December 23, 2011
Yet another business aviation forecaster is predicting the start of a long-term industry recovery in 2012.
Forecast International (FI), a provider of market intelligence, forecasting, proprietary research and consulting services for the worldwide aerospace, defense, electronics and power systems industries, expects modest improvements next year, with stronger growth coming in 2013.
“Production is forecast to total 683 units in 2011, and then rise to 728 units in 2012,” FI said of projected aircraft sales in the executive summary to a recent report, entitled The Market for Business Jet Aircraft 2011-2020.
FI agrees with several earlier forecasts that have predicted pent-up demand and other market factors will help sustain growth into the next decade. The report predicts production in the 2011-2020 timeframe to total 10,907 aircraft at an estimated value of $230.3 billion. However, FI doesn’t expect business aircraft production to return to the 2008 record high of 1,313 jets until 2018.
Reflecting the growing international nature of business jet travel, the FI report predicts that most of the industry’s gains will be driven by sales of larger, high-value business jets. While the U.S. remains the largest geographic market for business aircraft, the country’s share of worldwide sales has declined to between 45-50 percent. “Market demand is strong in the Middle East, Asia and parts of Latin America,” the report said.
In October, Honeywell predicted in its 20th Annual Business Aviation Outlook that new aircraft purchases would increase next year by between 3-5 percent in units and 5-8 percent in dollars. It also expects the recovery to continue into 2021, with sales during the 10-year period reaching about $230 billion, or about 10,000 aircraft.
Both reports acknowledge that business aircraft production will decline for a third straight year in 2011. In December, the General Aviation Manufacturers Association (GAMA) said worldwide deliveries of general aviation aircraft totaled 436 units during the third quarter, up slightly from 425 units in 2010. Billings in the quarter rose to $4.8 billion, up from $4.1 billion the same time a year ago.
However, GAMA said shipments for the nine-month 2011 period, ending Sept. 30, were down nearly 10 percent. Billings for the period totaled $12.1 billion, down 10 percent from the 2010 period.
Caveats
As promising as the forecasts sound, economic concerns have led at least one business aviation analyst to scale back his earlier predictions for growth starting in 2012.
“Our 2012 forecast has flattened a bit, although the total is still slightly higher than 2011,” said Richard Aboulafia, vice president of The Teal Group. “The key U.S. market is in better shape than generally known, but a difficult global environment is keeping U.S. companies from spending money. Europe, of course, looks like it has another year or two of pain and restructuring ahead. Some emerging markets, particularly China, are also showing worrying signs of a slowdown.”
Nonetheless, Aboulafia still sees some positives on the horizon that will continue to drive business aviation market growth.
“Corporate profits and cash holdings have reached record levels,” he said. “That, coupled with three or four years of drastically reduced aircraft deliveries, implies considerable pent-up demand. When the global picture brightens, and when confidence returns, this market could recover at a very high growth rate. But that probably won’t start until later in 2012, and it might not start until well into 2013.”
Brian Foley, of Brian Foley Associates, remains upbeat about growth prospects for 2012, noting that many segments of the market already are posting improvements.
“FBO, MRO, charter, fractional and large cabin jets have already been on the upswing, which should continue throughout 2012,” Foley said. “As for the small- and mid-size jets, their recovery is largely dependent on equity markets showing some form of stabilization and growth. My guess is as good as anyone’s when this may happen. Let’s hope it’s in 2012.”
International Business Aviation Council Ltd.