The business jet industry should expect to deliver approximately 9,200 new aircraft over the next decade, according to the results of Honeywell’s 24th annual Global Business Aviation Outlook, released in Las Vegas on the eve of NBAA’s Business Aviation Convention and Exhibition. Those deliveries, worth $270 billion, represent a 3- to 5-percent decline in value from last year’s forecast, which called for deliveries of up to 9,450 business jets through 2024. According to Honeywell, that decrease in value can be attributed to the fact that operator buying plans have slid somewhat, while delays to some large-cabin aircraft programs have moved their entry into service further toward the end of the forecast window.

Each year the company surveys hundreds of operators to gain insight into their buying plans over the next five years, and provide the basis for the forecast. “It leverages the survey data but it also takes into account a number of other factors like our relationship with the aircraft manufacturers as a key supplier,” noted Charles Park, Honeywell Aerospace’s director of strategic marketing. He added that the 10-year forecast is also based on a number of statistical models past the five-year survey window. As it prepares the forecast, Honeywell does not include airliner-derived models such as the Boeing Business Jet, Airbus Corporate Jet or Embraer Lineage 1000 in its calculations. “We talk to traditional corporate flight departments who use business jets as productivity tools and focus on purpose-used aircraft,” said Park. “The high prices of bizliners would distort the overall market data.” Likewise, the engine and avionics maker excludes any jet smaller than the Citation Mustang or Embraer Phenom 100 as it assumes jets such as the Eclipse 550 are more in the realm of owner-flown aircraft and therefore outside the scope of the survey’s reach.

For 2015, the Phoenix-based OEM anticipates deliveries of approximately 675 to 725 new jets, a slight increase at best, from the previous year’s delivery total. That improvement is largely credited to new model introductions and an increase in fractional-use deliveries. For next year, Honeywell projects a decrease in aircraft handed over by the OEMs, which if correct, would snap the industry’s three-year streak of rising delivery totals. It bases that assessment on continued weak demand from emerging markets, partially offset by deliveries to fractional operators. “Overall, though, based on the pipeline of new aircraft coming into the market, we still think we are in for a period of relatively stable expansion once we get past the 2016-2017 period,” Park told AIN.

According to this year’s survey, which received more than 1,500 completed responses, while overall purchase plans are down by one percent compared to last year’s survey, operators globally over the next five years intend to make new jet purchases equivalent to approximately 22 percent of their fleets, either as replacements or additions to their current fleet. Of those, nearly 20 percent expect to purchase a new jet by the end of 2016 while another 37 percent said they will buy by the end of 2018.

“We continue to see the larger cabin aircraft drive the majority of future demand,” said Brian Sill, president of Honeywell’s business and general aviation segment, who added that the super-midsize through businessliner categories will account for 81 percent of the dollar value of the planned purchases. “Range and cabin volume across the globe were number one and number two in terms of importance of the top reasons for choice of a business jet.”

Fifty-two percent of the survey respondents noted they planned to purchase a large-cabin jet. That category, in Honeywell’s calculations, includes the super-midsize segment, which has been bolstered of late by the arrival on market of the Embraer Legacy 500 and the Bombardier Challenger 350. “That’s actually one of the most vibrant segments of the market,” said Park. “We do anticipate that one to grow at a pretty robust clip, and we’re excited about that at Honeywell because we have a lot of content on those airplanes.” The demand profile was rounded out by 23 percent for the midsize aircraft segment and 25 percent small cabin, over the life of the survey.

Around the World

North America remains the pre-eminent region in terms of projected demand, accounting for 61 percent of world new jet sales, up two points from last year’s survey. Plans call for purchases of just under 22 percent of the current fleet over the next five years, a number that is lower than the averages of the 2008-2012 period. Despite that, Honeywell noted expansion of the North American fleet and operator base have supported demand levels in the face of slightly reduced purchase plans. “It’s hard for that region not to be predominant just due to the size of the installed base of aircraft,” said Park. “Even though purchase plans might be flattish, that region is still generating the majority by several percentage points of the projected demand that we are getting out of the survey.”

In Europe, weak growth, depreciating currencies and political tensions have all caused purchase plans there to drop to 24 percent of the existing fleet, and its share of the global five-year demand is below historical norms at 14 percent, down four percent from last year.

While the BRIC countries (Brazil, Russia, India and China) have long been coveted for their market potential, Honeywell noted that industry growth has lost momentum with purchase plans there reaching just over 21 percent of their existing fleets in this year’s survey, yet it encountered several surprises in this year’s survey. “We saw relatively strong plans in Latin America, above the world average, and that’s despite the fact that Brazil is in a recession currently,” noted Park. Brazil in fact, recorded the strongest new aircraft purchase plans in the survey, with operators there expecting to replace a third of the country’s business jet fleet over the five-year survey window. Latin America, including Mexico, is predicted to account for 18 percent of the overall global demand over the next five years, up one percent from last year’s survey. It saw plans to replace 29 percent of its fleets with new jets within the next five years, with nearly half of those purchases taking place in the next two years.

The Chinese business jet market has noticeably cooled of late due to internal pressure from the government and its anti-extravagance policies, while Russia is facing external pressures due to its involvement in Ukraine, yet both those areas noted slight improvements in their new jet purchase plans over last year’s results. “I was actually a little surprised to see the China and Russia buying plans go up given the current political and economic environment,” Park told AIN. “Though it’s well below historical levels that we’ve captured in this survey, it’s encouraging to see that it’s starting to creep back up a little bit.” He added that those countries have typically been large-cabin markets in the past. The survey noted the combined BRIC countries retain a very strong near-term demand profile with 47 percent of their intended new jet purchases slated to occur in the next two years. Even considering these improvements over the previous year’s survey, the company noted they are not enough to support an improved overall BRIC outlook.

Based on the survey results, the Middle East and Asia-Pacific will each account for approximately 3 percent of the world’s new business jet demand over the survey horizon. In the Middle East and Africa, the company noted that regional distress continues to weigh on operators, with potential buyers scheduling their purchases later in the next five-year window compared with last year. Less than a quarter of those purchases are planned before 2018.

Good News on Pre-Owned Front

The pre-owned business jet inventory has gradually declined from a high in 2009, when 16 percent of the fleet was available, to a more normal amount in the 9- to 10-percent range, currently. “I would say that the used inventory is at a relatively healthy place from a historical perspective,” said Park. “The one issue that kind of remains in that market is that used aircraft prices have not firmed up so we are still seeing some decline period over period.” Yet, based on its latest survey results, Honeywell noted improved interest in the used market on a wide-scale basis. “The good news is that in every region of the world, the plans to buy used business jets increased with the exception of the Middle East and Africa, and it was down [there] only one point of a pretty robust number, year on year,” said Park, adding interest levels for new and used jets often move in opposite directions. “We’ve been fortunate in the last couple of years when the new buying plans were up, the used buying plans also increased, so that’s a good situation."