ORLANDO, Fla., Oct. 4 /PRNewswire-FirstCall/ -- NBAA -- In its 17th annual Business Aviation Outlook issued today, Honeywell forecasts delivery of approximately 17,000 new business aircraft by manufacturers from 2008 through 2018, generating expected industry sales of $300 billion.
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2008 marks the fifth consecutive year of industry expansion since the last industry slowdown. Year-to-date, the number of aircraft delivered is up almost 22 percent compared with the same point in 2007, and industry-wide new jet delivery revenues are also up just over 22 percent.
For 2008, Honeywell Aerospace forecasts deliveries of nearly 1,200 new business jets for the first time in history, up from 1020 in 2007, a 15 percent increase, despite an uncertain economy in North America. Deliveries in 2009 are expected to range between 1,300 and 1,400 jets depending on how quickly several new programs are able to ramp up.
"New Aircraft sales have remained at record levels," said Rob Wilson, President, Business and General Aviation, Honeywell Aerospace. "2008 will add to the string of record years the industry has experienced and order intake across most business jet categories remains strong, consistent with last year's forecast. Aircraft backlogs currently equate to nearly three years worth of deliveries, so 2008 and 2009 still shape up to be strong years for the industry."
Year to date new jet orders have risen roughly 20-25 percent over first half 2007 levels, however a sizable portion of these orders are for new models entering service in 2012 and beyond. Honeywell believes that order intake will moderate to more sustainable levels in the second half of 2008 and into 2009. Nevertheless, available measures of total industry book-to-bill ratio are still running at or over two-to-one so far in 2008.
While the overall outlook for the OEM portion of the industry remains positive, recent data from the FAA and Euro-control points to reduced business aircraft flight activity in the U.S. and Europe for the rest of this year and potentially impacting 2009 flight operations. Operators appear to be reacting to economic pressures and unexpected fuel price increases by reducing activity and in some cases putting aircraft up for sale.
Global Purchase Expectations Stable
The 2008 survey indicates record aircraft deliveries will continue into 2009 with a likely peak next year or in 2010. North American purchase expectations improved slightly, but expectations in several other world regions softened to some extent. In total, respondents to this year's survey said they expect to replace or expand the equivalent of about 32 percent of their fleets over the next five years, within one percent of the level recorded in the 2007 survey.
The stability in overall purchase expectations is supported by the increasingly global nature of the industry. International demand now accounts for about 45-55 percent of the new aircraft purchase plans projected over the next five years. Coupled with very high order rates from non-U.S. customers over the past few years already reflected in the existing backlog, the regional mix of deliveries will continue to reflect this global shift in share.
Purchase expectations trended up in North America and Latin America, declined moderately in Europe and the Middle East and fell more noticeably in Asia. Aggregating all regions, five-year purchase expectations equaled the 2007 levels and remain well above the 24 percent average recorded for several years prior to 2007. Between 2009 and 2013, the 2008 survey indicates a demand for 5,200 aircraft globally, excluding demand from fractional ownership or branded charter start-up businesses and piston aircraft owner trade-ups into jet aircraft. The 2008 survey projection represents a 14 percent increase over the five-year demand estimated from a year ago.
North America Expectations
In North America, 2008 survey respondents said they expect to replace or expand about 25 percent of their fleets during the next five years. "Despite slower economic growth and recent credit and stock market fluctuations, survey purchase plans gained five points over their 2007 levels, reflecting the value and productivity these aircraft deliver in today's more challenging business environments," Wilson said
Regional Purchase Expectations
In other regions, five-year purchase expectations were mixed. In Europe, purchase expectations of 41 percent were off about seven points compared with record levels posted in 2007, but are well above the 25 percent-or-better levels that have prevailed between 2001 and 2006. "Eight consecutive years of strong purchase intentions in Europe is evidence of the value operators place in using business jets," Wilson said.
The strength of the Euro, Pound, Swiss Franc and Ruble against the dollar are acting as purchase incentives for new aircraft, as does the increased wealth and business expansion enjoyed by Eastern Europe and Russia. Recent strengthening of the dollar against these currencies adds some risk to the forecast. We believe a sustained stronger dollar will place some pressure on maintaining strong sales rates in these regions.
Asia, Africa and Middle East Expectations Remain High
The Asia, Africa, and Middle East regions still rank as the areas with the highest purchase expectations despite some reductions compared to 2007. Purchase expectations of 44 percent recorded in Africa/Middle East were off just under six points from the 2007 record high of nearly 50 percent. Nearly all the decline in purchase plans came from the fleet expansion category.
Asia Purchase Plans Moderate, But Remain High In Relative Terms
Asian Purchase plans posted the largest drop in the 2008 survey, but remain high compared to other regions and from a historical perspective. Total replacement and expansion plans totaled just over 50 percent for the region in 2008 after approaching 80 percent last year. Since the fleets are relatively small in this region some volatility is to be expected.
Latin America
In Latin America, operators reported stronger levels of purchase expectations in 2008. Slightly less than 45 percent of current fleets are expected to be replaced or added to over the next five years. Purchase plans improved from the 2007 level by six points, and interest is still high in historical terms, exceeding all recent survey levels. Latin American purchase plans were influenced in the 2008 survey by continued reflection of the positive impact of elevated energy prices on regional economies, including those of Mexico, Venezuela and Brazil. Stronger currencies have added purchasing power in the area as well.
Worldwide Fleet Replacement Drivers
Chief reasons cited for replacement of current aircraft remain relatively consistent with prior surveys, with age, cabin size and range improvement all listed as important criteria in every region. Asian and Middle Eastern operators listed more spacious cabins as a primary reason for replacement aircraft followed by longer range. State of the art technology in avionics and engines also continued to gain prominence as leading reasons for aircraft replacement in every region.
"Gains in new aircraft capability and flexibility, incremental demand from fractional ownership and jet cards, airline use of business jets, branded charter operations and special mission applications, and a global economy are all contributing to business jet demand."
Near-Term Demand Well-Distributed Across Aircraft Classes
Based on new jet models mentioned by survey respondents, the 2008 Business Aviation Outlook projects fairly balanced demand growth across most business jet segments over the next five years. Medium and medium-large aircraft together account for about 29 percent of the projected demand through 2013, with the medium-large segment interest up several points over the 2007 share. Light and light-medium aircraft make up about 23 percent of projected five- year demand. The next largest grouping is in long-range and ultra long-range aircraft at 21 percent. Sustained interest in the long and ultra long-range segment has been present for several years and reflects increased need for aircraft capable of trans-Pacific flights, as well as the growth in demand in other regions requiring more long range operations as trade and economic growth flourish.
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.
This year's Business Aviation Outlook is derived from interviews with over 1,800 corporate flight departments around the world that operate roughly 14 percent of the world's turbine-powered fixed-wing aircraft. Honeywell's Business Aviation Outlook tracks purchase expectations for business jets with gross take-off weight (GTOW) of less than 100,000 pounds.
NOTE TO EDITORS:
A fully detailed forecast that includes regional breakdowns and aircraft model expectations is available at http://www.honeywell.com/
Honeywell International is a $38 billion diversified technology and manufacturing leader, serving customers worldwide with aerospace products and services; control technologies for buildings, homes and industry; automotive products; turbochargers; and specialty materials. Based in Morris Township, N.J., Honeywell's shares are traded on the New York, London and Chicago Stock Exchanges. For additional information, please visit http://www.honeywell.com/
Based in Phoenix, Honeywell's aerospace business is a leading global provider of integrated avionics, engines, systems and service solutions for aircraft manufacturers, airlines, business and general aviation, military, space and airport operations.
This release contains forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934, including statements about future business operations, financial performance and market conditions. Such forward-looking statements involve risks and uncertainties inherent in business forecasts as further described in our filings under the Securities Exchange Act.
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