Bombardier Aerospace’s decision to pause its Learjet 85 program should not be seen as a sign of weaker demand for Cessna’s or Embraer’s competing products, analysts say.
The Learjet 85 pause, in fact, is good news for the competition, Jefferies analyst Howard Rubel wrote in a note to investors.
“This should be viewed as a positive for all other OEMs (original equipment manufacturers), particularly the Embraer Legacy 500 and Cessna Latitude models,” Rubel wrote.
At the same time, experts predict a decent increase in demand for business jets in 2015, with small and mid-size business jets showing more progress.
The uptick in the mid-size and super mid-size segments of the business jet market is due to new aircraft products coming into the market and a growing U.S. economy which favors smaller jets, Robert Stallard, an aerospace analyst with RBC Capital, said in a note to investors.
Overall, when last year’s business jet delivery numbers are announced next month, experts predict that fourth-quarter and full-year 2014 shipments will be up over the previous year. They expect this year to be up from last year and increasing over time.
Business jet manufacturers are expected to have delivered about 714 jets in 2014, an increase of 4% from 2013. The aircraft are expected to set a record in value at $21.8 billion, up 10% to 11% over a year ago, said Rolland Vincent, a consultant with Rolland Vincent and Associates in Plano, Texas.
“I think it’s going to be the second-best year in terms of value in (business) jet shipments,” Vincent said.
That’s because of deliveries in the larger, more expensive business aircraft segments.
Delivery figures are being compiled by the General Aviation Manufacturers Association and will be announced at GAMA’s annual “State of the Industry” media event Feb. 11.
“We see pretty much stability in the top of the market,” Vincent said of the large business jets. “Our bet is … flat but at a high level.”
On the small end of the business jet market, however, “there’s not much of a revival,” he said.
The trends are moving in the right direction, said Pete Bunce, GAMA president and CEO, although “we’re not where we want to be.”
Mid-market growth
Last year shaped up as a solid year for business jet deliveries. In fact, it’s likely the best year the industry has had since the recession, even if the recovery hasn’t come as fast as hoped, said Ed Bolen, president and CEO of the National Business Aviation Association.
More hours are being flown, used inventory for sale has declined and the U.S. economy is stronger than it has been, Bolen said.
Most people in the industry thought 2014 was one of the best years since the economic downturn, he said.
While growth has been strong in the large jet category, it’s the middle of the market that’s expected to grow.
On Jan. 15, Bombardier announced it was pausing its long-delayed Learjet 85 program, a clean-sheet design composite aircraft launched in 2007.
The company cited weak market demand for the hiatus. That segment of the market hasn’t bounced back as quickly as expected, Bombardier officials said.
Analysts say, however, that the issue was not purely the market, but an allocation of resources for Bombardier, which has been investing heavily in its CSeries and Global 7000/8000 development programs. The Global 7000 and 8000 are designed to take on the size and range of Gulfstream’s G650.
“As best we can tell, the decisions … were pretty [Bombardier] specific,” Stallard wrote.
The mid-size business jet segment of the market is increasingly a crowded space, said Stallard with RBC Capital. Embraer has the Phenom 300, which is doing well, and the Legacy 450 and 500 on the larger end. Cessna has the Citation Latitude in the works and the Sovereign +.
“Thus, we think underlying demand is picking up,” Stallard said in a note to investors. But the Learjet 85 has “found life tough versus the competition.”
4Q Deliveries
In some good news, fourth-quarter business jet deliveries are tracking above expectations, Rubel said.
Higher-than-expected demand is driven by higher deliveries to fractional ownership companies than estimated, Rubel wrote in a note to investors.
Based on available data, Rubel counts 243 business jet deliveries were made in the fourth quarter, compared to an expectation of 229.
That’s down, however, from 249 aircraft shipped in the same period in 2013, he said.
Large jet deliveries were about flat year-over-year, with deliveries of the Gulfstream 650 up from the previous year, Rubel said. He estimates 16 deliveries were made, based on the number of completions. Deliveries of the Global 5000 and 6000 are mixed.
And deliveries of medium-size and light jets are also mixed, depending on the model, he said.
Deliveries for the Challenger 350, Challenger 605 and Phenom 300 were solid because of demand by fractional ownership companies.
The firm estimates that fractional operators accounted for 10% of all deliveries in the fourth quarter.
Cessna Aircraft deliveries, meanwhile, were in line with the forecast.
Looking ahead
Aviation Week Intelligence Network forecasts a steady year-over-year increase in business jet deliveries for the seven years from 2015 to 2021.
Then they’re predicted to contract for the next three years of 2022 through 2024. Categories range from very light jets to ultra long-range jets.
Over the next 10 years, deliveries in the very light jet segment is expected to grow the most, with a 25% increase.
The segment is expected to grow from 211 deliveries this year to 229 shipments next year. Over the next decade, planemakers are expected to ship a total of 2,719 very light jets.
Super-midsize jet shipments, meanwhile are expected to grow by 20% over the next decade, followed by light jets at 19%, large-cabin jets at 17%, mid-size jets at 12% and ultra long-range jets at 8%
Business aircraft retirements are expected to follow a moderate pace during the next 10 years. More than 5,000 aircraft are expected to retire between this year and 2024, affecting 13% of the entire fleet, according to Aviation Week.