NBAA: Honeywell survey shows declining long-term demand for business jets

Two forecasts have been released ahead of the show that predict a recovering market in the next few years. Honeywell’s latest 10-year forecast of business jet deliveries is down about 3.5% compared with last year’s long-term projection, but the overall trend is better than that statistic might suggest, executives say.

The company’s survey-based analysis projects deliveries of 8,300 jets valued at $249 billion over the next 10 years. Although that represents declines from last year’s projection of 8,600 deliveries worth $255 billion up to 2026, Honeywell’s forecast supports industry-wide expectations that a slight market recovery is around the corner.

A separate forecast from aircraft sales firm Jetcraft backs this up, predicting that the business jet fleet will grow by a third over the next decade with sales of large-cabin aircraft – the worst-hit segment of the past three years – leading the recovery. It also forecasts a steady improvement in the used aircraft market.

According to Honeywell, jet deliveries are widely expected to decline to a decade-low in 2017, but pick back up slowly over the next two to three years. Honeywell’s survey suggests overall deliveries will grow by about 3-4% up to 2019, says Ben Driggs, president of the Americas aftermarket for Honeywell Aerospace.

Driving growth up to the end of the decade are several new clean-sheet designs scheduled to start ramping up production after this year, including the Pilatus PC-24, Cessna Citation Longitude, thr Gulfstream G500 and G600 and the Bombardier Global 7000, Driggs says.

“As new models come into play, you’re going to see more interest,” Driggs says.

Despite the entrance of new products, operators surveyed by Honeywell lowered fleet acquisition plans over the next five years by eight percentage points. In 2016, operators expected to replace 27% of their fleet by 2021. A year later, Honeywell’s forecast shows operators plan to replace only 19% of their fleet by 2022.

The year-on-year reduction brings the 2017 forecast more in line with surveyed plans in 2014 and 2015, rather than the one-year spike to 27% in 2016, Driggs says. Another factor limiting demand for new aircraft is a glut of used inventory under 10 years old, which represents a pre-recession spike of jet deliveries from 2007 to 2009. As that inventory passes the 10-year-old mark, demand should surge again for new models, Driggs says.

That unusual glut of younger aircraft models accounts for a strange statistical phenomenon in Honeywell’s survey. Although overall used inventory is about three percentage points lower than the average, prices for used aircraft are continuing to decline. As aircraft the thousands of jets delivered from 2007 to 2009 pass the 10-year-old market, used prices should start increasing again, Honeywell says.

Jetcraft, which has released its third annual forecast in advance of the show, reckons on today’s base of 21,000 aircraft surpassing 28,000 by 2026, with a total of 8,349 deliveries in the 10 years from 2017, slightly more than Honeywell estimates. Jetcraft says that North American customers will account for 62% of these, followed by Europe with 17% and Asia with 12%.

“Pinpointing the transition into a new business cycle is challenging,” says Jetcraft’s chairman Jahid Fazal-Karim. “Our forecast indicates we are finally exiting the post-2008 recession period, entering several years of steadier, healthier growth and expanding revenues. This new business cycle should shape our industry for years to come.”

Jetcraft president Chad Anderson adds that the large-cabin segment will lead the recovery after a marked fall in deliveries and values. “That was the market that got furthest out of control,” he says. “Order books were full of speculators and impatient clients over-bought. Because of that balloon, prices had further to fall.”

“Large aircraft will drive a higher-revenue market in the coming decade,” Anderson says. “Jetcraft’s experience reinforces this trend, as we’ve seen more and more customers preferring larger, long-range aircraft to support their needs in today’s global business environment.”

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