Honeywell lowers business jet forecast – again

Work is done inside the fuselage of a Cessna Citation business jet on an assembly line Textron Aviation’s west campus. (April 2015)
Work is done inside the fuselage of a Cessna Citation business jet on an assembly line Textron Aviation’s west campus. (April 2015) File photo

Honeywell Aerospace’s new forecast is a mixed bag for business jet manufacturers in Wichita and elsewhere.

Honeywell’s 2016 Global Business Aviation Outlook, released Sunday, projects 8,600 business jet deliveries valued at $255 billion over the next decade.

That’s 600 fewer jets and $25 billion less than its 2015 forecast, which is in its 25th year.

It’s the second time in as many years that Honeywell has lowered its 10-year forecast projections from the prior year. In 2015, it lowered its forecast projections from 2014 by 250 jets and $10 billion.

Slow and struggling economies in parts of the world are among the factors behind this year’s lower forecast projections, which over the length of the forecast average out to a 3 to 4 percent average annual growth rate for the industry, Honeywell officials said.

“We continue to see relatively slow economic growth projections in many mature business jet markets,” said Brian Sill, president of commercial aviation for Honeywell Aerospace. “While developed economies are generally faring better, commodities demand, foreign exchange and political uncertainties remain as concerns.”

Midterm interest

But the forecast – released in advance of the National Business Aviation Association Convention & Exhibition that starts Tuesday in Orlando – does show some improved interest in new aircraft purchases in the midterm, especially between 2018 and 2019, Sill said.

And North America – with historically the highest global demand for the light and midsize jets Bombardier Learjet and Textron Aviation build in Wichita – will continue to be a primary driver for new jets, representing nearly two-thirds of projected demand.

The forecast is developed from sources such as aircraft manufacturers, macroeconomic analyses and interviews with more than 1,500 business jet operators, Honeywell said.

Honeywell’s short-term projections call for deliveries of between 650 and 675 jets in 2016. Last year, the forecast projected business jet deliveries of between 675 and 725 new jets.

According to the General Aviation Manufacturers Association, the industry delivered 654 jets in 2015.

Waiting to take delivery

In 2017, the forecast expects deliveries to be slightly lower than in 2016, though it didn’t quantify how much lower. The lower deliveries that year will partly reflect customers waiting to take delivery of new jet models slated for production in late 2017 and 2018, the forecast said.

Twenty-one percent of new business jet purchase plans are expected to made by 2017, while 18 percent are expected to be made in both 2018 and 2019, the forecast said. In other words, more than half of new aircraft purchases over the forecast period will be made in a three-year window.

The forecast projects only new business jet demand regionally over its first five years due in part to fluctuating currency values, slower global economic growth projections and political uncertainty, the forecast said.

“What’s different here is we’ve still got really high exchange rates against our trading partners, we have not seen a rapid increase in commodity prices, and there’s no real change in geopolitical (circumstances),” said Charles Park, Honeywell Aerospace’s director of market analysis.

Bulk in North America

During the period, North America will account for the bulk of the demand at 65 percent, the forecast said, which is up from 61 percent in last year’s forecast. It’s followed by Europe at 14 percent, Latin America at 12 percent, Asia Pacific at 6 percent and Africa and the Middle East at 3 percent.

Of those regions, Europe and Africa and the Middle East are flat, Latin America is down 6 percent, and Asia is up 3 percent compared with last year’s forecast.

As with last year’s forecast, most business jet operators prefer big business jets, from super midsize to business liners such as Boeing Business Jets.

“This is not a change,” Park said. “The operators have been very consistent in their preference.”

Those aircraft are expected to account for more than 85 percent of expenditures in the next five years, the forecast said. That could be a positive for Textron Aviation, which expects to certify its super midsize Cessna Citation Longitude next year. It also plans to develop the large-cabin Citation Hemisphere in time for a 2019 first flight.

But the preference for large jets does not signal the beginning of the end for small and midsize business jets.

“That’s not to say the light jets and medium jets are fading away,” Park said. “They both physically expand in terms of units and dollar value” over the period.

Jerry Siebenmark: 316-268-6576, @jsiebenmark