The business and general aviation community has already begun to feel the ripple effects from the U.S. government shutdown, with a range of critical services coming to a standstill – from ’s registration branch to an accident investigation by the .
Not only have more than a dozen new aircraft transactions been delayed, but an investigation of one major business aviation accident has been halted.
“It’s a problem,” says NBAA President and CEO Ed Bolen, who met with FAA Administrator Michael Huerta on Oct. 3 to express the industry’s concerns. “We are one of the most heavily regulated industries. To produce aircraft parts, buy a plane or sell a plane, all of that requires government involvement.”
Industry groups also expressed their concerns Oct. 3 to a general aviation roundtable that was hosted by the Small Business Committee, which is chaired by General Aviation Caucus co-Chair Sam Graves (R-Mo.). Bolen says he stressed to the committee, “The effects of the shutdown are really magnified for us. Business aviation is predominantly a U.S. industry and it is predominantly a small business industry.” He adds that the businesses are facing numerous challenges. “Those challenges during a shutdown are really intense. In some cases we can’t even move an airplane.”
The government shutdown, which began Oct. 1 after a congressional impasse led to the lapsing of government funding, affects all activities except “essential” services – those deemed necessary for life-threatening/life-saving issues, Bolen notes.
The U.S. Civil Aviation Registry in Oklahoma City was informed on Sept. 27 that it would shut down, and it notified industry on Sept. 30. Industry leaders call the action unprecedented – the registry remained open through the last shutdowns in 1995 and 1996.
This is not only affecting new deliveries from a registration standpoint, but also hampering title search and other activities necessary to obtain financing for aircraft sales. According to the General Aviation Manufacturers Association, at least one dozen aircraft deliveries have been delayed in the past two days, with as many as 123 more scheduled over the next couple of weeks.
The value of these aircraft total $1.38 billion, says Jens Hennig, vice president of operations for GAMA. These numbers are particularly skewed since these manufacturers typically have a fourth-quarter push of deliveries. Roughly 35% of business and general aviation deliveries occur in the fourth quarter.
Right now these transactions are on hold, but the fear is that loans will go into default if the title searches and other activities do not resume in the near term, adds Mike Nichols, NBAA’s vice president, operational excellence and professional development for the National Business Aviation Association.
“This is bubbling to a head,” says Piper Aircraft Director of Marketing Jackie Carlon. The manufacturer, like a number of others, pushed out a number of planes last week as the third quarter closed. But it is already affecting a handful of deliveries planned this week, she says. Not only does it effect Piper, but its dealers and customers who need the aircraft for their businesses. Piper delivered an aircraft on Oct. 2 financed by the dealer, but now the dealer is concerned it will not be able to secure the financing because the banks can’t process the liens with the government shutdown. Piper also needs special permission from FAA to deliver new aircraft internationally, and those certificates are not getting processed.
Beechcraft says both it production and delivery of business and general aviation and trainer aircraft are affected. Not only can’t the company’s customers’ obtain aircraft registrations, but required government inspections cannot occur on T-6 trainers due to furloughs of Defense Contract Management Agency (DCMA) inspectors. Beechcraft says it “is closely monitoring the situation to determine what actions may be necessary.”
Used aircraft sales can still take place – assuming the financing is available – as long as the deliveries are domestic and don’t require a permanent registration, says Rob Hackman, vice president of regulatory affairs for the Aircraft Owners and Pilots Association. Temporary registrations are available. The same holds true for airmen certificates and medical certificates, unless a special issuance is required. Then Oklahoma City must get involved.
Hennig notes that Oklahoma City already sustained a 12% cut in employees in March from sequestration, so the backlog, once it reopens, may take some time to sort through. “The longer this draws out, the more the industry is going to see the effects,” adds Hackman.
Gulfstream has experienced little impact on its operations so far, the Savannah, Ga.-manufacturer says, but adds, “The federal government shutdown and furlough of nonessential government employees are a serious concern for Gulfstream.”
Hennig adds that it comes as the industry is still stabilizing from the economic downturn. “The impact is detrimental on an industry that is at the bottom of a recovery and trying to work its way out,” he says. If this continues, cash shortages will become a factor for the original equipment manufacturers. “This must be resolved immediately.”
Piper’s Carlon agrees, saying that if not resolved, this will become a “massive issue” for the industry.
Outside of FAA, the shutdown has essentially closed the Export-Import Bank, which has become an important source of financing for parts of business and general aviation, particularly with agricultural aircraft and helicopters. These transactions have stopped, Hennig says.
From a safety standpoint, Hennig says the industry is also extremely concerned about the National Transportation Safety Board’s furloughs. NTSB’s inspection team has been trimmed from 135 down to three individuals, meaning unless an accident is a large commercial event, the safety board will not send a team. In fact, the safety board pulled back a team deployed over the weekend to investigate the crash of a525A CJ2+ business jet on Sept. 28 at Santa Monica Airport in California that killed all four aboard.
Business aviation leaders believe that the recent events underscore the importance of taking action to improve government processes, particularly at FAA. Noting a proposal to further streamline certification and prioritize NextGen, Bolen says, “There are a lot of ideas out there. We all need to be working together.”
“The lifeblood of general aviation manufacturers is their ability to bring new safety-enhancing products to market. The government shutdown will interrupt the flow of innovation,” says GAMA President and CEO Pete Bunce. “While there is a compelling need to implement a more streamlined certification process, an indiscriminate government shutdown – which hurts the livelihood of hardworking men and women – is not the way to do it.”