to educating local and state legislative bodies on the vital role aviation businesses fill. An NATA-produced video is available to advise NATA members how to work with community leaders to promote the value of airports and prevent closures. In conjunction with the video, a Community Relations Toolkit published by the association provides a comprehensive manual for those individuals and communities seeking guidance in working with community leaders to protect and expand general aviation airports. 2

5 With the economy of the U.S. and much of the world in turmoil, government financial aid to the banking and manufacturing sectors has led to a public perception of business aircraft as a luxury indulgence of top corporate executives. NATA is working hard to change that perception and present general aviation as a vital business tool and major part of the U.S. economy. NATA is also resisting legislative and rule-making attempts that would effectively limit the use of general aviation aircraft. For example, a proposal by the TSA, known as the Large Aircraft Security Program (LASP), would implement burdensome and costly security mandates on anyone operating a general aviation aircraft with a maximum take-off weight (MTOW) in excess of 12,500 pounds even if the aircraft is owner-flown. At the same time, NATA continues to work with Congress to help secure long-term funding for FAA reauthorization, the Airport Improvement Program (AIP), and research and development in such areas as the Next Generation Air Transportation System (NextGen). However, NATA opposes any legislation that would impose unreasonable user fees on the general aviation community. Among NATA's other concerns is what appears to be a lack of standardization regarding the interpretation of FAA regulations among the agency's Flight Standards District Offices (FSDO). In addition, the association is working to establish a national standard of badge issuance for workers with access to high security parts of airports. Criteria for the issuance of badges often differs from one airport authority to another. Education and training are a focus of the National Air Transportation Foundation (NATF), a stand-alone organization within NATA. The primary mission of NATF is to enhance safety and aviation business services through education and training of employees. NATF is also working with colleges, universities and technical schools to develop courses and training materials specific to the needs of the general aviation community. This includes student scholarships and grants for teachers to acquire aviation-related training materials in order to ensure continued availability of qualified people who will choose general aviation as a career. The Airline Services Council (ASC) was formed in 2002 as an organization within NATA to represent those companies whose main business is providing ground services to scheduled airlines. Those services include fueling, baggage, cargo and aircraft handling, cleaning, catering, deicing, maintenance and security. Although the ASC caters to the unique concerns of airline service firms, Airline Services Council NATA s traditional membership has always included companies that serve commercial air carriers, but mostly for into-plane fueling and baggage handling, as a secondary, rather than primary line of business. The ASC provides its member companies with a single voice within the public policy arena concerning issues that affect their viability and 3

6 profitability, and serves as a catalyst for industry discussion and education. In that regard, the ASC works to ensure that this critical and growing segment of the commercial aviation industry is fully recognized by government and other entities, and that airline services providers have the opportunity to comment on any proposed legislation or regulations. Given the current uncertainties of the international economy and today's security concerns, the ASC's goals include the improvement of communications and information distributed to ASC members and the development of staff contacts at federal agencies, including the DOT, DHS and TSA. The ASC is also working proactively with these agencies to identify risks and opportunities Currently, the ASC represents 20 domestic and international firms ranging in size from single-location to multi-national companies that employ a combined workforce in excess of 90,000 at 450 airports worldwide and generate more than $2.5 billion in annual sales. To reduce costs at a time of global recession, more established airlines, as well as start-up carriers, will outsource aircraft service functions to independent companies that can provide ground handling packages on an a la carte or turnkey basis. However, in tandem with this trend, airline services companies are being impacted by air carrier bankruptcies and consolidations and their own challenges, including fluid staffing levels, uneven training, and security or environmental regulations, which may be burdensome or of limited value. concerning any proposed regulatory changes. For example, the ASC is in discussions with the TSA on the implementation of new mandates to screen all cargo to be carried on commercial airliners. In 2008, the ASC worked with the TSA to develop an employee screening pilot program. The organization is also working with the agency to develop a secure web board or other notification procedures allowing airline services companies direct access to any security protocol that affects their operations at commercial airports. On the legislative side, the ASC continues to monitor the status of the latest war risk insurance programs affecting its member companies and to mitigate the impact of proposed environmental legislation on the airline services industry. 4 Based on the FAA s latest available forecast data, released in February 2009, the total U.S. general aviation fleet, including fixed-wing aircraft and rotorcraft (helicopters), is projected to grow from an estimated 234,015 aircraft as of the end of 2008 to 275,230 by This growth trend follows four years of decline that began in 2000 when the total fleet The General Aviation Fleet was 217,533 aircraft, dropping to a low point of 209,606 in By 2004, the downturn was reversed and the fleet expanded that year to 219,319 units. The FAA is forecasting a slight increase in the fleet to 236,235 for 2009, despite the economy, and projects an average annual growth rate of 0.1 percent through 2025, factoring

7 in new aircraft deliveries and the retirement of older units. By far, the total (fixed-wing and helicopter) piston-driven fleet will continue to be the most popular for general aviation operators, increasing from an estimated 168,790 in 2008 to 170,475 by 2025 a one percent annual growth rate. A more substantial 3.2 percent growth rate is predicted for the turbine fleet, including jets and turboprop aircraft, which stood at 28,145 in The total turbine fleet, the FAA forecasts, is projected to grow to 48,280 by For the period, the FAA estimates that the two greatest areas of average annual growth will be in the fixed-wing jet and the relatively new sport plane category. For jets and sport planes, the respective forecasted growth rates are 4.8 percent and 5.0 percent. The 2008 turbojet fleet stood at 11,400 and is estimated to reach 25,165 by The sport plane fleet in 2008 stood at 6,965, with a 15,865 estimated total in The growth of the general aviation fleet will also mean increasing numbers of flight hours. According to the latest FAA forecast, total flight hours are projected to go from an estimated 27,784,000 in 2008, to 37,846,000 by 2025, for an average annual growth rate of 1.8 percent. Here, too, the single-engine, fixed-wing piston fleet dominates, accounting for 13,530,000 hours flown in 2008, but projected to reach 14,643,000 hours in 2025, for a 0.5 percent annual growth rate. The sport plane group, on the other hand, is expected to experience a 7.1 percent average annual flight hours growth rate--the highest for the period. For that time frame, sport plane hours estimated at 305,000 hours in 2008, are projected to come in at 971,000 by This group is edging out jets, the second highest in hours of the fixed-wing group, which had 4,043,000 hours in 2008, and are expected to reach 9,569,000, for a 5.2 percent annual growth rate in Turboprops will experience a 1.3 percent average annual growth rate between 2008 and 2025, going from 2,594,000 to 3,219,000. Behind the jets, the piston helicopter group will have an average annual growth rate of 3.9 percent, reaching 1,355, 000 hours in 2025, up from the 703,000 hours in However, the turbine helicopter, at 2,484,000 flight hours in 2008, will continue to account for more rotorcraft flight hours, which the FAA estimates will hit 3,815,000 by 2025, for an average annual growth rate of 2.6 percent. Each type of general aviation aircraft--piston, turboprop, jet, and rotorcraft--is designed to satisfy one or more broadly defined mission categories personal, business, and corporate/utility. Personal flying simply means that the aircraft is used for non-business purposes, while business flying refers to the use of the airplane piloted by the owner. Corporate and utility flying, while done for business purposes, involves the use of a professional pilot who is compensated for the work. According to a study of the general aviation market, released in 2006 by consulting firm MergeGlobal, of the 17.8 million hours flown by all types of general aviation piston aircraft in 2005, 47 percent was for personal use and 40 percent was for business-related transportation. Only 13 percent of the total piston flight hours were devoted to corporate transportation and general utility work. For rotorcraft and turbine-powered fixed-wing aircraft, however, the MergeGlobal study deter- 5

8 6 mined that usage was almost strictly business. Of the 3.9 million hours flown by turboprops in 2005, corporate and utility use accounted for 73 percent, while 16 percent was devoted to business travel. Just 11 percent was devoted to personal flying. On the jet side, corporate and utility missions accounted for 81 percent of the 2.5 million hours flown by those airplanes that year, with personal use just 8 percent and business flying 11 percent. Rotorcraft had the lowest percentage of personal use at just 4 percent of the 2.3 million hours flown in 2005, with an equal percentage for business flying. But, 92 percent of the flight hours were for corporate or utility flying. Global Fixed-Wing Market Trends For 2008 In spite of the current global economic downturn, which began in December 2007, the manufacturers of general aviation aircraft worldwide enjoyed a record year for billings throughout As a result of huge orders booked prior to the recession, the manufacturers, according to GAMA data, billed out $24.8 billion, a 13 percent increase over 2007's $21.9 billion, making 2008 the industry's fourth straight record year. Of the global market, the U.S. share was $13.35 billion, an 11.8 percent increase over the $11.94 billion in Also in 2008, the U.S. general aviation aircraft manufacturing industry shipped 1,161 units on the export market, up 1.7 percent over the 1,142 shipped the previous year. From a dollar standpoint, this translated into $5.86 billion in sales of exported aircraft--a 27.8 percent increase over 2007's $4.59 billion. The total U.S. share of the 2008 export market was 37.7 percent in terms of shipments and 43.9 percent of the billings. However, as the recession took hold, actual aircraft shipments worldwide declined by 7.6 percent to 3,969 in 2008, compared to the 4,272 in That decline was accounted for by a fall-off in piston aircraft sales. The U.S., which is the world's largest producer of general aviation aircraft, reflected the global market trends, based on GAMA statistics. In 2008, the U.S. accounted for 3,079 shipments, a 6.5 percent decline from the 3,279 reported that year to 3,079 in That, too, was largely due to the weakening piston aircraft market, which saw a decline of 21.4 percent in 2008, as the recession continued. That year, U.S. manufacturers shipped 1,791, down from the 2,174 in Worldwide, the piston group accounted for 2,119 shipments in 2008, a 26.2 percent decline from the 2,675 shipped in Other categories, however, remained strong. Business jet shipments were up 15.6 percent in 2008, with 1,315 deliveries, versus the 1,138 in Turboprops also did well at 535, a 16.6 percent increase over 2007's 459. U.S.-built business jets and turboprops, on the other hand, followed the increased global demand for turbine-powered aircraft. For 2008, the business jet group accounted for 955 aircraft, a 17.2 percent increase over the 815 shipped in For turboprops, the U.S. shipped 333 aircraft in 2008, up 14.8 percent over the prior year's 290. High oil prices and resulting increases in jet fuel retail costs are among the chief reasons why the industry is seeing a renewed interest in turboprops. Business Jets The world business jet fleet totaled 16,097 as of March 31, 2009, an increase of 6.1 percent from the 15,174 in service by the same time in 2008, according to statistics from Utica, New York-based JETNET. At the end of 2008, the FAA put the U.S. business jet fleet at 11,400, but expects that to more than double to 25,165 by 2025, for a 4.8 percent average annual growth rate. Flight hours for U.S. business jets were estimated by the FAA to total about 4,043,000 in 2008, reaching 9,596,000 in 2025, for an average annual growth rate of 5.2 percent. According to the FAA Aerospace Forecast Fiscal Years , despite a 16 percent increase in business jet shipments in 2008, events related to the global economy, especially during the last quarter of 2008 have dampened market prospects in this sector for at least the next few years. This is because the market for business jets is largely dependent upon the growth in the economy and corporate profits, which have declined in the current environment. Brian Foley Associates, a Sparta, New Jerseybased consulting firm, is projecting that business jet deliveries in 2009 will drop by about one-third compared to 2008, with North America accounting for approximately 50 percent of total

9 shipments The company anticipates that a growth trend could emerge in this segment by mid-year 2010, although at a slower pace than what the industry has experienced in the recent past. In its 10-year proprietary forecast, Brian Foley Associates estimates negative to flat growth in each of the three (small, medium, and large) cabin segments. However, in general, the larger the cabin, the larger the compound annual growth rate. Very Light Jets A newly-emerging category within general aviation aircraft is known as the very light jet (VLJ). Sometimes referred to as micro-jets or personal jets, they are generally recognized as those designed for single-pilot operation and a certified MTOW of under 10,000 pounds. As of March 31, 2009, JETNET statistics show that 430 VLJs have been delivered. That is more than double the number shipped by the same period in 2008, when deliveries totaled 204. The Adam 700, Citation Mustang, Diamond D-JET, Eclipse EA500, Embraer Phoenom 100 and 300 models and the PiperJet are the seven VLJ types on which JETNET's research is currently based. Because of their relatively inexpensive $1-2 million pricing, it was estimated that VLJs would account for 500 new aircraft shipments per year by As recently as 2007, industry experts suggested the market for new VLJs could add 500 aircraft a year to the active fleet by However, the bankruptcy of a major VLJ builder-- Eclipse Aviation and the failure of DayJet, a large, start-up air taxi service that had placed major orders for VLJs, has throttled back the once optimistic projections. For example, according to the FAA, only 262 VLJs were delivered in 2008, instead of the 400 predicted originally. Still, the current FAA forecast assumes that about 200 VLJs will enter the active fleet in the U.S. over the next 2 years and then increase to a rate of 270 to 300 aircraft a year through That would put the total projected VLJ fleet at 4,875 by that year, when annual utilization is estimated to average 432 hours per aircraft, taking into account air taxi/shared use and private operator utilization. Newtown, Connecticut-based Forecast International, however, projects that between 375 and 400 VLJs could enter the market annually through VLJ production rates are expected to be impacted by the currently weak demand for business jets and the difficulties of some manufacturers. However, deliveries should increase as the market recovers and new models enter service. As a result, it is estimated that VLJ deliveries could reach 3,232 aircraft in the period, primarily to the owner-flown market and small businesses. More specifically, the company predicts that VLJ buyers will be dominated by the owner/operator who wants to upgrade from a piston or turboprop, as well as those who might be considering a light business jet. Forecast International also expects fractional ownership plans to account for some VLJ sales, primarily among more regional as opposed to the large national firms. Conversely, sales to the once promising air taxi market segment are likely to be sluggish, although the company predicts that significant long-term potential is there. As product lines have expanded, Forecast International sees VLJs falling into two sub-markets. The first comprises operators looking for an alternative aircraft to more traditional light business jets. Given their size and performance, the Citation Mustang, the Embraer Phenom 100, the HondaJet, and the S-33, are considered especially well suited to this role. The second sub-market will cater more to the owner-flown and air taxi services, rather than corporate flight departments and most on-demand charter firms. For this segment, the twin engine Eclipse 500 and the single-engine D-JET, Vision SF50, and PiperJet are considered promising. Turboprops While jets continue to dominate business aircraft production, the high cost of fuel is causing a number of general aviation aircraft operators to look again at turboprops. As of March 31, 2009, JETNET put the global turboprop business aircraft fleet at 12,261, up from the 11,817 from the same time in 2008, for a 3.7 percent increase. In its latest forecast, the FAA puts the U.S. share at 9,600 in 2008, rising to 12,245 in 2025, for a 1.4 percent annual growth rate. The FAA estimates that in 2008, general aviation turboprop aircraft in the U.S. flew 2,594,000 flight hours, and is projecting an increase to 3,219,000 by 2025, for an annual growth rate of 1.3 percent. 7

10 Looking at a 10-year period from , Forecast International is projecting deliveries of 4,628 turboprop general aviation aircraft, with 545 delivered by year-end exclusive of turboprop regional airliners. The company estimates that North America will account for about 50 percent of the twin-engine models, but as much as two-thirds of the single-engine aircraft. For the global market, the projection is that 65 percent will be captured by single-engine models, with the twin-engine group accounting for the remaining 35 percent. For the near term, , Forecast International predicts that turboprop deliveries will fall due to prevailing economic conditions, but expects an upturn after that as production cycles increase. As budgets will continue to be constrained, more customers are expected to consider turboprops as a viable alternative to jet aircraft, given their higher fuel efficiency, lower operating costs, and spacious cabin sizes. Forecast International also cites a trend among light turboprops to enter the utility segment of the general aviation market, which was traditionally the realm of piston-powered aircraft. Among the reasons given for this is the growing scarcity and increasing price of avgas in many markets. Piston-Engine Aircraft General aviation is virtually synonymous with single- and twin-piston engine aircraft in the public's eye. Since these airplanes are mainly owner-flown, their operation is considered an indication of the direction in which the economy is headed. That, in fact, is being substantiated by data published by the FAA in March 2009, which showed a year over year decline in both single- and multiengine fixed-wing, U.S.-registered, piston aircraft from 147,569 and 19,337 respectively in 2007 to 146,590 and 19,130 in 2008, the first full year of the current recession. The FAA is further predicting a decline in the annual growth rate of piston singles of 0.6 percent in the time frame and a 0.9 percent decline for the multi-engine models during the same period. (These figures do not include experimental or light sport aircraft, for which the FAA maintains separate data). Flight hours also showed some reduction. In 2008, single-engine piston aircraft in the U.S. flew approximately 13,530,000 hours, down from the 13,571,000 in The multi-engine group accounted for 2,591,000 hours in 2008, nearly 100,000 hours below the 2007 level of 2,686,000. The FAA estimates that between 2008 and 2010, the single-engine models will have a negative 1.4 percent annual average growth rate in flight hours, while the twins will see a decline of 2.2 percent for the same period. Of the piston-driven aircraft, the singleengine, fixed-wing fleet is expected to continue to be the most popular, increasing from 146,590 in 2008 to 148,545 by 2025, for a 0.1 percent annual growth rate. During this period, the number of multi-engine, fixed-wing piston aircraft is expected to show a one percent decline from the 2008 estimated 19,130 to 16,005. Taken together, the total fixed-wing piston fleet will have virtually zero growth by 2025, when it is expected to reach 164,550, compared with 165,720 in In terms of flight hours, the average annual growth rate for the single-engine pistons is estimated to be 0.5 percent between 2008 and 2025, although the twin pistons are projected to have a negative 1.5 percent rate for the same period. Rotorcraft The turbine-powered helicopter will continue to be the dominant player in the rotary wing world, based on the latest FAA forecast. In 2008, the turbine-powered rotorcraft fleet was 7,145, and is expected to increase to 10,870 by 2025, for a 2.5 percent annual growth rate. But pistondriven helicopters are also expected to grow during the forecast period, from 3,070 to 5,925, for a 3.9 percent annual average growth rate. Although it represents the larger of the two markets, the more immediate outlook for turbinepowered helicopters is being heavily impacted by the current global economy. According to Honeywell's Eleventh Turbine- Powered Civil Helicopter Purchase Outlook, issued in February 2009, deliveries for the period are predicted to be flat to slightly higher than they were for the time frame. This is due to a lack of available financing, a spike in the inventory of current production used models, and a weakness in new orders. For the survey period, deliveries of new turbine-driven helicopters worldwide should range between 3,500 and 4,500, of which 37 percent will be 8

11 accounted for by North America--the largest regional share of the market. Of that number, 62 percent will be for light singles, as some operators opt to trade down to less expensive models. From , purchase expectations for medium twin-engine models fell by 43 percent, 49 percent for intermediate twins, and 28 percent for aircraft in the long cabin, light single-engine category. Purchase expectations, however, rose by 29 percent for short cabin single-engine models, and 23 percent for light twins. Heavy twin-engine helicopters are projected to account for only one to five percent of the total share. Although the market is changing, corporate, emergency medical services (EMS), law enforcement and utility missions combined are still expected to account for more than 80 percent of all global new civil rotorcraft sales during the fiveyear forecast period--the same percentage cited in Honeywell's 2008 survey. In North America, law enforcement applications were the most frequently mentioned use category, accounting for 27.5 percent of all purchase planning. Corporate usage came in at 24 percent, and EMS at 21 percent. Worldwide, the corporate category represents the largest segment, at about 40 percent of projected new turbine helicopter sales for In that group, close to 70 percent of all demand in Latin America is for corporate use, followed by Asia at over 50 percent, Europe at over 40 percent and Africa/Middle East at 31 percent. In second place behind the corporate category, EMS applications will comprise about 14.7 percent of total worldwide demand, with law enforcement at 14 percent. Television news, tourism, firefighting and training continue to report projected requirements for new helicopters over the next five years, with tourism and sightseeing at 6.4 percent of global purchases, according to the Honeywell survey. Experimental Aircraft Within general aviation, experimental aircraft are typically those built or restored by aviation enthusiasts, often for use at air shows and exhibitions. Prior to 1994, the FAA general aviation aircraft survey counted only those experimental aircraft built without an FAA production certificate, but starting that year it was expanded to include those holding the agency s Experimental Airworthiness Certificate. This included amateur-built aircraft and those used for research and development, exhibition, racing and crew training, as well as market survey or proof of concept purposes. According to the most recent FAA data, experimental aircraft have accounted for an average of 9 to 10 percent of the general aviation fleet since For 2008, the FAA estimated the size of the U.S. experimental fleet at 24,100, or 10.3 percent of the 234,015 in the total U.S. general aviation fleet for that year. That number is expected to reach 34,625 by 2025, for a 2.2 percent annual growth rate. In that year, the total general aviation fleet is estimated to reach 275,230 aircraft. As a proportion of total general aviation flight hours in 2008, experimental aircraft accounted for 1,316,000, or about 4.7 percent of the 27,784,000 estimated flight hours for that year. By 2025, the FAA projects that some 2,017,000 flight hours will be attributable to experimental aircraft, or 5.3 percent of the 37,846,000 total general aviation flight 9

12 hours estimated for that year, for a 2.5 percent annual growth rate. Light Sport Aircraft Since 2005, the Light Sport Aircraft certification and pilot's license has offered what is considered to be a more affordable entree to aviation, especially for the novice pilot. Light sport aircraft can be no more than 1,320 pounds MTOW (1,420 pounds for a seaplane), have no more than two seats, and be powered by a single reciprocating engine, and flown under daylight conditions, and for recreational (non-business) purposes only. According to FAA data, 2,623 sport pilot certificates were issued as of December 31, The agency projects that by 2025 the total number of sport pilot certificates will reach approximately 20,600. The FAA also predicts a growing number of light sport aircraft and flight hours, as the anticipated popularity of this new entry level pilot certificate increases. In 2008, the number of light sport aircraft was 6,965, but that is expected to reach 15,865 by 2025, for a 5.0 percent annual growth rate. That, says the FAA, assumes the addition of 930 aircraft per year through 2013, and 300 annually through The fleet includes purpose-built light sport models, as well as aircraft converted from ultra-light trainers. Flight hours by 2025 in light sport aircraft are expected to reach 971,000, a 7.1 percent annual growth rate from the 305,000 hours in The fixed base operator (FBO) is the primary provider of services to general aviation aircraft operators. Long before there were scheduled passenger airlines, there were FBOs. The first ones were reportedly operating as early as According to Aviation Resource Group International (ARGI), a Denver-based worldwide FBO marketing and consulting firm, any business calling itself an FBO must operate under a lease with an airport-owning authority and it must dispense aviation fuel--jet A and/or Avgas. In addition, an FBO must perform at least one of four other basic services: line service, which may include tie-down and hangar services; technical services, such as airframe and engine maintenance; aircraft rentals, charters, aircraft management and/or aircraft sales; and flight instruction. At some airports, FBOs have fueling contracts with commercial passenger and cargo carriers or with government entities, such as an Air National Guard unit. At certain locations, FBOs also perform line maintenance, cabin cleaning, and baggage handling for airline customers. An ARGI survey completed in April 2009 put the number of U.S. businesses meeting the minimum criteria for an FBO at 3,138 (down from Fixed Base Operators 3,346 in ARGI's 2006 survey). The survey included those located at the more than 3,300 airports with at least one paved runway that is 3,000 feet or more in length. For those FBOs with over $5,000,000 in annual revenue, the payroll per facility ranged between $980,000 and $1,240,000, with an average of 14 employees per location (down from 18 in the 2006 survey). ARGI puts the total employment for this group of companies at 31,200 (down 6,800 personnel from 2006 survey). Fuel and maintenance are considered the top two services provided by U.S. FBOs. In fact, the 2009 survey reveals that FBOs pump approximately 98 percent of the fuel consumed by general aviation aircraft. The remaining amount is pumped by corporate flight departments that operate their own fuel farms or municipal airport authorities that are direct sellers of aviation fuels. This percentage has increased by 3 percent from the 95 percent reported during the 2006 survey due to the direct reduction in corporate self-fueling flight departments and the corresponding cessation of self fueling. Based upon its own client profiles of FBOs averaging over $5,000,000 in annual revenues, ARGI reports that Jet A fuel accounts for 85 percent of the fuel sold, with Avgas accounting for 15 10

13 percent. For those averaging under $5,000,000, the ratio of avgas and jet fuel sold is about 50/50, although at some very small FBOs, Jet A fuel sales could be as low as 15 percent. ARGI classifies FBOs as falling into one of three groups single location, regional chain or national chain. It defines a chain as an FBO company with three or more operations. To be considered a national chain in the U.S., an FBO must have facilities in at least two distinct regions of the country. A regional chain s activities are concentrated in one specific geographical area, such as the Midwest, East Coast or Southwest. Due to ongoing industry consolidation over the past decade and a half, there are now four national and six regional chains in the U.S. In 1990, there were 10 national and 12 regional chains. The consolidation of the FBO industry continues. Special Aviation Service Organizations (SASO) Special aviation service organization (SASO) is a term that was developed by Aviation Resource Group International (ARGI), in the early 1990s to effectively classify non-fbo activities that support the delivery of services to the general aviation industry. More specifically, an SASO is a non-fbo that operates under a non-fbo lease and under restrictive provisions with the airport lessor, which precludes it from performing full FBO services. Services that are specifically excluded are the sale of aviation fuel and aircraft and passenger ground handling. Examples of SASOs are companies that provide aircraft technical services; avionics repair and installation; reciprocating engine repair and overhaul; turbine engine hot section and overhaul; aircraft component and accessory overhaul; standalone flight schools; specialized vendors of pilots supplies; aircraft detailing and cleaning services; and aircraft in-flight catering services. An ARGI survey completed in April 2009 put the number of U.S. businesses meeting the minimum criteria for a SASO at 667. Since no previous census of the number of SASOs has been conducted, 2009 represents the baseline for the annual ARGI SASO census. Although the economy and the high fuel spikes of 2008 impacted fuel sales to general aviation aircraft operators, the most recent FAA forecast predicts a modest long-term growth trend for jet fuel, although it does predict negative longterm growth for avgas consumption. However, between 2008 and 2025, gains in jet fuel use are expected to offset the losses in avgas pumped, resulting in an average annual growth rate of 3.1 percent in the total amount of fuel pumped into all segments of the U.S. general aviation fleet. The FAA forecast estimates that in 2008, a total of 1,898,500,000 gallons was consumed by the entire U.S. general aviation fleet, including fixed- and rotary-wing aircraft. That number includes 348,900,000 gallons of avgas, and 1,549,700,000 jet fuel gallons. As the economy continued to weaken, avgas gallons showed a decline from the 350,900,000 pumped in 2007, Fuel although jet fuel managed a small gain above that year's 1,543,500,000. By 2025, the forecast predicts that the amount of avgas pumped that year will be 345,800,000 gallons, while jet fuel will account for 2,868,000,000. In fact, the forecast indicates that jet fuel pumped into general aviation aircraft will exceed two billion gallons for the first time in 2014, with an estimated 2,646,000,000 dispensed that year. Fuel consumption rates, of course, will vary by aircraft type, with the steepest drop--1.9 percent--coming from the multi-engine, fixed-wing piston-engine category, and the highest growth rate--6.6 percent--predicted for the popular light sport category. Business jets will account for second place with a 4.1 percent average annual growth rate, between 2008 and Continued on page 14 11

14 General Aviation Fuel Consumption (Millions of Gallons) Part One CALENDAR FIXED-WING FIXED-WING FIXED-WING FIXED-WING YEAR PISTON SINGLE-ENGINE PISTON MULTI-ENGINE TURBO PROP TURBO JET Historical , , , , E ,248.1 Forecast , , , , , , , , , , , , , , , , ,490.0 Avg. Annual Growth % -1.9% 1.0% 4.1% 12

15 General Aviation Fuel Consumption (Millions of Gallons) Part Two CALENDAR ROTOR CRAFT ROTOR CRAFT EXPERIMENTAL SPORT TOTAL AVGAS TOTAL TOTAL YEAR PISTON TURBINE OTHER CONSUMED JET FUEL FUEL Historical NA , NA , NA , NA , NA , , , , , , , , E , ,898.5 Forecast , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,213.8 Avg. Annual Growth % 2.3% 2.4% 6.6% -0.1% 3.7% 3.1% Source: FAA APO 2008 Estimates. Note: Detail may not add to total because of independent rounding. 13

16 Continued from page 11 Rotorcraft will also show a significant increase in fuel consumption, with a 3.8 percent average annual growth rate for piston-driven models, and a 2.3 percent growth rate for turbine engineequipped types. On a big picture basis, the FAA statistics indicated that in 2008, the 1,550,000,000 gallons of fuel consumed by general aviation jets was about 7.4 percent of the total of 20,889,000,000 gallons of jet fuel pumped, with the remainder-- 19,339,000,000 gallons--accounted for by U.S. domestic and international air carriers. By 2025, it is projected that the air carrier portion will account for 25,482,000,000, while the general aviation jet fuel share will be 2,868,000,000, or approximately 11.3 percent of the total jet fuel gallons used that year. With avgas all but gone from the air carrier community, general aviation will account for nearly all product consumed. In 2008, air carriers accounted for 2,000,000 of the 351,000,000 gallons sold, for just under.6 percent of the total. By 2025, the air carriers are projected to remain at 2,000,000 gallons out of a total of 348,000,000 for that year, putting their share at percent. One of the most important contributions of general aviation is providing on-demand, or as needed, transportation for freight and passengers especially to airports that have no scheduled commercial air carrier service. In the U.S., most operators using general aviation aircraft in a for-hire passenger and/or cargo service are certificated under FAR Part 135. Under FAR Part 135, on-demand charter passenger operations are limited to no more than 30 passengers and a 7,500-pound payload. According to the FAA, as of March 28, 2009, a total of 2,228 operators held active Part 135 certificates exclusively, while another 19 had authority under both Part 135 and Part 121, which applies to larger capacity and heavier aircraft. Although air tour operations and aeromedical services are also operated under FAR Part 135, most activity is carried out by companies providing charter services for business and leisure travelers and shippers of high-priority cargo. The FAA classifies these companies as air taxis. Most aircraft used for air taxi or charter services are turbine powered. The most recent FAA Part 135 list includes 11,195 aircraft, but according to industry authority Air Charter Guide of Cambridge, Massachusetts, a total of 5,110 fixedwing aircraft were used in on-demand charter as their primary mission. The fleet comprised 1,557 single- and twin-engine aircraft, 905 turboprops, 410 turboprop airliners and 2,239 jets--including 22 very lights jets, and six airliner VIP-configured jets. Along with the fixed-wing fleet, 630 helicopters were flown in charter services other than aeromedical missions or air tours. On-Demand Charter A large number of aircraft are deployed in charter service on a part-time basis when not flying their primary mission, such as executive transport. Air Charter Guide reports that approximately 6,000 aircraft in the U.S. are currently flying charter at least some of the time. Of that, about 85 percent 5,100 are made available for charter under a management contract between the owner and an aircraft management firm when the owner is not using the aircraft. Of the aircraft under management contracts, 40 percent are in charter service under charter management contracts in which the aircraft s owner instead of the management company furnishes the pilots. The remaining 15 percent of the 6,000 aircraft fleet are chartered to the end-user directly by the owner. About 75 percent of the charter trips flown are for business-related travel, with 15 percent for leisure trips and 10 percent for small package and aeromedical transport. Due to the worldwide economic downturn, on-demand charter slowed down considerably in 2008 and during the beginning of However, according to Air Charter Guide, as of the second quarter of 2009, charter operators began to report more charter travel and a more cost-sensitive aircraft type selection. Regional Air Cargo Charter The growth of the large, integrated global freight carriers, such as FedEx, UPS and DHL, have brought about a segment of the on- demand charter market in which the aircraft are used primarily as 14

17 cargo haulers, feeding hubs and other large transshipment points for these shipping companies. According to the Regional Air Cargo Carriers Association (RACCA), there are currently 50 companies in the U.S. flying over 1,050 small aircraft as dedicated freighters, mostly in short-haul regional cargo service and mainly for the large air freight carriers, as well as the U.S. Postal Service and Federal Reserve. Fleet sizes range from as few as 3 aircraft to as many as 200. Most of those companies operate under FAR Part 135, which restricts payload to 7,500 pounds unless an exemption is granted to an individual operator. At this time, four of those carriers hold FAR Part 121 authority, allowing for heavier payloads. Over the past few years, there has been a major trend among regional air cargo operators to replace older, twin-piston aircraft, such as the Cessna 402 and Piper Navajo, with more recently built, but mostly out of production, former twinturbine passenger airliners. According to data supplied by the RACCA, there are currently 75 Beech 99s, 45 Beech 1900Cs, 25 EMB 110 Bandeirantes and 75 Fairchild Metroliners now in dedicated regional cargo service. In addition, FedEx verified that it owns 252 single-engine turboprop Cessna Caravans and a combined 39 ATR 42/72 twin turboprops, all of which are leased to seven independent operators that fly those airplanes exclusively on behalf of the big freight company. A further evolution in the cargo fleet is taking place due to the dwindling supply of quality, preowned Bandeirantes and Beech 99 and 1900Cs. As a result, more regional cargo operators are acquiring such larger, former passenger turboprops as the Saab 340, the Embraer EMB 120 Brasilia and the ATR 42/72 family. According to the RACCA, these three families now represent the major growth sector in regional air cargo equipment, with 40 ATR 42/72s, 7 Saab 340s, and 12 Brasilias in dedicated U.S. freight service. As a result of the depressed economy, RACCA reports that the regional air cargo business in the U.S. experienced a flat growth rate in revenue and flight hours. The impact of the economy on retail sales has resulted in fewer shipments generated by Internet-based purchasing. The industry has also been hurt by the growth of electronic bank check clearance. That, however, has been somewhat offset by the ongoing trend toward lean inventories with just-in-time deliveries and storage facility consolidation. Aeromedical Services According to the Association of Air Medical Services (AAMS), approximately 250 organizations in the U.S. are currently engaged in the transport of seriously ill or injured people to hospitals for emergency care. When appropriately used, air medical transport saves lives by bringing more medical capabilities to the patient than are normally provided by ground emergency medical services, along with faster transit times to the appropriate specialty care location. Air medical service providers usually operate from an average of 1 to 2 bases, and operate a fleet of 3 to 5 aircraft, although there are providers with as few as 1 to as many as 30 aircraft. The helicopter is the dominant fleet type, with approximately 750 aircraft in dedicated air medical service, transporting over 400,000 patients per year. The AAMS estimates that, separately, on-demand charter operators fly an additional 100, ,000 patients per year on fixed-wing aircraft. The helicopters deployed in air medical transportation are a combination of newly-built and 15

18 those which have been purchased on the used market and reconfigured for air ambulance service. Employment by these organizations ranges from fewer than 10 to as many as 100 individuals. Roughly 60% of air medical flights are interfacility, that is, between a referring and a receiving hospital. Some 30% of the flights respond to the scene of an accident or injury, and the remaining 10% are classified as other, such as organ procurement. Fractional Ownership Companies For those who do not need the use of an airplane full time, fractional plans offer all of the benefits of private aviation, including on-demand transportation, consistently high service levels and an excellent safety record. The typical candidates for fractional plan participation are businesses that do not have their own flight departments, private individuals, and corporate flight departments that need additional lift but cannot justify the cost of acquiring another aircraft. Historically, fractional fleets are predominately light- to medium-size jets. Continued on page 18 Bombardier Aerospace (Flexjet) Make/Model #Aircraft Average #Share- #Aircraft Age holders In Use CHALLENGER CHALLENGER CHALLENGER LEARJET LEARJET 40XR LEARJET LEARJET 45XR LEARJET LEARJET 60XR Total Total Unique Shareholders 638 Source: JETNET CitationShares Make/Model #Aircraft Average #Share- #Aircraft Age holders In Use 16 CITATION BRAVO CITATION CJ CITATION CJ CITATION EXCEL CITATION SOVEREIGN CITATION XLS Total Total Unique Shareholders 529 Source: JETNET

19 Flight Options, LLC Make/Model #Aircraft Average #Share- #Aircraft Age holders In Use BEECHJET 400A CITATION X EMBRAER LEGACY HAWKER 400XP HAWKER 800XP HAWKER 800XPI HAWKER 850XP Total Total Unique Shareholders 653 Source: JETNET Netjets (Executive Jet Sales Inc) Make/Model #Aircraft Average #Share- #Aircraft Age holders In Use BOEING BBJ CITATION ENCORE CITATION ENCORE CITATION EXCEL CITATION SOVEREIGN CITATION ULTRA CITATION X CITATION XLS FALCON FALCON 2000EX EASy GULFSTREAM G GULFSTREAM G GULFSTREAM G GUL7FSTREAM G GULFSTREAM G-IVSP GULFSTREAM G-V HAWKER 400XP HAWKER 800XP HAWKER 800XPI HAWKER 900XP KING AIR C90B Total Total Unique Shareholders 2357 Source: JETNET 17

20 Continued from page 16 In 2008, 109 or 8.3 percent of the 1,315 total new business jet deliveries that year went to the fractional ownership plans. Of those 109, 72 percent went to the combined Netjets and Netjets Europe, the largest of the fractional plans, according to an analysis by Lewisville, Texas-headquartered Chase & Associates, based on JETNET and GAMA data. As the term fractional implies, participants are brought together to buy into a specific airplane, with each holding a fractional share entitling them to usage of that aircraft on a predetermined hourly basis, normally over a 12-month period. Usually, the fractional unit available for purchase is onehalf, one-quarter, one-eighth, or one-sixteenth. The higher the fraction or portion of the aircraft purchased, the greater the number of hours that the shareholder can fly over the term of the contract, which is normally five years. At the conclusion of the period, the owner can either extend his contract or sell his shares back to the fractional plan provider. Fractional plan participants can hold shares in more than one airplane at any given time. Those whose holdings are limited to a single aircraft are referred to as unique shareholders. The day-to-day operational management of an aircraft involved in a fractional plan is carried out by the plan s operator, who is responsible for the acquisition and management of the aircraft on behalf of the shareholders. This operator also provides flight crews and is responsible for maintenance and scheduling. All of this is paid for by the owners through management fees and other ancillary charges, such as hourly usage fees, which are separate from the cost of the shares. Since the cost of the fractional shares is directly tied to the procurement cost of the aircraft, shares in a mid-size jet will cost more than those for a light jet or twin turboprop. The concept of aircraft fractional ownership was introduced in 1986 by NetJets when just three shares in a single aircraft were sold. According to JETNET, as of March 31, 2009, a total of 5,049 shares in 931 aircraft had been sold in fractional plans worldwide. JETNET recognizes four major fractional companies NetJets, Bombardier Aerospace Flexjet, Flight Options LLC, and CitationShares Sales, Inc. along with 21 minor firms. As of March 31, 2009, NetJets, including its NetJets Europe and NetJets Middle East operations, was the largest, with 474 aircraft and 2,357 shareholders. With 74 aircraft and 529 shareholders, CitationShares Sales was the smallest of the majors. Together, the four major players encompassed 738 aircraft and 4,177 shareholders, while the 21 minor providers had a total of 193 aircraft and 872 shareholders. Long-Range Impact of Fractional Ownership Plans The currently depressed global economy has not spared the once booming fractional ownership plans. According to information provided by Honeywell, the fractional providers took delivery of 115 new jets in 2008, a four percent decrease from the number added in Also in 2008, net sales of fractional shares declined by 13 percent compared to 2007, which was considered a strong growth year. Honeywell adds that as of the end of the first quarter of 2009, just nine new jets came into the fractional fleets, versus 28 added in the same period of Also, net share additions are off by approximately 27 percent. Given the impact of the economy, Honeywell predicts that 2009 will be a slow growth year for fractional expansion, with new aircraft additions running at less than 50 percent of more recent rates. The result of this is that the portion of the backlog of business jet orders will most likely be less than the percent share the fractionals commanded over a five-year period prior to Nonetheless, Honeywell maintains that while the recession has delayed and reduced the nearterm rate of fractional fleet expansion, the slowdown has been based more on rescheduling of deliveries than actual cancellations. In fact, the OEM is optimistic that the rate of new aircraft additions to the fractional plans will reach the more typical level of aircraft annually as the economy improves. Part of the increased deliveries will be driven by replacements of older aircraft that will be retired from the fleet, as well as the needs of an expanding number of shareholders. Along with this, the expansion of jet card programs that permit prepayment of flight hour blocks will cause more aircraft to be added since fractional operators often provide lift for jet card customers. 18