Stating that business aviation is not immune to a worldwide economic slowdown, this year’s Honeywell Business Aviation Forecast predicts 9,200 jets worth $270 billion will be delivered during the next 10 years. That compares to a Honeywell forecast in 2014 of 9,450 jets in the decade ahead, and in 2013 the company forecast 9,250 jets through 2023. (Similarly, Embraer forecasters predicted 9,100 jets will be delivered in the next 10 years worth $259 billion over the same period.)
“While emerging markets like Brazil continue to be a bright spot for business aviation over the medium term, we have seen weaker demand across other key growth markets, which may affect near-term order and delivery levels,” said Brian Sill, president of Honeywell Aerospace’s business and general aviation division. “And while the sluggish economic growth and political tensions are driving [a] more reserved approach to purchasing, we are seeing operators invest in retrofits and upgrades for their existing aircraft, especially around connectivity, boosting aftermarket opportunities.”
Honeywell predicts 675 to 725 jets will be delivered in 2015. The General Aviation Manufacturers Association has reported 465 deliveries so far in 2015, meaning 210 to 260 jets will need to be delivered in the fourth quarter of this year to make the Honeywell forecast correct. That is possible, looking at GAMA numbers of 257 for the fourth quarter of 2013 and 263 in the fourth quarter last year. In 2014 Honeywell predicted 650 to 675 jets would be delivered, but actually 722 were delivered.
Honeywell officials said they raised the prediction to 675 to 725 “largely due to new model introductions” and an increase in deliveries to fractional-ownership companies. In 2016, a weakness in emerging market demand is predicted to drop deliveries slightly, although fractional ownership companies will continue to build their fleets.
The economic analysis, based partly on interviewing flight departments to learn of their plans, predicts a 3-percent annual growth rate through 2025. Honeywell said operators continue to focus on larger jets from super-midsize to ultra-long-range jets. However, a banker involved in aircraft loans recently told AOPA that while those two classes of jets have attracted interest, and his clients have the money, they continue to take a wait-and-see attitude. They are not convinced the economic recovery is real, the banker said. And they are aware that jet values are dropping and feel that the longer they wait, the lower the values will go.
Here are additional predictions.
Brazil, Russia, India, and China are known as the BRIC countries. In that category, there will be slight improvements in purchases by China and Russia but not enough to support an improved BRIC outlook. Industry growth in those countries has lost momentum, Honeywell said.
The excitement is gone from the Asia Pacific market. “Disappointing growth figures from several major regional economies, ongoing regional tensions, and government austerity initiatives dampen operator enthusiasm,” the Honeywell study said.
“Slightly lowered purchase plans were reported” for the Middle East and Africa, “which is not surprising given another year of significant political upheaval and ongoing conflict in the region in tandem with low oil prices,” according to the Honeywell study.
Latin America is a bright spot with more flight departments planning new purchases in the early years of the 10-year period—especially the first two years.
North America continues as one of the strongest markets, although plans to purchase aircraft are lower than the averages of the 2008-2012 period. Overall, demand remains steady.
European operators are “contending with sluggish growth and increased political tensions, a refugee and migrant surge, and depreciated currencies,” the study said. There is less certainty that orders will take place in the next few years, with many in the survey holding off until 2018 or later.
Looking at used jets, the amount of flying activity has slowed and has not returned to levels last seen before the recession. While only 10 percent of the jet fleet is for sale, compared to 16 percent in 2009, their value continues to lower. While the total for sale, about 640 aircraft, is lower than six years ago, they include slightly more recent-model jets.