October 20, 2013
By Alton K. Marsh
Jet deliveries in 2013 are predicted to be down slightly in the newest Honeywell global business aviation forecast presented yearly during the National Business Aviation Association (NBAA) convention in Las Vegas Oct. 22 through 24. Analyst Brian Foley cautions that while deliveries might fall slightly, other areas of the general aviation industry are up, including single-engine and turboprop sales. Overall, Honeywell predicts an annual 4- to 5-percent growth over the next decade. That’s 1 percent higher than Honeywell predicted last year.
While Honeywell’s 2012 forecast predicted 10,000 deliveries of new business jets through 2022, this year’s forecast calls for 9,250 new business jet deliveries worth $260 billion. The report also predicts a slight decline in 2013 deliveries, compared to last year’s prediction, to 600 to 625 new business jets. The value of the jets to be delivered in the next decade is up, despite fewer numbers, “…which reflects the ongoing trend towards larger [and more expensive] business jet models,” the report said. It also reflects higher prices, the report states.
“The reduced deliveries expected in 2013 are largely due to new program delays, rather than deterioration in demand,” Honeywell officials said. Honeywell interviews corporate jet owners worldwide in an effort to determine what type of Honeywell products will be needed. The firm makes mechanical and electrical products used on nearly every commercial and defense-related aircraft.
“I don’t think there is any surprise here. There is no big shift one way or the other,” Foley said. “What it telegraphs to me is the general consensus that we are at or near the bottom. All forecasters point in the direction of growth during the next 10 years. Whether the turnaround year is this year or next isn’t important. There could very well be sales going on now that wouldn’t be reflected in delivery figures until next year.
“I’m more hopeful that 2013 jet deliveries could come in even higher than Honeywell’s estimate of 600 to 625,” Foley added. “This idea is supported through Embraer’s announcement that they delivered 66 business jets in the third quarter of 2013 compared to 46 in the third quarter of 2012.
Predicting when the recovery may occur in the jet industry has eluded all economic forecasters. Foley argues that the recovery began long ago in single-engine and turboprop sales. “The term recovery is a pretty broad term,” Foley said. “There is more to this industry than just business jets. Flight operations are up. FBOs seem to be off the bottom as far as pumping gas. Pistons and turboprops are up. That all points to the fact that there has been an ongoing recovery. If people are just gauging the recovery by the business jets we delivered last year, they are missing the point since that is a lagging indicator. Often there is a one-year delay in delivering a business jet, not to mention the purchase decision cycle—more approvals are needed for large purchases.”
The Honeywell report notes the weakness in sales of smaller jets. Large-cabin jets account for more than 55 percent of all new purchase plans, the report said. The firm Corporate Jet Investor has noted in past months that smaller jets are linked to small companies, and small businesses do not yet have confidence that an economic recovery is here to stay.
Honeywell said operators indicated they will replace about 28 percent of their fleets over the next five years, although Foley noted that what people say and what actually takes place often differ.
Especially notable in the report is an indication that the North American market is heating up. “The overall level of forecast aircraft demand coming from inside North America has increased for the first time in recent history. This year, roughly 61 percent of projected demand comes from North American operators, up eight points from the 2012 survey,” the report said. The percentage of operators planning jet acquisitions in Brazil, Russia, India, and China has dropped to 42 percent, down from 46 percent in last year’s Honeywell survey.
The company reports uncertainty in the recovery of flight operations. “Much of the ground lost by operations during the 2009 recession still remains to be captured, but modest improvements in international flight activity and in U.S. operations in general have been seen in recent months,” the Honeywell report said.
Europe’s purchase expectations declined this year to 25 percent, compared to between 30 and 33 percent seen in the previous three Honeywell surveys.
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