ORLANDO, Oct. 19, 2014 /PRNewswire/ -- In its 23rd
annual Business Aviation Outlook, Honeywell (NYSE: HON) is
forecasting up to 9,450 new business jet deliveries worth
$280 billion from 2014 to
2024.
The 2014 Honeywell outlook reflects an approximate 7 to 8
percent increase in projected delivery value over the 2013
forecast. Slightly higher unit deliveries are coupled with modest
list price increases and the continued strong showing of larger
business jet models in the delivery mix to generate the growth.
Honeywell forecasts 2014 deliveries of approximately 650 to 675
new jets, a single-digit increase in percentage growth year over
year. The improvement in deliveries expected in 2014 is largely due
to program schedule recoveries, new model introductions and
additional fractional uptake.
"2015 industry deliveries are anticipated to be up modestly
again, reflecting momentum from several new model introductions and
some gains linked to incremental global economic growth," said
Brian Sill, president, Business and
General Aviation, Honeywell Aerospace.
SURVEY FINDINGS
In its latest survey, Honeywell found that the operators
interviewed plan to make new jet purchases equivalent to about 23
percent of their fleets over the next five years either as a
replacement or in addition to their current fleet. This level of
interest is several points lower than the past four survey cycles,
but is in line with results of 25 percent or less that were the
norm until 2006. Of the total new business jet purchase plans, 19
percent are intended to occur by the end of 2015, while 14 and 22
percent are scheduled for 2016 and 2017, respectively. The survey
does not allocate projected demand to specific years beyond 2017.
Purchase timing is shifted somewhat later compared with last year's
results and leads to a modest slowdown in projected demand for the
near term. However, pre-sold positions for new models entering
service in 2015‒16 should mute this effect on recorded
deliveries.
LARGER JETS REMAIN POPULAR
Despite lower overall purchase expectations, operators continue
to focus on larger-cabin aircraft classes ranging from super
midsize through ultralong-range and business liner, implying these
types of aircraft will command the bulk of the value billed from
now until 2024. This large-cabin group is expected to account for
more than 75 percent of all expenditures on new business jets in
the near term. Volume growth between now and 2024 will be led by
these classes of aircraft, reflecting 60 percent of additional
units and nearly 85 percent of additional retail value.
"The strong desire for larger-cabin aircraft with greater range
and advanced avionics is seen again in this year's survey," Sill
said. "We are also seeing some improved interest in midsize and
small-cabin models this year. As a full-spectrum supplier, we are
pleased to see aircraft in every class with significant Honeywell
equipment content among the most popular models cited in the
operator survey."
"For many years, the Honeywell Operator Survey has pointed the
way for the industry," said Carl
Esposito, vice president of Marketing and Product
Management, Honeywell Aerospace. "The annual outlook reflects
topical operator concerns but also identifies longer-cycle trends
we use in our own product decision process. It has helped Honeywell
focus on investments such as designing and developing flight
efficiency upgrades, optimized propulsion offerings, innovative
safety products and enhanced aircraft connectivity offerings. The
survey also contributes to our business pursuit strategy, and helps
position Honeywell consistently on high-value platforms in growth
sectors."
Another notable finding in the 2014 survey is the improved
interest levels for midsize and small-cabin aircraft in operator
purchase plans. While large-cabin models still garner the largest
share of specific buying plans, the midsize and smaller models
recovered some share for the first time in several years,
reflecting improved prospects for popular production models as well
as stronger interest in newer models just now available or soon to
enter service.
REGIONAL BUYING
DETAILS
Regional purchasing results are affected by each market's
maturity, economic environment and other characteristics. Emerging
markets generally show higher, but historically more volatile,
levels of demand and a more pronounced preference for larger
aircraft. As traditional regional markets have coped with economic
variability and political uncertainties, key emerging markets have
been shaping recent industry growth, backlog and portfolio
composition.
This year, Honeywell sees a realignment of near-term regional
market shares. The overall level of forecast aircraft demand coming
from inside North America slipped
back after increasing for the first time since 2010 last year.
Roughly 59 percent of projected demand comes from North American
operators, down two points from the 2013 survey. "New aircraft
acquisition plans in North America
are still significant given the region's overall size," Sill said.
"Coupled with projected gains in fractional fleet deliveries, North
American demand should still support industry volumes as some of
the traditional higher-growth regions work through another year of
reduced growth rates."
Honeywell first began spotlighting growth in the BRIC countries
(Brazil, Russia, India
and China) in 2011. Last year,
these results led the survey with 42 percent of respondents
reporting acquisition plans. This has lowered to 29 percent in the
2014 survey, but remains above the world average of 23 percent. Of
the BRIC countries, Brazil
remained a bright spot by recording the strongest new aircraft
purchase plans in the survey. Overall, the BRIC countries still
retain a relatively strong near-term demand profile with 45 percent
of intended new jet purchases scheduled for the next two years.
Together, the results from BRIC countries evidence a continued
tempering of enthusiasm compared with a year ago but are still
quite strong when compared with other regions, or with results
accrued during the more than 20 years Honeywell has been conducting
the survey.
Asia
Pacific
Operators in the Asia Pacific
region, where many of the industry's major players still have high
expectations for long-term future growth, report new jet
acquisition plans for 12 percent of their fleet. This is much lower
than the 24 percent reported last year and has slipped below the
world average. Disappointing growth figures from several major
regional economies, higher levels of regional tensions and
government austerity initiatives have muted operator enthusiasm in
the current survey. As a result, the total share of global demand
over the next five years for Asia
Pacific is about 3 percent, off two points from 2013
levels.
Fleets in this region have been growing at double-digit rates
throughout the past five years and should continue to expand at
strong, if slightly slower, rates over the next few years. This
year, almost 30 percent of respondents are scheduling their new
purchases within the first year of the five-year horizon. When
comparing purchase timing in Asia
Pacific between the past two surveys, it is evident that the
front-loaded profile has resurfaced and should help bridge the gap
to improved operator sentiments in the future.
Most operator concerns centered on the economic tempering,
tensions and fiscal austerity affecting several of the region's
major economies. However, this is a topical phenomenon as most
forecasts call for a relatively strong recovery in economic growth
within the region over the next five years.
"Survey findings from this part of the world rely on a smaller
base of operator pools, and we do not believe the 2014 results
represent any long-term structural change in the region's
fundamental underlying growth drivers or commitment to business
aviation," Sill said.
Middle East and Africa
The share of projected five-year global demand attributed to the
Middle East and Africa region moved below its historical range
of 4 to 7 percent this year.
In the Middle East and
Africa, 18 percent of respondents'
fleets are projected to be replaced or added to with a new jet
purchase, down from 26 percent last year. The level of purchase
plans is under the world average and unsurprising in that it has
been a year of significant political upheaval and ongoing conflict
in the region as well as a year in which oil prices have drifted
lower and health crises have emerged in Africa. Regional distress has taken a toll,
with operators in the region scheduling their purchases later in
the next five-year window than expected last year, with only 21
percent of purchases planned before 2017.
Latin America
Latin America's survey results
indicate 28 percent of the sample fleet will be replaced or added
to with new jet purchases, which is 11 points lower than last
year's result. The 2014 results remain above the world average, and
planned acquisitions remain more front-loaded than the world
average, with almost 47 percent of this region's projected
purchases timed to happen between 2014‒2016. As a result of the
current purchase plan levels, Latin
America's share of total projected demand holds relatively
steady compared with a year ago at 17 percent.
North America
North America, the industry's
mainstay market, has seen new jet purchase plan levels slip about
six points to 22 percent, just under the world average of 23
percent, after averaging near 25 percent for the past six years.
Though buying plan levels might be moderate when compared
with emerging markets, North
America represents nearly 60 percent of projected global
demand for the next five years based on the region's larger
installed business jet base, affirming the region's unquestionable
importance to the industry's future.
Timing of North American acquisitions has been deferred compared
with other regions, suggesting that despite aggregate five-year
interest levels reported by potential purchasers, short-term
conversion plans could be moderate until 2016.
Europe
Europe's purchase expectations
jumped this year, to 31 percent, and are now back in line with the
30 to 33 percent levels seen in the three surveys before 2013. The
European share of estimated global five-year demand also moved back
in line with norms at 18 percent in the 2014 survey. European
operators are still contending with sluggish growth and increased
political tensions.
Within the current setting, the buoyancy of operator attitudes
is surprising. Russia, which
supported the region before 2013 with strong local purchasing
ambitions, has slipped in reported purchase plans in the 2014
survey, as Western sanctions expanded over the Ukraine crisis. Honeywell must note that
Russian responses in this year's survey were again limited, so the
small sample has an added element of volatility.
A comparison of the planned timing for European purchases
indicates uneven proportions of demand in the next three years of
the five-year window, with about 20 percent allocated through 2015
followed by a 13 percent dip in 2016 and a strong rebound to over
30 percent in 2017.
"The long-term macro trends that support demand for business
jets are still in place, notwithstanding the topical issues we find
coloring responses to the 2014 Operator Survey," Sill said. "We
believe global business aviation growth will be aided by structural
and regulatory reforms, longer-term economic growth and aircraft
innovation. As a systems supplier, we believe product innovation in
the form of aircraft connectivity and communication technology
solutions like the JetWave Ka-band satellite connectivity system,
safety and situational awareness offerings like the IntuVue weather
radar, as well as flexible service offerings and value-added
upgrades, will support the expanded use of business aircraft as a
key tool in the global economy."
USED JETS AND FLIGHT ACTIVITY
Shifting from jet purchases to flight activity, over the course
of the past year the pace of recovery has improved but remains
somewhat mixed. Much of the ground lost by operations during the
2009 recession still remains to be recaptured, while moderate
improvements in international flight activity and in U.S.
operations in general have continued into 2014.
Among the indices followed by Honeywell, pre-owned jets for sale
and flight activity continue to receive special attention.
The number of pre-owned jets for sale today has fallen from a
year ago. Approximately 10 percent of today's fleet is up for
resale, down from a high of nearly 16 percent reached in 2009.
Current levels are normal in light of the past decade's history;
meanwhile, asking prices continue to drift lower.
Before 2008, younger inventory (10 or fewer years old) usually
made up 20 percent of what was for sale, but this year, the
percentage of younger used jets still hovers at just over a quarter
of all listings. This is down from record averages of about 30
percent reached in 2009. In 2014, improvements have occurred in the
total young jet listings but in proportion to the decline in
overall listings, keeping the overall share stable. Operator
respondents increased their used jet acquisition plans moderately
again in this year's survey by about two points, equating to 28
percent of their fleets in the next five years.
All regions posted increased used jet buying plans except
Latin America. The used jet
purchase plan increases over the last two surveys mesh nicely with
the observed decline in used inventory for sale. Honeywell also
sees increases in regions that experienced declines in new jet
purchase plans, perhaps reflecting a shift in the near term to a
more financially conservative approach to upgrading or expanding
business jet fleets with used equipment.
Prospects for improved levels of flying activity in the near
future remain modest. Honeywell expects U.S. business jet cycles to
close this year with an expansion of about 5 to 6 percent, largely
driven by international flight growth and relatively strong charter
operations. 2015 should also bring growth in the low single
digits.
European activity in 2014 — which does not include Russia in this case — is expected to decline
approximately 1 percent. International flights (outside the EU) are
actually slightly positive thus far this year. Modest growth is
expected in 2015, driven in part by improved economic prospects in
Western and Central Europe but
remaining exposed to further drags imposed by the ongoing political
tensions present with Russia.
FRACTIONAL MARKET
Flight activity for charter-like operations and fractional
ownership appears to be doing relatively well in the U.S. but not
yet translating into many new aircraft deliveries. Fractional
operators have taken only 11 new jets through mid-year. Large order
backlogs accumulated over the past two years should impact delivery
performance favorably beginning in the second half of 2014 based on
delivery schedules.
METHODOLOGY
Honeywell's forecast methodology is based on multiple sources
including, but not limited to, macroeconomic analyses, original
equipment manufacturers' development plans shared with the company,
and expert deliberations from aerospace industry experts. Honeywell
also taps into information gathered from interviews conducted
during the forecasting cycle with over 1,500 non-fractional
business jet operators worldwide. The survey sample is
representative of the entire industry in terms of geography,
operation and fleet composition. This comprehensive approach
provides Honeywell with unique insights into operator sentiments,
preferences and concerns, and provides considerable insight into
product development needs and opportunities.
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