Forecasts 2009 - Business Aviation: From boom to gloom

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Half a decade of dramatic global growth, bulging orderbooks and infectious optimism in business aviation is coming to an end. The combination of the global credit crunch, declining corporate profits, the squeeze on finance and a strengthening dollar are sending business aircraft buyers running for the hills.

US engine and avionics manufacturer Honeywell and aerospace analyst Forecast International support this gloomy outlook in their latest market forecasts, with both companies expecting a peak in business aircraft deliveries this year and a downturn in 2010.

Honeywell says that with a record 1,200 new business jets delivered, 2008 marked the fifth consecutive year of industry expansion since the last slowdown in 2003, but deliveries "are likely to peak in 2009 or 2010". Connecticut-based analyst Forecast International says this will be followed by a three-year decline in annual production, with growth not expected to resume until 2013.

Swiss investment banker UBS Investment Research also paints a dismal picture of the corporate aviation market in the next 12 months. In its latest business aviation market report, UBS analyst David Strauss says the market has "few serious buyers, too much supply [used and new delivery slots]" and that prices are plummeting.

UBS says the lack of financing is also endangering aircraft manufacturers' backlogs. "While our survey has indicated slowing end-market demand for some time, financing looked to be there to deliver the backlog. Now, business jet financing looks to have dried up considerably. The surge we have seen in delivery slots available for sale is at least partially attributable to this and indicates that backlogs are at risk." Add to this an increase in inventory of pre-owned aircraft and decline in flight activity in the coming months, he says, and "we think there will be a significant slowing in new aircraft demand".

embraer phenom 300 
 © Embraer

The industry has already begun to turn up its collar against the economic chill.

Embraer has lowered its delivery forecasts for this year to reflect only orders from clients who had clearly indicated their ability to take delivery. The Brazilian airframer's 2009 delivery prediction for its business jets is now 145 aircraft, down from the previous forecast of 195-200 aircraft. This includes 110 Phenom 100 and 300 very light and light jets, down from the 150 it predicted last year.

In Wichita, Cessna and Hawker Beechcraft have clipped their workforces and revised delivery schedules and avionics manufacturer Rockwell Collins is to lay off staff.

Cessna chief executive Jack Pelton warned employees late last year that "changes to our 2009 production schedules, as well as reduced aircraft utilisation, will result in a need to reduce our current workforce level". Cessna plans to deliver in 2009 slightly more than the 475 Citation jets handed over last year, but fewer than the 535 business jets originally planned for delivery over the coming 12 months. But the airframer is increasing production of the Caravan by more than 10% as the price of fuel continues to boost sales of single-engined turboprops worldwide.

Hawker Beechcraft's outgoing chairman Jim Schuster told employees last year that the company will lay off 5% of its workforce - about 500 people - as a result of "very serious challenges facing our company due to the unprecedented worldwide economic decline".

The airframer - which delivered its long-awaited Hawker 4000 super-midsize business jet last year - was badly hit in August by the month-long strike of assembly workers, which resulted in 20 fewer deliveries across its aircraft line than in the previous year. Although Hawker Beechcraft had a $7.9 billion backlog at the end of 2008's third quarter, production will drop in 2009, the company says. "The change in aircraft production reflects anticipation of reduced demand for new aircraft, spares and maintenance services," it says.

EXHIBITIONS CANCELLED

Economic slowdown is also affecting the normally robust exhibitions market - a beneficiary of business aviation's golden half century - leading to cancellation or downsizing of events due to poor take-up.

The National Business Aviation Association has cancelled its Asian business aviation show ABACE, which was to have been held in Hong Kong next month, and has shrunk its inaugural Light Business Airplane show in March from three to two days. Registration fees have been halved and booth sizes restricted to keep the conference "manageable and affordable", says NBAA. It is hoped the deepening economic crisis will not hit attendance and exhibition numbers at leading industry showcases, including the EBACE European Business Aviation Association convention in Geneva in May and the US NBAA event in Orlando in October.

Although 2009 holds much uncertainty for the business aviation industry, it is also likely to see a number of key milestones for airframers and start-ups. The coming weeks will reveal the fates of bankrupt very light jet manufacturer Eclipse Aviation and German start-up Grob Aerospace - developer of the SPn light business jet.

eclipse 500 
 © Eclipse Aviation

The resurgent seaplane market could be boosted in March when Germany's Dornier Seaplane is expected to decide whether to proceed with full-scale development of its 12-seat Seastar amphibian. The company began taking orders for the aircraft in October last year - 17 years after the original programme was halted due to a lack of funding - when it declared an orderbook of 25 or more would secure its relaunch.

Austria's Diamond Aircraft is planning to be the first to market with the first of a new wave of personal jets when its four-seat D-Jet personal jet finally enters service in 2009. Certification of the Williams FJ33-5A-powered single-engined aircraft is planned for the second quarter.

Cessna will follow later in the year with certification of its light business jet, the CJ4. Embraer's Lineage 1000 is earmarked for service entry this quarter while the smaller Phenom 300 light jet is due for certification and service entry in the third and fourth quarter respectively. The Phenom 300s could form a pivotal role in the operations of start-up air taxi operator JetBird. The Dublin-based company is to launch in April what could become the largest low-cost, pan-European air taxi operation with up to 100 Phenom 100/300s business jets.

While the overall mood of the business aviation industry is subdued, innovative airframers continue to work behind the scenes, bringing new clean-sheet designs to market. Last year saw a stampede of new programme launches - the midsize Bombardier Learjet 85, the large-cabin Citation Columbus, the ultra-long-range Gulfstream G650 and midsize G250 - after a new design drought of several years, punctured only by upgrades to existing models.

These new designs are scheduled to enter service early in the next decade, when growth, prosperity and optimism should have returned to the industry.