October 9, 2011
BY MOLLY McMILLIN
LAS VEGAS – A leading business aviation forecast predicts business jet deliveries will increase in 2012, but won’t return to pre-recession levels until the end of the decade.
This year marks the bottom of a down cycle that began in late 2008, when the recession hit the general aviation industry, the outlook said.
Near term, demand will be tempered by the continued slow economic recovery.
But after 2012, the industry appears positioned to begin another expansion, although at a moderate pace.
Honeywell Aerospace’s just-released forecast predicts sales and deliveries of 10,000 business jets worth $230 billion over the 10-year period from 2011 through 2021.
Half of the deliveries – 5,000 – are projected for the five years from 2012 to 2016.
“Overall, I think it’s a solid outlook,” said Rob Wilson, president of Honeywell Aerospace’s business aviation and general aviation unit.
Honeywell, a components and systems manufacturer, released its 20th annual outlook at a meeting Saturday evening at the Palms hotel in Las Vegas before the start of the National Business Aviation Association meeting and convention. The show opens Monday and runs through Wednesday.
Honeywell surveyed more than 1,500 corporate flight departments around the world to compile its forecast.
The forecast predicts business jetmakers will deliver 600 to 650 planes this year – an 11 to 18 percent decline from the 732 delivered in 2010.
Next year, deliveries should total about 700, the outlook said.
But it will take until the end of the decade before deliveries are expected to return to pre-recession levels, Wilson said.
“It’s going to take us that long to dig out,” Wilson said.
Meanwhile, new orders have risen at most business jet manufacturers since the downturn began, while cancellations have dropped precipitously. Still, the recently improved order rates face economic pressures.
In all, planemakers are expected to take orders for more than 500 business jets this year for future delivery.
Thirty percent of the flight departments Honeywell surveyed said they planned to replace or add to their fleets in the next five years. Eighty percent of the buying is expected in 2013 or beyond as operators remain cautious about the economy.
A top reason for the desire to buy is the need for more range.
“They want to go farther,” Wilson said. “They want to buy a plane that enables them to do that better.”
A pipeline of new aircraft models from manufacturers remains important for longer-term growth.
And large business jets, which generally weigh more than 40,000 pounds and can carry more than 12 passengers, are faring better when it comes to demand. By value, 60 percent of the demand in the next decade will be in large-cabin jets, it said.
By aircraft class, 31 percent of the units delivered are expected to be large-cabin jets, 34 percent medium-cabin jets and 35 percent small-cabin jets.
The mix shifted somewhat in favor of the smaller models from previous years. That’s good for Wichita, where manufacturers build small, medium and super mid-size business jets.
With buying delayed a few years, the industry must invest in technologies and products so that jet owners can upgrade their aircraft, Wilson said. For that reason, Honeywell has invested in cabin management systems, engine upgrades and cockpit enhancements.
“That’s why we continue to focus on that area,” Wilson said.
The down economy has eroded backlogs at many business jet manufacturers.
But while backlogs are about 30 percent lower overall than pre-recession levels, they’re more solid.
“I think the industry is focused more on making sure we have solid backing on a lot of these orders,” Wilson said.
The trend is toward cash sales instead of financed ones, he said.
Some of that is the result of a combination of companies holding onto cash and a tight credit environment, Wilson said.
Cash purchases of new and used business jets are up 73 percent from before the recession, he said.
Honeywell’s outlook also found:
* Significant international demand with 45 percent of the shipments outside North America, with a continuing global shift in demand.
* The world’s highest percentage of purchase plans expected from Brazil, Russia, India and China.
* An increase in the number of planned purchases from Asia, the Middle East and Africa.
* Flat buying expectations from North American customers.
http://www.kansas.com/2011/10/09/2054703/business-jet-deliveries-forecast.html
Source: WICHITA EAGLE
Date: 2011-10-09