Honeywell’s current 2009 statistical forecasting model predicts a business jet delivery decline of more than 40 percent measured in dollar terms (excluding fractional and start-up jet taxi demand) with the trough occurring in 2010 and a flat to moderate improvement in 2011. The model is signaling a rather robust recovery starting in 2012 with the next cyclic peak likely to be higher than in 2008, although fairly late in the forecast period.
During the last down cycle, the Honeywell’s statistical analysis accurately predicted the timing and magnitude of the 2003 trough and also accurately predicted the recovery timing. The magnitude of the recovery upswing at that time was driven by the rapid globalization of new aircraft demand, leading to a reconfiguration of the model emphasizing world economic performance more so than that of the U.S. alone.
Based on the historical relationships between the global economies, new model value and the business jet segment, there is every reason to believe that demand for business jets will begin to recover 12 to 18 months after a global economic recovery begins.
Overall, Honeywell believes that the longer-term outlook for business aviation is still positive. The company said its update process factors the survey findings together with statistical model analysis, manufacturer insights, backlog levels and timing to produce the current outlook.
Honeywell predicts deliveries will cycle down in 2009 and 2010 and the peak-to-trough decline will be in the range of 40 to 45 percent. By 2012, a combination of pent-up demand and global economic recovery will cause demand for new jets to improve. The pipeline of new high-value models also supports the long-term growth scenario and international demand will remain significant.
A year ago, it appeared that the large industry backlog would act as a buffer to any moderate economic contraction and reduce the volatility in new aircraft deliveries. As the extent of the recession worsened and the insidious nature of the credit crisis was revealed, it became evident that industry backlogs were insufficiently firm to provide short term buffering.
Despite significant cancellations and deferrals, there are still several thousand aircraft on order – many scheduled for delivery post-2010. Assuming economic recovery progresses, it is still likely delivery of these aircraft will be taken, providing a boost to shipment levels as we move into the 2011-2012 period.
Honeywell Aerospace’s “Customer Benefit Index,” a key component of the long-range forecast, which tracks the perceived value offered by business jets to fleet owners and operators, also has a favorable long-term trend based on many new production models and development programs in the pipeline – even after taking account of several recent program delays and cancellations.
“Evaluating these customer values along with the purchase plans from the 2009 operator survey still supports a more positive long-range outlook for the industry,” Wilson said.
Owners of fleets serving fractional shareholders and jet card purchasers have reduced demand sharply in the current recession. Fractional fleet operators still account for about 10 to 12 percent of the backlog for business jets, but have drastically curtailed current new aircraft additions in the face of net share sales erosion.
New jet deliveries to fractional fleet operators are off more than 76 percent through the first three quarters of 2009. Sales of new ownership shares have deteriorated further after 2008 posted a 13 percent loss. As a result, Honeywell is projecting much lower deliveries into this segment for the next few years as excess capacity is worked off and shareholder levels are rebuilt.
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