The business aviation industry continues its progress towards a recovery from the steep industry downturn suffered during the 2009 global economic crisis. Whilst it may be clear that the industry has yet to return to the giddy high it enjoyed in the days of exuberance before the Lehman Brothers saga, 2015 is shaping up to be one of the most encouraging years since the severe economic downturn.
A recent report from Bombardier Aerospace, one of the 3 major business jet manufacturers, forecasts 22,000 business jet deliveries valued at US$617 billion over the next 20 years; with 9,200 deliveries worth US$264 billion from 2014 to 2023, and 12,800 deliveries worth US$353 billion from 2024 to 2033. Meanwhile, at its 23rd annual Business Aviation Outlook, Honeywell Aerospace, one of the major players in avionics manufacturing, predicts 9,450 business jet deliveries worth US$280 billion from 2014 to 2024.
Around half of new business jet demand is derived from customers looking to replace their aircraft, typically at 5 to 10 years of age. The level of pre-owned aircraft for sale is therefore a good indicator of business jet demand. Throughout 2014, there had been a continued reduction in pre-owned inventory for sale, which has helped keep used prices buoyant and signified growing demand.
The development and availability of more capable and efficient aircraft directly induces demand for replacement aircraft and entices first-time buyers into the arena. The launch of new airplane programmes therefore is an important driver for business jet market growth.
Makers of large cabin business jets are faring particularly well. “The strong desire for larger cabin aircraft with greater range and advanced avionics is seen again in this year’s survey,” said Brian Sill, president of Business and General Aviation at Honeywell Aerospace. Gulfstream Aerospace, with its recently introduced G650ER was top of the pile. It posted nearly US$7 billion in revenue in 2014, bringing it ahead of its two nemeses, Bombardier Aerospace and Dassault Aviation.
The G650ER, which began customer deliveries late last year, is Gulfstream’s ultra-long range flagship, extending the non-stop reach of the long-range business jet to an industry-leading 7,500 nautical miles (nm), bringing to reality city-pairs such as Hong Kong-New York and Los Angeles-Melbourne. A nicely optioned G650ER retails for nearly US$80 million. The Savannah, Georgia-based manufacturer delivered 150 new aircraft in 2014.
Bombardier Aerospace comes a close second, posting US$10.5 billion in revenue for 2014 according to its latest annual report. However, the fact that a significant proportion of that cash is being ploughed back into product development means the company is actually making a net loss, with earnings before interest and tax (EBIT) at a -US$995 million. The Montreal-based manufacturer is working hard on two of its major development projects, the Global 7000 and Global 8000. These two aircraft directly compete with the Gulfstream G650 and G650ER respectively. Launched in 2010, the Global 7000 project was originally planned for entry into service in 2016. According to a Bombardier official, the Global 7000 flight test vehicle is taking shape in final assembly, with major structural parts – including the front, centre and aft fuselages, main landing gears and wing all completed. Meanwhile, the 7,900nm Global 8000 was in line to earn its type rating and certification in 2017. However, this is assuming that the Global 7000 programme sticks to it planned milestones deadline, as the two programmes are intricately connected.
Worldwide purchasing results are shaped by each market’s maturity, political stability and economic sentiments. As traditional markets, North America and Europe, have had to cope with economic and political instabilities, key emerging markets have been shaping recent industry growth and trend. Emerging markets tend to show higher but more volatile growth, and a more pronounced preference for large cabin, long-range aircraft.
The Asia/Pacific region is widely regarded as one of the fastest-growing markets for business jet services today. According to research by Gama Aviation, during the four-year period from 2010-2014, 714 new business jets were delivered to the region. This compares to the period immediately preceding, from 2005-2009, with only 501 aircraft deliveries. This was a jump of more than 42%. Lately however, sales in China, which to a degree had offset the downturn in the North America market, had been affected to a degree by the government mandate for officials and business tycoons to be ‘less ostentatious’.
For now, the upward trend is pronounced and secure. Market forecasts by Bombardier, Honeywell and others project steady growth through this decade and beyond. Continued wealth creation in major emerging markets, coupled with aviation development is expected to keep business aircraft demand buoyant. Whether the future turns out to be quite as rosy as these predictions, only time would tell.
http://www.aspireaviation.com/2015/07/30/the-rise-of-business-aviation/