Honeywell Business Aviation Outlook Forecasts Strong Growth Potential in Middle East

“Customers tell us they want aircraft that are both economical and deliver efficiencies of flight. Technologies for the Next Gen flight environment are entering the marketplace today and are actively being pursued by every manufacturer to meet these desires,” said TK Kallenbach, Vice President, Marketing and Product Development. “Capabilities such as RNP and WAAS-LPV, teamed with improved cabin comfort, extended range, broader mission capability and safety systems will produce business jets that are highly productive, cost-efficient assets. These innovations are available now for both existing and emerging business aircraft OEMs.”

Used Jets and Flight Operations Levels

The used jet environment remains challenging in the near-term. Over the last year, asking prices have begun to slide rapidly – first for older used models, but more recently newer model jets have begun to see significant price erosion.

Average pricing is estimated to be 15 to 18 percent lower than a year ago after several years of gradual increases. The 2009 survey recorded a further decline in planned used-jet purchases over the next five years, which may add continued pressure to pricing of older less economically attractive models. Recent inventory levels have stabilized after particularly strong increases from 2008 into early 2009.

The 2009 survey recorded clear intentions regarding usage rates of business jets in the near future. All regions posted a shift in intention toward flat to lower usage rather than increased utilization in the near-term.

These actions are already in place based on reduced jet cycle counts recorded by the FAA and Eurocontrol thus far into 2009. Declines in the level of flight activity have been reported in various media and are consistent with Honeywell’s own analysis indicating a 20-plus percent business jet cycle reduction overall through three quarters of 2009.

Flight activity declines are largest in absolute and percentage terms in Light Aircraft; however most aircraft segments are posting reductions in the 12- to 24-percent range over 2008 levels of activity. Very Long Range and Very Light Jet (VLJ) activity levels appear least affected with both classes showing well below average levels of decline. Obviously, a contributing factor in these classes is the surging fleet growth in the VLJ segment and the strong recent levels of demand for Long Range models at the top end of the spectrum.

The implications of these used aircraft and jet utilization trends are significant for service providers and dealers. Economic and operating cost concerns are clearly affecting the desire to own and operate older jets as extensively as in the past. The most pronounced effects appear to be more prevalent in the smaller classes of Jets and extend down into the general aviation segments.

Global Economy and New Product Pipeline Favor Recovery and Long-Term Growth

For the past several years, the Honeywell model has been predicting a moderate down cycle to initiate in the 2009-2010 time period and the company’s public forecast releases had reflected this pattern.

The 2009 business jet down cycle has been much more severe than originally forecast in Honeywell’s 2008 survey due to the sudden, unpredicted downturn in the global economy and limitations on credit availability.

The company therefore conducted a re-survey of 500 operators during the first quarter of 2009, and this re-survey confirmed changes in purchase plans consistent with industry new aircraft delivery performance thus far in 2009.

The first quarter 2009 findings indicated that globally more than 75 percent of purchase plans mentioned to Honeywell during the 2008 survey were still in place, though about 17 percent were being deferred to a later date. It should be noted that industry deliveries of new jets were off 24 percent on a unit basis and 25 percent on a retail value basis in the first half of the year – directly in line with the re-survey projections. The improvement in purchase plans fount in the full 2009 survey process run during May – August , are encouraging in this light, and seem to indicate that operators are now looking forward with a more positive attitude toward the resumption of economic growth around the world.