Honeywell Trims 10-Year Business Jet Forecast
AeroBD | The AERO news Company…LAS VEGAS, Nov. 26, 2015 : Over the next 10 years, Honeywell Aerospace is forecasting demand for up to 9,200 new business jet deliveries at a value of $270 billion, a decline of 3% to 5% in value over its 2014 forecast.
“We had another year of slow growth and some problems in some of our developing or high-growth BRIC (Brazil, Russia, India and China) economies,” said Charles Park, director of market analysis for Honeywell Aerospace. That has led to weaker demand across those key growth markets, which may affect near-term order and delivery levels, Honeywell said.
“Overall buying plans are flattish compared to last year,” Park said.
Long term, significant growth is expected in 2018 and beyond, however, the forecast said. At the same time, operators are investing in retrofits and upgrades of existing aircraft, especially around cockpit upgrades connectivity, which is boosting aftermarket opportunities, said Brian Sill, Honeywell president of business and general aviation.
“The market is still responding to those options very well,” Sill said. Operators want to keep their aircraft relevant.
Honeywell released its latest annual forecast during a media briefing in Las Vegas Nov. 15 ahead of the National Business Aviation Association convention. The forecast projects deliveries of 675 to 725 new business jets in 2015, a single-digit percentage growth over last year. The expected increase is largely due to new model introductions and to increase in the use of the deliveries by fractional ownership companies, it said. Next year, deliveries are expected to decrease slightly, reflecting weaker emerging market demand partially offset by deliveries to fractional operators, it said.
In a survey, 22% of business jet operators say they plan to make new jet purchases over the next five years as they replace or add to their current fleets. Of the total buying plans, 19% are expected to occur by the end of 2016, 17% in 2017 and 20% in 2018. Longer range, the forecast through 2025 projects a 3% average annual growth rate as new models and improved economic performance help grow the industry.
Focus on Large Jets
Operators continue to focus on the larger-cabin aircraft classes, with 52% of all new purchase plans expected to be for large-cabin jets. At the same time, 23% of the demand is expected in the midsize-business-jet category with 25% of the demand for small-cabin jets. In addition, manufacturers have a number of new programs in development, which is causing some operators to delay their purchase plans of large-cabin jets until the new aircraft are available. Unfortunately, some of those new-aircraft programs have been delayed, which is contributing to a small pullback over last year’s projections, Park said.
“We do see that situation reversing itself once the new programs come into the market,” he acknowledged. The new aircraft are compelling in terms of performance, cabin environment, cabin comfort and productivity, Parks said. “We’re really seeing some advanced models in the development pipeline.”
Demand continues to be strongest from North America, which has 65% of the world’s fleet. Honeywell projects 61% of worldwide sales to originate in North America, up 2% from its 2014 survey. The North American market has taken a larger proportion of aircraft compared to the rest of the world in recent years, Park said, although the business will continue to globalize.
“I think that the operator base is telling us right now that they’re cautious, because there’s a lot of unsettled conditions in various places around the world,” Park said. “On the other hand, we know that there’s a lot of new product coming that’s pretty exciting. When the operators tell us about the aircraft they’re most interested in buying, it’s the new aircraft they’re wanting.”
That bodes well in the long term.
In Europe, which has 14% of the world’s fleet, operators are still dealing with sluggish growth and increased political tensions, a refugee and migrant surge and depreciated currencies. Europe has had no annual fleet growth over the last five years, with low single-digit growth forecast through 2020. Europe is expected to comprise 14% of global demand over the next five years, it said. Demand from Latin America is expected to make up 18% of global demand over the next five years. Latin American operators plan to replace 29% of their fleets over the next five years, with 48% of their purchases expected before 2017.
The Asia Pacific regions are expected to comprise 3% of the global demand. Operators there report new-jet acquisition plans for 14% of their fleet, up 2% from 2014. Nearly 40% of operators responding to Honeywell’s survey said they are scheduling their new purchases within the next two years.