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

As NBAA opens, biz remains bullish


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.

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