I've gotten a couple of phone calls over the past few days from friends in the industry picking my brain over what the credit crunch means for general aviation.
The bottom line is, it's a big deal, though I admit up front that I'm as in the dark as the economists seem to be as to where this crisis will go next and how big an effect it will have on the global economy.
Unlike some other economic problems, tight credit ripples throughout the industry insidiously, and there's no segment that is left untouched by it.
For some airplane manufacturers, the lack of credit is potentially a game ending crisis. We saw that with Grob (with its typographically and aerodynamically unusual SPn light jet) and Adam (with its simply unusual A700 VLJ). These two companies needed funding to keep their development plans moving forward and neither could get it. While the terms are different, due to their locations in the world, the result is the same. Insolvency for Grob and bankruptcy for Adam both meant throwing their current creditors to the wolves and starting over. The current guardians of both companies are scrambling to keep the respective programs alive, but that's a tall order given the credit crunch, as well. In a tough market, who wants to invest in a program that's already established a track record of not making it?
And make no mistake about it: Those two firms are not alone in their struggles. While large, established companies with a record of building and delivering lots of jets will surely survive even a two or three year storm, that's almost certainly not the case for some start up jet makers, who are relying almost completely on venture capital to get their airplanes in the air and into production.
And to make matters worse, because potential customers won't be able to get credit to buy their small jets, the number of orders shrinks, which makes the enterprise look even less appealing to potential investors, at least to those who are even considering such relatively risky options at this point.
Our hope is that the economic mess we find ourselves in somehow gets straightened out, though at this point the outcome is, it's safe to say, completely unknown. Will Congress's attempts at rescuing Wall Street from the mess it made for itself work? I think that's the hope on Wall Street, if not Main Street, but the bottom line is, our industry, along with everybody else's, is in for some rough air before we break into the clear.
It will be interesting to see how the issue is addressed at the NBAA Convention in a few days. In my most non-partisan way, I'm hoping for some serious straight talk or some real hope this presidential race season from the bizjet leaders, though I'm not sure how much of either I'm likely to come home with.
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