ATLANTA , Sept. 23 /PRNewswire-FirstCall -- NBAA -- In its 16th annualBusiness Aviation Outlook issued today, Honeywell (NYSE: HON) forecasts delivery of approximately 14,000 new business aircraft from 2007 through 2017,generating industry sales of
2007 marks the fourth year of industry expansion since the last trough in2003. Year-to-date, the number of aircraft delivered is up almost 11 percentcompared with the same point in 2006 and industry-wide sales are up just over12 percent, according to Honeywell Aerospace. For 2007, Honeywell Aerospaceforecasts deliveries of over 1,000 new business jets for the first time inhistory, up from 861 in 2006. Deliveries in 2008 are expected to exceed1,300.
Year to date new jet orders have risen over 100% over first half 2006levels. Available measures of total industry book to bill ratio have exceeded2.0 thus far in 2007. "Industry growth has moved into unparalleled territory,"said Rob Wilson , President, Business & General Aviation, Honeywell Aerospace."2007 is a record year for the industry," Wilson said, and "order intakeacross most business jet categories remains very strong, with littlediscernable effect from recent stock market fluctuations and with backlogsexceeding two and one half years worth of deliveries, 2008 will likely beanother banner year for the industry."
Global Purchase Expectations Increase
The 2007 survey indicates record aircraft deliveries will continue into2008. North American purchase expectations declined slightly, butexpectations in all other world regions expanded significantly. Overall,respondents to this year's survey said they expect to replace or expand theequivalent of about 33 percent of their fleets over the next five years, upfrom about 26 percent in the 2006 survey.
The increase in overall purchase expectations is supported by theincreasingly global nature of the industry. International buyers now accountfor about 50 percent of the new aircraft deliveries projected over the nextfive years. Purchase expectations trended up in Asia, Africa and the MiddleEast and rose strongly in Europe . Aggregating all regions, five-year purchaseexpectations were well above the 24 percent average recorded over the last sixyears. Between 2008 and 2012, the 2007 survey forecasts demand for 4,600aircraft globally, not including demand from Fractional ownership or brandedcharter start up businesses.
In North America , 2007 survey respondents said they expect to replace orexpand about 20 percent of their fleets during the next five years. "Thelevel of purchase expectations in North America remains significant," Wilsonsaid. "Despite slower economic growth and recent credit and stock marketfluctuations, survey purchase plans lost less than one percent of their 2006levels. Just like last year, we continue to hear concerns about high fuelcosts, taxes, user fees and ease-of-use issues such as Temporary FlightRestrictions in the United States ."
Despite those responses, overall buying plans in the region heldrelatively steady, with replacement plans actually increasing and offsettingsome of the slowdown in plans for fleet expansion. Honeywell's baselineforecast assumes lower than three percent U.S. GDP growth in the short term.Should the U.S. economy outperform those estimates purchase expectations couldstrengthen further.
In other regions, five-year purchase expectations gained strength. In Europe , purchase expectations of 47 percent were up significantly comparedwith 2006, and are well above the 25 percent-or-better levels that haveprevailed since 2001. "Seven consecutive years of strong purchase intentionsin Europe is a great track record, and confirms the value operators receivefrom using business jets," Wilson said.
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
Most of the economic factors that support demand for business jets favorcontinued industry growth. Estimates of growth in U.S. gross domestic productcontinue to project slower growth over the next 12 to 18 months, but strongergrowth subsequently resumes. Regional economic growth rates are all generallyfavorable for the industry, especially within Central Europe , Asia, the MiddleEast and Sub-Saharan Africa . In addition, Honeywell Aerospace's "CustomerBenefit Index," a key component of the forecast, which tracks the perceivedvalue offered by business jets to fleet owners and operators, also continuesto trend upward. "Tying all these factors together with the improved purchaseplans from the 2007 operator survey, continues to paint a broadly positivepicture for the industry," Wilson added.
Owners of fleets serving fractional shareholders and Jet Card purchaserscontinue to provide a substantial portion of total industry demand.Fractional fleet operators still account for about 15-18 percent of thebacklog for business jets but have seen inroads made in their overall share ofbacklog and new deliveries by the large number of orders placed by traditionaloperators and Charter providers over the last one-to-two years. Newdeliveries to fractional fleet operators should range between 110 and 150aircraft annually through the forecast period. Sales of new ownership shareshave flattened significantly since 2004 but are back in positive territorythus far in 2007. Sales of jet cards, which offer business jet access insmaller blocks of flight hours without a long-term financial commitment orequity stake remain strong as well. New branded charter operations continueto place sizable aircraft orders, especially of new Very Light Jet (VLJ) classaircraft and adding to total aircraft demand.
"Advances in technology are sought by every manufacturer. Innovation toimprove cabin comfort, extend range, broaden mission capability and producebusiness jets that are highly productive, cost-efficient assets is ongoingacross the industry, and is coming from existing and emerging businessaircraft OEM's," Wilson said. "Gains in new aircraft capability andflexibility, incremental demand from fractional ownership and jet cards,airline use of business jets, branded charter operations and special missionapplications, are all fueling unprecedented business jet demand."
"U.S. commercial airlines in particular continue to run extraordinary loadfactors and have suffered from schedule fidelity issues. Such conditions mayresult in fractional and charter fleet operators carrying more and moretraffic," Wilson said. "If trends continue, shared ownership and charterfleets likely will continue to have high utilization rates and any resultingin capacity bottlenecks could fuel additional aircraft demand."
Replacement demand for new aircraft is also a significant source of newjet purchases in the Fractional segment. High utilization and the desire tomaintain consistent passenger experience and hold down operating costscontributes to fractional replacement rates at shorter intervals than typicalfor many traditional operator groups.
Near-Term Demand Well-Distributed Across Aircraft Classes
Based on new jet models mentioned by survey respondents, the 2007 BusinessAviation Outlook projects fairly balanced demand growth across most businessjet segments over the next five years. Medium and medium-large aircrafttogether account for about 25 percent of the projected demand through 2012.Light and light-medium aircraft make up about 19 percent of projectedfive-year demand. The largest grouping is in long-range and ultra long-rangeaircraft at 26 percent. The strength in the long and ultra long-range segmentis consistent with the last two year's findings and reflects increased needfor aircraft capable of trans-Pacific flights, as well as the growth in demandin other regions requiring more long range operations as trade and economicgrowth flourish.
North America is expected to account for about 50 percent of business jetdeliveries over the next five years, a lower-than-proportional share of globaldemand reflecting somewhat slower growth in the region and the very highlevels of purchase expectations in all other areas. Honeywell has reported onthis trend for several years and the survey is tracking with observed shiftsin orders and deliveries very closely.
Asia is up strongly and is expected to account for up to 15 percent oftotal business jet demand in the next five years. Europe rebounded strongly,and if realized, European demand will contribute about 22 percent of the worldtotal. Latin America follows at 10 percent and The Middle East/Africa regionremains steady over last year at four percent. While these percentages haveshifted somewhat, the overall demand pool has grown so individual regions arestill absorbing significant numbers of new aircraft into their fleets, even ifpercentage share slips a few points.
Demand Trends by Aircraft Segment
The 2007 Business Aviation Outlook provides the following estimates ofdemand trends by aircraft class:
Long-Range and Ultra Long-Range: Deliveries of aircraft in these segmentsare projected to top 2,000 in the forecast period Deliveries might range ashigh as 225 aircraft and should average 170 to 190 per year over much of theforecast period. Aircraft in this category include the Bombardier GlobalExpress and Global 5000, Challenger 850, Gulfstream G450, G500 and G550,Falcon 900EX, Falcon 900DX and the new Falcon F7X.
Large: Honeywell Aerospace again forecasts delivery of more than 1,300large business jets over the forecast period. Near-term, deliveries areexpected to run around 120 aircraft in 2007 and 2008 then decline slightly toa stable level of around 100-110 aircraft per year until trending up again in2013 and beyond. Aircraft in this category include the Challenger 604/605,Gulfstream 350, Falcon 2000, Falcon 2000DX and EX, the Future Super-MidsizeFalcon and Embraer Legacy 600.
Medium and Medium-Large: Combined, new aircraft deliveries in thesesegments are forecast to approach 280 annually in 2007 and average around280-300 units annually for several years. Deliveries for the forecast periodshould total more than 2,600 aircraft. Jets in these segments continue toenjoy strong interest from fractional fleet operators. Growth in thesesegments is also being fueled by the introduction of new models, bothnear-term and in the later years of the forecast period. Among the neweraircraft in these segments are the Citation Sovereign, Gulfstream G150, Hawker900XP, Hawker 850XP and Hawker 4000. Established platforms include theBombardier Challenger 300, Citation X, Gulfstream G200, Falcon 50EX, andLearjet 60.
Light and Light-Medium: Honeywell Aerospace anticipates deliveries ofmore than 3,850 jets in these segments between 2007 and 2017, an increase ofmore than 18 percent compared with delivery expectations for these segments inlast year's Business Aviation Outlook. As previously noted, the light andlight-medium segments continue to be one of the larger areas of operator newjet purchase plans in the 2007 survey. Aircraft in these segments include theHawker 400XP, Hawker 750, Citation Bravo, Citation Encore+, CJ3 (525B),Citation XLS, Grob SPn, Embraer Phenom 300, Lear 40 and Lear 45/45XR.
Very Light: Deliveries of business jets in this segment are poised toaccelerate rapidly off a base of around 175 units in 2007. Deliveries areforecast to increase dramatically in 2008 and beyond, averaging just under 320aircraft per year for the latter portion of the forecast period. The rapidincrease in projected demand reflects the introduction of new very light jets,such as the Embraer Phenom 100 and Cessna Citation Mustang, both of whichcontinue to enjoy strong order backlogs. Also entering the segment is therecently announced HondaJet. Total deliveries of very light jets for the 2007to 2017 period are expected to exceed 3,300. Other production and announcedaircraft in this segment include the Cessna CJ1+ and CJ2+, Beechcraft PremierI and Sino-Swearingen SJ30-2.
Personal Jets: The 2007 Business Aviation Outlook provides an updatedlook at the emerging General Aviation Jet segment. This portion of industrydemand has centered on the emergence of very light aircraft such as theEclipse 500, Adam 700, Diamond Jet, Cirrus, Piper Jet and others not normallycovered by the Business Aviation Outlook.
Honeywell Aerospace projections are based on general aviation orowner-pilot survey data collected in 2005 and corporate flight departmentinterest reflected in the 2007 purchase expectations survey. Total demandpotential over a 10 year period is estimated to be in the range of 6,000-7,000very light personal jets. When combined with new-generation low-cost aircraftcarried in the Very Light segment of the Business Aviation Outlook, the totaldeliveries range from 8,000-9,000 aircraft from 2007-2017 and fall directly inthe range predicted by earlier Honeywell survey research. The projections nowfactor in demand from fractional ownership companies, branded charter and someemerging "air taxi" operations that have ordered ultra-light jets as the coreof their fleets. Inclusion of these additional sources of demand hasincreased the outlook over the pure owner pilot based levels reported a yearago. Additionally, new OEM's with credible development programs have emergedand the forecast window has moved a year further into a period of rapidlyexpanding delivery ramp up plans for established programs.
Business Liners: The current Business Aviation Outlook does notexplicitly include aircraft in the Business Liner class (typically well over100,000 pounds takeoff weight and based on transport airframes). However,purchase expectations are recorded for these models in the survey. Deliveriesof aircraft in this class are projected to total around 250 through 2017 andshould average more than 20 aircraft per year in the forecast period.Aircraft represented in this segment include the Boeing BBJ series, the AirbusElite A318 and Airbus Corporate Jetliner as well as the Lineage 1000 fromEmbraer, plus corporate versions of twin aisle aircraft. This segmentcomprises an additional
The Honeywell Aerospace Business Aviation Outlook and the purchaseexpectations it summarizes are a snapshot of expected business aircraft salesat a point in time and reflect fleet operators' views of current events, suchas 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 ofunforeseen events such as a war, major economic shock, fuel crisis or newregulatory restrictions. The Outlook is based in part on Global Insight'sbaseline economic forecast assumptions that call for economic growth atquarterly 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 21years and has shared the findings publicly for the last 16 years. This year'sBusiness Aviation Outlook is derived from interviews with over 1,500 corporateflight departments around the world that operate more than 15 percent of theworld's turbine-powered fixed-wing aircraft. The Outlook is also shaped byinformation from aircraft manufacturers, other industry sources and HoneywellAerospace's analysis of the impact of various economic indicators on industrydemand trends. Honeywell's Business Aviation Outlook tracks purchaseexpectations for business jets with gross take-off weight (GTOW) of less than100,000 pounds.
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Based in Phoenix , Honeywell's aerospace business is a leading globalprovider of integrated avionics, engines, systems and service solutions foraircraft manufacturers, airlines, business and general aviation, military,space and airport operations.
This release contains forward-looking statements as defined in Section 21Eof the Securities Exchange Act of 1934, including statements about futurebusiness operations, financial performance and market conditions. Suchforward-looking statements involve risks and uncertainties inherent inbusiness forecasts as further described in our filings under the SecuritiesExchange Act.
SOURCE Honeywell Aerospace