Despite the current economic hardship that is gripping the US and other regions, Honeywell Aerospace’s Business Aviation Outlook predicts continued strong aerospace sector growth through 2018 – including 17,000 new business jet sales worth $300 billion.
Honeywell, which surveyed 1,800 flight departments worldwide for the 17th annual outlook, also forecasts record deliveries of nearly 1,200 new business jets in 2008. This number is up 15% from 2007 despite the uncertain economy, marking the fifth consecutive year of industry expansion. Deliveries in 2009 are expected to break the record again, going as high as 1,400 jets.
“That is great news for the industry,” says Honeywell Aerospace president, business and general aviation, Rob Wilson. “I would portray the demand for business aviation as stable.”
Wilson explains why the shaky economy is not having a greater impact on delivery numbers: “One of the factors to consider is the three-year backlog for these aircraft,” he says. “Very few customers are going to walk away from the deposits they had to put down. With this very strong backlog, and even with no order intake, the industry could live off that for more than three years.”
The survey indicates that deliveries will plateau slightly in the 2010-11 timeframe, followed by further increases throughout the decade as new aircraft are brought to the business aviation market.
In terms of intake, year-to-date new jet orders have risen about 20-25% over 2007, however many of these orders are for new models entering service in 2012 and beyond. Honeywell believes that order intake will moderate to more sustainable levels in the second half of 2008 and into 2009, but available metrics on total industry book-to-bill ratio are still running at or over two-to-one so far in 2008.
North America Buying
In North America, business aviation customers expect to replace or expand about 25% of their fleets during the next five years, says the survey. Purchase expectations rose in Latin America as well, while declining in Europe, the Middle East and Asia, but global five-year purchase expectations of 32% equaled 2007 levels and remain well above the 24% average recorded for several years prior to 2007.
“A very interesting point of the survey was demand in North America, with purchase expectations at 25% - five points higher than 2007,” says Wilson.
“Even in light of high fuel prices, recent credit and stock market fluctuations, and the uncertain economy, the North American customer base plans to purchase more,” he continues. “That is a pretty surprising confirmation of business aviation activity, and the fact that customers see business aviation as a business imperative.”
Wilson notes that in the face of all the economic challenges, companies still want to do business around the world, and aviation is seen as an essential productivity tool for business.
He points out that some developing regions, including Africa and China, offer great business opportunities in areas such as mining and raw materials. These regions can be very difficult to access via commercial airlines, however, greatly increasing the value of the business aviation option.
Top reasons cited for replacement of current aircraft include aircraft age, cabin size and improved range as important criteria in every region. State-of-the-art technology in avionics and engines also continue to gain distinction as leading reasons for aircraft replacement.
“Advances in technology are being pursued by every manufacturer,” Wilson says. “Improved cabin comfort, extended range, broader mission capability and advanced avionics and safety systems produce business jets that are highly productive, cost-efficient assets.”
With regard to aircraft type, the survey projects balanced demand growth across business jet segments over the next five years, with medium and medium-large aircraft at 29% of projected five-year demand, light and light-medium aircraft at 23%, and long-range and ultra-long-range aircraft at 21%.
Flight Activity Down
One more interesting development from the survey is that while the outlook for the OEMs remains positive, overall flight activity is down slightly in the US and Europe, with 8-10% lower utilization. According to Honeywell, operators appear to be reacting to economic pressures and unexpected fuel price increases.
“Budgets were set with fuel prices at a certain level, and now fuel prices are much higher,” Wilson notes, saying that some organizations report reduced flying activity to economize on fuel and remain within funded budget levels. “At the top end of the market we still see very high utilization on some of the long-range and ultra-long-range airplanes because of the global economic development going on.”