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ARSA Survey Finds Repair Stations Hit Hard by Economic Downturn in ‘09, Guardedly Optimistic About ’10

ALEXANDRIA, VA, November 16, 2009 – The downturn in the global economy has taken a toll on repair stations, a recent Aeronautical Repair Station Association (ARSA) member survey has determined. The majority of ARSA members have seen revenues fall over the last year and have cut jobs as a result. The outlook for next year is mixed. Slightly fewer than half of ARSA members expect to see revenues increase and only six percent are planning more layoffs. But only 21 percent expect to add positions next year, suggesting that recovery in the industry is likely to be sluggish.

The online survey was conducted on Nov. 12 and 13. Based upon 144 responses from ARSA repair station and corporate members, ARSA estimates the margin of error at just over six percent, making it the most reliable survey of maintenance industry economic conditions the association has ever conducted.

Ninety-four percent of the survey respondents were headquartered in the United States. While respondents represented a wide range of business sizes, consistent with the makeup of the repair station industry, the vast majority were small companies. Seventy-four percent of respondents had less than $10.5 million in revenues in 2008 and 72 percent had fewer than 50 employees. Based on an extremely conservative estimate, the survey respondents collectively had more than $1 billion in annual revenues in 2008 and more than 15,000 employees. The overwhelming majority (92 percent) were non-union companies.

By far, the most important markets for the respondents were commercial air carrier and business aircraft. Reflecting the international nature of the repair station industry, 68 percent of the U.S.-based companies reported that in addition to their FAA part 145 certificate they had a European Aviation Safety Agency (EASA) approval allowing them to work on European-registered aircraft and products installed thereon.

The survey’s key findings were as follows:

• Business conditions have deteriorated for ARSA members over the past year. Sixty-two percent of respondents reported that their 2009 revenues fell below 2008 levels and only 21 percent reported increased revenues this year.

• The economic downturn has taken a toll on industry employment. More than half of respondents (53 percent) reported laying off workers in the past year because of poor business conditions. On average, companies reporting layoffs had eliminated nine percent of their workforces.

• ARSA members are guardedly optimistic about the future. Forty-six percent of survey respondents believe their companies’ revenues will increase in 2010 and only 14 percent are anticipating a decrease.

• The industry employment outlook is relatively stable. Only six percent of respondents planned to eliminate positions in the coming year and 63 percent said they expected to hold their workforce at current levels.

• Despite poor business conditions, ARSA members are continuing to invest in their companies. Fifty-one percent of respondents have made substantial capital investments in 2009 and 47 percent plan to do so next year. Capital investment in the coming year might be improved by extension of the economic stimulus bill’s depreciation bonus and increased Sec. 179 expensing levels.

• Despite poor industry economic conditions, ARSA members continued to struggle to find qualified technical workers. Sixty-five percent of respondents reported that they had difficulty finding skilled workers for technical positions in the past two years. This reinforces the need to reauthorize and expand the Workforce Investment Act to strengthen America’s base of skilled technical workers.

• Inadequate FAA resources have taken a toll on the industry’s profitability and efficiency. One third of respondents (33 percent) said that delays resulting from inadequate FAA staffing (e.g., delays in processing an application for a new certificate, changes in operations specifications or capabilities, obtaining data approval) had caused them to lose a customer or otherwise forego a business opportunity in the past two years. This reinforces the need to increase the FAA’s oversight resources, as ARSA has urged Congress to do as part of the FAA reauthorization and annual appropriations processes.

• Business from foreign customers is critical to the health of the U.S. repair station industry. The U.S. aviation maintenance industry is clearly concerned about the impact of provisions in the House-passed FAA reauthorization bill targeting foreign repair stations and the likely consequent collapse of the U.S.-European Union Bilateral Aviation Safety Agreement (BASA). Close to two-thirds (65 percent) said that the collapse of the BASA would have a “major” or “devastating” impact on their companies, with 20 percent saying that it would threaten their ability to say in business.

• Weak airline industry, collapse of BASA cited as biggest threats to aviation maintenance industry. In an open-ended question, survey takers were asked to identify the single biggest threat to their company’s continued survival. The continued poor economic health of the U.S. airline industry was cited most frequently (16 mentions) with the collapse of the U.S.-EU BASA a close second (15 mentions). Other frequently cited threats: the weak overall economy (12 mentions), failure by manufacturers to comply with FAA rules requiring sharing of maintenance manuals (i.e., Instructions for Continued Airworthiness) (11 mentions), over-regulation in general (11 mentions), the decline in corporate aviation resulting from political/media pressure and the poor economy (nine mentions), and poor/inconsistent FAA oversight of the industry (eight mentions).

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About ARSA
ARSA has a distinguished, 25 year record of representing certificated aviation maintenance and alteration facilities. ARSA’s 700 members, a vast number of which are small businesses, are an important part of the $9 billion per year domestic air transportation support sector of the U.S. economy. According to the U.S. Census Bureau, this economic sector is responsible for more than 115,000 jobs and a total annual employer payroll of $3 billion.



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