Honeywell Again Lowers Bizjet Delivery Expectations

Honeywell Aerospace has lowered its 10-year business jet delivery forecast to 8,300 aircraft worth an approximate $249 billion in 2017 dollars over the span of the prediction. The avionics and engine maker’s 26th annual Global Business Aviation Outlook, released on the eve of the 2017 National Business Aviation Association Convention, is down approximately 3.5 percent compared with last year’s forecast in terms of total aircraft, and 2.3 percent in overall value. It continues a trend of four consecutive years of forecast downgrades.

“Declining used aircraft prices, continued low commodities prices, and economic and political uncertainties in many business jet markets remain as near-term concerns for new jet purchases,” noted Ben Driggs, the company’s president for the Americas.

Honeywell projects total deliveries this year of between 620 and 640 jets, which if borne out, would be the lowest yearly delivery total since 2004. The company noted that the decline of approximately 30 aircraft year-over-year comes on the heels of a moderate decrease last year, and is largely due to slower order rates for mature airplane models and a transition to new models slated for later this year into 2018. “We believe that 2017 will be the last year of decline for the industry,” noted Gaetan Handfield, senior manager of market research for the Phoenix-based manufacturer. “In 2018 we are projecting a modest increase in deliveries of 2 percent, or 15 to 20 aircraft. Beyond that, in 2019 and all the way to 2027, we are projecting a growth rate of 3 to 4 percent annually.”

“Part of that is driven by the introduction of new models,” Driggs added. “That can drive demand, just because they bring new value into the marketplace and that idea is one of the factors that we’re really seeing for the 2019 and beyond growth, because you have so many new models coming in.” Among them, he lists the Global 7000, Gulfstream G500 and G600, the Cessna Citation Longitude, and the Pilatus PC-24, as well as others that will be hitting their production stride, such as the Dassault Falcon 8X. The company also expects to see improved global economic performance as a contributor to industry growth.

For its forecast window, Honeywell believes North America will account for 61 percent of the market, followed by Latin America at 15 percent, Europe (14 percent), Asia-Pacific (6 percent), and the Middle East and Africa (4 percent).

Operator Buying Plans

Among the tools the company uses for its forecast is its annual operator survey, now in its 31st year, which involves querying more than 1,500 corporate flight departments and owner-operators about their aircraft buying plans. Globally, the company found that those surveyed, who represent approximately 3,800 business aircraft, expect to purchase the equivalent of 19 percent of their current fleet over the next five years as replacements or additions, a sizeable drop from last year’s 27 percent, but in line with the totals from 2014 and 2015. Of that amount, according to Handfield, 19 percent of those purchases are expected to occur by the end of 2018, 17 percent by the end of 2019, and an additional 14 percent in 2020.

Operators are still focusing their purchase plans on larger-cabin aircraft. “Overall, big-cabin [models] were 57 percent of all mentions,” Handfield told BJT sister publication Aviation International News, adding that the super-midsize and up category will equate to 85 percent of total delivery values over the life of the survey. “Midsize cabins will represent about 18 percent and small-cabin [models] about 25 percent.”

Regionally, North American respondents' purchase plans were down by 9 points year-over-year, and this was the primary drag on the global expectations. “What’s positive about North America is that despite purchase plans being a bit lower, more operators said they are going to buy sooner,” said Handfield. Indeed, 39 percent of the survey takers indicated that they would be making their purchases within the next two years, an increase of 4 percent over last year’s survey.

In Europe, purchase expectations dropped 11 percentage points year-over-year, to 19 percent. Of those, one third of the purchases are anticipated over the next two years, while nearly half are expected to be deferred until 2022 and beyond. Asia-Pacific, along with the Middle East and Africa, also showed declines in purchase expectations. Honeywell attributes the decline in the latter region to the continuing slump in oil prices and political tensions.

Among the BRIC countries, Brazil proved to be the lone bright spot in this year’s survey, recording the strongest new aircraft purchase plans from a major market. While the group remained in line with this year’s overall purchase percentage, its overall demand profile has shifted to later in the forecast period with less than a quarter of the intended jet purchases scheduled for the next two years.

Driggs noted that the used jet market is still having an effect on new aircraft purchase decisions. “The aircraft that are dragging down the new market are aircraft aged zero to 10 years,” he told AIN, “ones that are being offered [that] are identical to the aircraft still being sold as new. Why buy new if I can get this aircraft for 50 percent less?”

The company observed that while the number of recent model jets listed for resale is down 15 percent year-over-year and now represents less than 8 percent of the installed base, the share of those aircraft still represents more than 30 percent of total listings, as compared with pre-recession levels of 15 to 20 percent.