Fueling the Increased Demand
There is no doubt world economic conditions underpin a large part of business jet expansion, but the industry is also realizing the benefits of steady gains in aircraft value to the operator and passenger in the form of improved aircraft reliability, mission flexibility, cabin productivity, comfort and convenience, according to Honeywell. "Historically, Honeywell’s Business Aviation Outlook shows increases in purchase plans and subsequent aircraft deliveries tend to be highly associated with the introduction of new aircraft. Business Aviation will never be insulated from economic cycles, but it’s clear that manufacturers help stimulate demand with new models incorporating advances in aviation technology," Wilson said. "Improved engines, safety systems, cockpit avionics and cabin information and comfort improvements along with advances in aerodynamic design can deliver compelling gains in value to fleet operators, pilots and passengers." "The march to adopt advances in technology continues at every manufacturer. Innovation to improve cabin comfort, extend range, broaden mission capability, and produce business jets that are highly productive, cost-efficient assets is ongoing across the industry, from both traditional and emerging business aircraft OEM’s," Wilson said. "Steady gains in new aircraft capability and flexibility, coupled with incremental demand from fractional ownership and jet cards, airline use of business jets, Branded Charter operations and special mission applications, all fuel unprecedented business jet demand over the next 10 years."
Global Purchase Expectations Increase
Honeywell, which bases its forecasts on interviews with 1,400 corporate flight departments as well as manufacturers and other industry sources, said the rosy outlook is driven in part by an uptick in sales activity in North America. Purchase expectations had softened in North America in 2005, but have improved in 2006. North America is expected to account for 61 percent of the market over the next five years.
Purchase expectations remained about the same in Europe and have increased in Asia, Africa and the Middle East. The strength of the euro against the dollar certainly contributes as an incentive to buy new aircraft, as does the increased wealth and business expansion anticipated in Eastern Europe and Russia. As predicted in Honeywell’s 2005 survey findings, European operators also reported a particularly strong increase in expanding their fleets, versus simply replacing aircraft, an indication of overall confidence among operators in the region. “Six consecutive years of strong purchase intentions in Europe is a great track record, and an indication of the value operators derive from business jets,” Wilson said.
The Asia/Africa/Middle East region once again ranks as the area with the highest purchase expectations. Purchase expectations grew for the fourth consecutive year to a record level exceeding 50 percent-the highest reading in the history of the survey. Middle East and selected African economies continue to benefit from higher oil prices and expect to be active buyers.
Purchase expectations declined in Latin America but still remained strong at 30 percent, Honeywell said. Elevated energy prices, which are boosting the economies of Mexico, Venezuela and Brazil, have helped to keep purchase expectations high. But political instabilities in Latin America have dampened expectations somewhat. Despite those responses, overall buying plans in the region still rose this year, with increased interest in expanding fleets driving most of the improvement.
Replacing One Quarter of the Fleet
Overall, respondents to this year’s survey said they expect to replace or expand the equivalent of about 26 percent of their fleets over the next five years, up from about 23 percent in the 2005 survey. The company forecasted a five-year demand for 3,600 to 4,000 aircraft worldwide, but that range does not include the fractional aircraft ownership market.
The used market also shows signs of improvement, with operators planning to replace about 15 percent of their current fleets with used aircraft. Used sales have ebbed in the past three quarters, but should rebound over the next year. The company pointed to both a good economy and new aircraft and technology as factors propelling the strong growth.
Chief reasons cited for replacement of current aircraft remain consistent with prior
surveys, with age leading overall and range improvement the next most important criteria in every region except Europe. European operators listed more spacious cabins as their most important reason for replacement aircraft followed by longer range. Improved speed, comfort and updated technology in avionics and engines also appear as leading reasons for aircraft replacement across all regions.
Over the last three quarters, the volume of used jet transactions has softened and likely reflects the weaker buying plans reported in last year’s survey. The stronger used jet purchase plans recorded this year should begin to be felt over the next 12 months. An encouraging note is that used jet replacement and expansion plans are up in the core North American region as well as in Europe over 2005 levels.
Near-Term Demand Well-Distributed Across Aircraft Classes
Based on new jet models mentioned by survey respondents, fairly balanced demand growth was predicted across most business jet segments over the next five years. Medium and medium-large aircraft together account for about 30 percent of the projected demand through 2011. Light and light-medium aircraft make up about 25 percent of projected five-year demand, followed closely by long-range and ultra long-range aircraft at 21 percent. The strength in the long and ultra-longrange segment reinforces last year’s findings and reflects increased need for aircraft capable of trans-Pacific flights, as well as the growth in demand in the Latin America, Asia-Pacific and Middle East regions. Honeywell, however, predicts “balanced demand” for model segments over the next 11 years.
Honeywell’s Aerospace Business Aviation Outlook
The Honeywell Aerospace Business Aviation Outlook and the purchase expectations it summarizes are a snapshot of expected business aircraft sales at a point in time and reflect fleet operators’ views of current events, such as political and economic conditions, fuel costs and changes in regulations, taxes and user fees that would affect expected sales in the near term. Honeywell Aerospace’s Business Aviation Outlook does not reflect the impact of unforeseen events such as a war, major economic shock, fuel crisis or new regulatory restrictions. The Outlook is based in part on Global Insight’s baseline economic forecast assumptions that call for economic growth at quarterly rates in the two-to-three percent range for the next six quarters, and exceeding three percent thereafter.
Honeywell Aerospace has produced its Business Aviation Outlook for 20 years and has shared the findings publicly for the last 15 years. The report was derived from interviews with 1,400 corporate flight departments around the world that operate more than 10 percent of the world’s turbine-powered fixed-wing aircraft. It is also shaped by information from aircraft manufacturers, other industry sources and Honeywell’s analysis of the impact of various economic indicators on industry demand trends. |
