Honeywell Aerospace Forecasts $233 Billion in New Business Jet Sales Through 2017

As NBAA opens, biz remains bullish


The strength of the Euro against the dollar certainly contributes as anincentive to buy new aircraft, as does the increased wealth and businessexpansion anticipated in Eastern Europe and Russia . Overall, Europeanoperators reported a particularly strong increase in replacing their fleets,while holding fleet expansion plans more in line with 2006 levels. A greatdeal of interest in moving into larger and rangier models was reported byEuropean respondents and charter/managed fleet operators contributed to theimproved purchase plans as well.

The Asia/Africa/Middle East region once again ranks as the area with thehighest purchase expectations. Purchase expectations grew for the fifthconsecutive year to record levels exceeding 50 percent, again attaining thehighest readings in the history of the survey. Middle East and selectedAfrican economies continue to benefit from higher oil prices and expect to beactive buyers. Confidence in Asian economic growth remains high boostinginterest in longer-range aircraft with state-of-the-art avionics.

In Latin America, operators reported a strong level of purchaseexpectations. Just over 38 percent of current fleets are expected to bereplaced or added to over the next five years. Purchase plans recovered fromthe lower 2006 level by eight points, and interest is high in historicalterms, exceeding all prior survey levels except 2006. Latin American purchaseplans were influenced in the 2007 survey by several sometimes contradictoryfactors. The region still reflects the positive impact of elevated energyprices on regional economies, including those of Mexico , Venezuela and Brazil .On the other hand, concern over potential political instability was mentionedagain in 2007 as a reason to postpone new aircraft purchases.

Chief reasons cited for replacement of current aircraft remain consistentwith prior surveys, with age leading overall and range improvement also listedas an important criteria in every region. European operators listed morespacious cabins as an important reason for replacement aircraft followed bylonger range. Improved speed, comfort and updated technology in avionics andengines also appear as leading reasons for aircraft replacement across allregions.

Factoring in projected record aircraft deliveries in 2007 and theincreased global purchase expectations noted above, this year's BusinessAviation Outlook forecasts another record-setting year in 2007. Beyond 2008,the outlook remains strong, with annual deliveries expected to run in the1,200 - 1,400 range for the balance of the decade, with only modest cyclicalvariability.

Five-year purchase expectations for used jets also stayed in line with2006 results and continued a modest rate of improvement. Purchases of usedaircraft have been at relatively high levels for several years, resulting infirming prices and a declining inventory of late-model jets. Over the lastfew quarters average asking prices have trended upward and supply as measuredby share of active fleet for sale has trended downward, moving in line withsurvey results over the past two years. Recent sales activity has beenparticularly strong with second quarter 2007 unit sales posting the highestsecond quarter level in 5 years. Current average pricing is running nearly 14percent ahead of levels from the same period a year ago though there isobviously some variability on a by model basis. Large backlogs in the new jetsector also contribute to stronger used jet business environment since fewslots are available on many models until 2010 or beyond.

"World economic conditions play a key part in the industry expansion we'veexperienced but steady gains in aircraft value offered to operators alsostimulates growth. Value to the operator takes the form of improved aircraftreliability, mission flexibility, cabin productivity, comfort andconvenience," Wilson said. "Historically, Honeywell Aerospace's BusinessAviation Outlook shows increases in purchase plans and subsequent aircraftdeliveries tend to be highly associated with the introduction of new aircraft.Manufacturers help stimulate demand with new models incorporating advances inaviation technology within the larger global economic framework," he said."Improved engines, safety systems, cockpit avionics and cabin information andcomfort improvements along with advances in aerodynamic design continue todeliver compelling gains in value to fleet operators, pilots and passengers."

Global Economy and New Product Pipeline Favor Long-Term Growth

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