Honeywell Aerospace’s recently released 23rd annual Business Aviation Outlook calls for up to 9,450 new business jets worth $280 billion to be delivered over the next 10 years. While that’s up by 200 aircraft from the 2013 forecast, the share of projected five-year global demand in the Middle East and Africa moved below its historical range, the company noted.
In fact, 18 percent of operators in the Middle East and Africa surveyed by Honeywell for the outlook said they plan to purchase a new business jet as a replacement or addition, down from 26 percent last year. “The level of purchase plans is under the world average and unsurprising in that it has been a year of significant political upheaval and ongoing conflict in the region, as well as a year in which oil prices have drifted lower and health crises have emerged in Africa,” Honeywell said. “Regional distress has taken a toll, with operators in the region scheduling their purchases later in the next five-year window than expected last year, with only 21 percent of purchases planned before 2017.”
The overall global forecast reflects an 8-percent increase in projected billings over the 2013 outlook, thanks to 200 more forecasted aircraft deliveries, “modest” list price increases and the continued strong demand for larger business jets. Notably, annual billings are expected to surpass peak 2008 levels in 2017 and beyond, though unit deliveries are not projected to reach the 2008 peak any time during the 10-year forecast.
In the near term, Honeywell is projecting deliveries of 650 to 675 new jets this year, a single-digit percent increase from 2013. This improvement is largely due to “program schedule recoveries, new model introductions and additional fractional uptake,” the company said.
“2015 industry deliveries are anticipated to be up modestly again, reflecting momentum from several new model introductions and some gains linked to incremental global economic growth,” said Honeywell Aerospace president for business and general aviation Brian Sill.
Honeywell (Stand 562) bases its forecast on a survey of operators about their future aircraft purchasing plans. In its latest survey, Honeywell found that operators plan to make new jet purchases equivalent to about 23 percent of their fleets over the next five years, either as a replacement or addition. While this is several points lower than the past four survey cycles, it is in line with results of 25 percent or less that were the norm until 2006.
Of these five-year new business jet purchase plans, 19 percent are expected by year-end 2015, and 14 and 22 percent are scheduled for 2016 and 2017, respectively. Purchase timing is shifted somewhat later compared with last year’s results, leading to a modest slowdown in projected demand for the near term, but is offset by pre-sold positions for new models entering service over the next two years.
Operators surveyed continue to prefer larger jets–those ranging from super-midsize to ultra-long-range to bizliners–meaning these types will dominate billings over the forecast. In the near term, Honeywell said these models are expected to account for more than 75 percent of all expenditures on new business jets. Volume growth between now and 2024 will be led by this segment, reflecting 60 percent of additional units and nearly 85 percent of additional values, the company estimated.
“The strong desire for larger-cabin aircraft with greater range and advanced avionics is seen again in this year’s survey,” Sill said. “We are also seeing some improved interest in light and midsize jets this year.” In fact, the Honeywell forecast notes that the midsize and smaller jets recovered some share for the first time in several years, reflecting improved prospects for in-production aircraft and stronger interest in newer models in this class.
In its latest forecast, Honeywell sees a realignment of near-term regional market shares, with business jet demand from North America slipped two percentage points to 59 percent over next five years after increasing for the first time since 2010 in last year’s outlook. “New aircraft acquisition plans in North America are still significant given the region’s overall size,” Sill said. “Coupled with projected gains in fractional fleet deliveries, North American demand should still support industry volumes as some of the traditional higher-growth regions work through another year of reduced growth rates.”
Europe is expected to be the next-largest market for business jets in the next five years, accounting for 18 percent of new deliveries, up 6 percentage points from last year’s outlook. Latin America is projected to account for 17 percent of the near-term demand, followed by Asia and the Middle East each at 3 percent.