In the 19th edition of its annual Business Aviation Outlook issued today, Honeywell forecasts delivery of approximately 11,000 new business jets from 2010 through 2020, generating estimated industry sales in excess of $225 billion. This represents approximately a 10% increase in total expected industry sales value versus the prior 10 year horizon forecasted in Honeywell’s Business Aviation Outlook in 2009.
For 2010, Honeywell Aerospace estimates deliveries of 675-700 new business jets, down 16-17% from 849 in 2009 mainly due to continued global economic weakness as well as overarching concerns about government debt, austerity programs, export growth, financing costs, and general availability, Honeywell officials said. Expected deliveries in 2011 will also fall below 700. Five-year buyer interest has softened from 2009, and new purchase plans are slightly below 2007-2008 levels observed in the 2007-2008 industry growth period. However, based on survey responses and factoring in economic growth forecasts, the industry should begin another period of expansion in 2012.
“This year, operators outside North America have become more cautious about the strength and pace of the recovery. While they are still looking beyond the current economic climate and anticipating a return to improved business conditions, they have tempered near-term expectations and buying decisions, as reflected in the current delivery forecast,” said Rob Wilson, President, Business and General Aviation, Honeywell Aerospace. “Despite the slow pace of economic recovery, North American operators responding to the Honeywell survey indicated their overall new jet purchase plans for the five-year horizon were largely unchanged from a year ago.
“These more cautious international purchase plans have resulted in overall five-year demand for new jets resembling levels similar to those we saw in the 2007-2008 time frame, but still above those seen in the post 9/11 recovery cycle.
“Despite a torpid recovery, there have been relatively few program cancellations and delays,” continued Wilson, “so the pipeline of new high-value models supporting long-term growth remains strong. Our survey indicates that international demand will still remain significant and contribute to longer-term growth.
“The retail value of jet shipments has not declined to the same extent, registering mid-to-high single digit erosion this year, due to the relative strength of large cabin aircraft. The industry should begin another period of expansion by 2012,” Wilson said.
North American purchase expectations remained largely unchanged, rising by about one point, but expectations in other world regions softened to varying degrees. Following last year’s unprecedentedly strong international results, this is not wholly unexpected.
International demand now accounts for 40-45% of the new aircraft purchase plans projected over the next five years after just exceeding 50% in the 2009 survey. Honeywell forecasts that international deliveries will continue to reflect this global shift in share, which is well above the current international business jet fleet share.
Aggregating all regions, five-year purchase expectations are now at a 30% level. Purchase expectations trended slightly up in North America, but retreated in other regions, most noticeably in Europe and in the Middle East. Latin American and Asian results softened to a lesser extent.
“The level of caution varies somewhat by region,” added Wilson. “We noted last year that the timing of planned purchases in the five-year window was heavily shifted in most regions to the post-2010 timeframe. That still remains the case, with roughly 90% of planned purchases timed for 2011 or after. Acting on these purchase plans in 2011 and 2012 is critical to giving the recovery momentum, as current backlogs will not sustain delivery levels indefinitely. If this occurs, we will start back on the path toward recovery and expansion in the industry.”
Honeywell’s 2010 survey still indicates a potential demand for more than 5,000 aircraft globally during the 2011-2015 period, excluding demand from fractional ownership or branded charter start-up businesses and piston aircraft owner trade-ups into jet aircraft. As reported last year, a sharp recovery in deliveries remains less probable, since this potential demand has to be translated to orders and, in turn, to increases in production, which will take some time to implement if purchase intentions remain near current levels.
The survey also showed a modest but steady shift to large cabin models in overall buying plans. This result aligns with the relatively strong performance of large cabin model deliveries thus far this year.
North American survey respondents said they expect to purchase aircraft equal to about 26% of their existing fleets for replacement or expansion during the next five years.
“North American purchase expectations edged up slightly,” Wilson said. “Despite the slow pace of recent economic growth in the U.S. and the ongoing concerns over job growth and credit restrictions, the survey indicates that purchases over the next five-year period are planned at levels similar to those reported in our 2009 survey, reflecting the value and productivity these aircraft deliver.
“The timing of new aircraft purchases in the five-year window in this year’s survey is still heavily weighted to 2011 and beyond,” Wilson said. “Overall buying plans in the region improved slightly, with replacement plans supporting the increase. Plans for fleet expansion were unchanged.”
Honeywell’s baseline forecast is based on 2.3 to 2.6% U.S. Gross Domestic Product growth this year, and positive growth on the order of just over 2% in 2011 and near 3% in 2012. Volatility in economic forecasts over the past few years are giving way to more consistent estimates, with recent forecasts from several sources settling in this range.
Chief reasons to replace current aircraft remain relatively consistent with prior surveys; with age, range improvement, cabin size are all listed as important criteria in every region. In particular, range demands increased in importance in this year’s survey. A desire to replace current models and gain the benefit for a warranty holiday also gained prominence this year, and new technologies in avionics and engines are also still mentioned as reasons for aircraft replacement.
The used-jet environment has shown modest improvement but remains challenging in the near-term. Over the last year, inventories of used jets for sale as a percent of the active fleet have declined by about three points off the peak levels seen in early 2009 and prices are still significantly lower than 2008 averages.
The 2010 survey recorded a modest improvement in worldwide planned used-jet purchases over the next five years, which may help maintain momentum in used inventory improvements. Used-jet purchase plans rose in North America, Asia, Africa and Middle East, but continued to decline in Europe and Latin America.
The 2010 survey recorded clear intentions regarding usage rates of business jets in the near future. All regions posted a shift in intention toward increased usage rather than decreased utilization in the near-term. These results are in-line with operational gains this year widely reported on in the U.S. (based on FAA jet cycle counts) and in Europe using similar information provided by Eurocontrol. Survey results support projections of continued recovery in operational levels into 2011.
Flight activity recovery rates are highest in percentage terms in Very Light and Ultra Long Range classes, both of which enjoy more rapidly expanding fleets in addition to recovering utilization rates. International jet flights are also recovering more rapidly than domestic missions in both the U.S. and Europe. Most aircraft segments are posting gains in the 10 to 20% range over 2009 levels of activity in the U.S. European rates of recovery are lower but most classes of aircraft are showing year-to-date gains in the 1 to 8% range. The implications of these used aircraft and jet utilization trends are significant for service providers and dealers. Economic and operating cost concerns are clearly affecting the desire to own and operate older jets as extensively as in the past. The weakest recovery rates appear to be more prevalent in the mid-cabin classes or fleets with large numbers of mature model jets.
Based on new jet models mentioned by survey respondents, the 2010 Business Aviation Outlook projects a slow but noticeable shift in demand profile across business jet segments over the next five years.
Medium to large aircraft, combined, account for almost 32% of the projected demand through 2015. Light and light-medium aircraft make up about 22% of projected five-year demand. The next largest groupings are in long-range and ultra-long-range aircraft at 21%. Sustained interest in the long and ultra-long-range segment has been present for several years and reflects increased need for aircraft capable of trans-Pacific flights, as well as the growth in demand in other regions requiring more long-range operations as trade and economic growth is still anticipated. These longer range models contribute nearly 50% of the dollar value of deliveries over the same period. The balance of demand is accounted for by very light aircraft, which account for roughly a quarter of the unit deliveries, but only 5% == of the retail value of shipments.
North America is expected to account for about 58% of business jet deliveries over the next five years, up in the short-term due to the more cautious attitudes which have crept into the levels of purchase expectations in other areas.
Honeywell has reported on the trend toward increasing international share of business jet demand for several years, and the survey is still tracking with observed shifts in orders and deliveries very closely. Asian demand through 2015, based on the survey, slipped slightly to around 6% of the total on lower purchase plans aimed at fleet replacement. European demand share returned to a more traditional 195. Latin America share improved roughly two points to 13%. The Middle East/Africa region also moved back in-line with survey findings prior to 2009’s record results. While these percentages shift somewhat each year, the overall demand pool remains fairly large so individual regions are still absorbing significant numbers of new aircraft into their fleets, even if percentage share slips a few points.
Demand Trends of Other Aircraft Segments
Personal Jets: The 2010 Business Aviation Outlook provides an updated look at the emerging personal jet segment. This portion of industry demand has been centered on the emergence of very light aircraft priced below $2.5 million and not normally covered by the Business Aviation Outlook.
The current outlook continues to reflect significantly lower deliveries for this class of jet and is heavily influenced by close monitoring of ongoing OEM developments. Current potential is limited by supply as much as demand due to the delays and disruption of several high profile projects.
With this in mind, deliveries over the next 10-year period will likely be constrained to somewhere between 500 and 1,000 very-light personal jets. When combined with new generation low-cost aircraft carried in the very-light segment of the Business Aviation Outlook, the total deliveries range from 2,600 to 3,100 aircraft from 2010 to 2020, well below the range predicted earlier by Honeywell survey research. Should plans to restart programs currently suspended or cancelled come to fruition, there could be a modest improvement in the outlook once global economic growth is on firmer footing.
Business Liners: The current Business Aviation Outlook does not explicitly include aircraft in the business liner class (typically well over 100,000 pounds takeoff weight and based on transport airframes). However, purchase expectations are recorded for these models in the survey. Forecast deliveries in this class will range around 200 to 220 aircraft through 2020 and should average roughly 20 aircraft per year in the forecast period. Aircraft represented in this segment include the Boeing BBJ series, the Airbus Elite A318 and Airbus Corporate Jetliner as well as the Lineage 1000 from Embraer, plus corporate versions of twin aisle aircraft and potential corporate versions of new regional jets. This segment comprises an additional $17 billion of business aircraft sales.
For more information: Honeywell.com