It’ll be another year before there’s an upturn in biz jets, forecast says

If you’re waiting for a meaningful increase in deliveries of business jets – and perhaps, more jobs in Wichita – you’ll have to wait at least a couple more years.

Honeywell Aerospace’s new 10-year business jet forecast expects fewer new business jet deliveries in 2017 than in 2016 – between 620 and 640 aircraft, down from the 661 jets, according to the General Aviation Manufacturers Association.

Honeywell’s 2017 Global Business Aviation Outlook projects slightly higher deliveries in 2018, followed by 3 to 4 percent annual increases in deliveries between 2019 and 2027.

Over the next 10 years, the forecast expects business jet manufacturers to deliver 8,300 planes at a value of $249 billion. That’s down from Honeywell’s 10-year forecast released last year, which pegged deliveries over a decade at 8,600 business jets valued at $255 billion.

“Declining used aircraft prices, continued low commodities prices, and economic and political uncertainties in many business jet markets remain as near-term concerns for new jet purchases,” said Ben Driggs, president of Americas at Honeywell Aerospace. “That said, there are several new … aircraft models coming to market, which will drive solid growth in new business jet purchases in the midterm and long-term.”

Bigger is best

The forecast was released Sunday in advance of the National Business Aviation Association Convention & Exhibition that starts Tuesday in Las Vegas.

In an interview with The Eagle, Driggs said purchase plans for new business jets in the short term have been affected by forces such as hesitancy over the direction of a strong U.S. dollar against foreign currencies, rising concerns about North Korea’s nuclear plans and uncertainty over the fate of corporate tax reform in the U.S.

Another key factor contributing to the delay of new jet purchases is stubbornly low prices on used business jets, Driggs said.

“I would say that is a near-term issue,” he said.

That’s because there’s strong evidence that the inventory of used aircraft is depleting, especially for used business jets for sale that are less than 10 years old.

Further, he said, new jets that are set to hit the market between 2018 and 2020 will offer so many more advancements and efficiencies that the differences between used and new jets on the market will be more stark.

“Then it’s a different choice between new and used that will have an impact,” Driggs said.

Honeywell’s forecast is developed from sources such as aircraft manufacturers, macroeconomic analyses and interviews with more than 1,500 business jet operators. The forecast is in its 26th year.

As in earlier forecasts, big cabin jets are expected to account for more than half – or 57 percent – of business jet deliveries in the next decade — and 85 percent of the value of deliveries.

“There continues to be a big demand for big cabin (jets),” Driggs said.

That bodes well for Wichita’s two business jet manufacturers, Bombardier and Textron Aviation. Montreal-based Bombardier, which employs 1,600 people at its Wichita site, is in the midst of flight testing its Global 7000, a $72.8 million jet that is Bombardier’s biggest business aircraft yet. It is expected to receive certification in the second half of 2018.

Wichita-based Textron Aviation, which employs 12,000 people companywide, expects to certify its $23.9 million super-midsize Cessna Citation Longitude jet by the end of 2017. Longer term, Textron plans to develop an even bigger jet, the $35 million Citation Hemisphere, which is expected to make its first flight in 2019.

Driggs said the Longitude fits Honeywell’s definition of a big cabin jet, which includes the super-midsize category.

For deliveries of midsize jets, Honeywell expects the total over the next decade to be about 1,245 jets, or 18 percent. Small business jets make up the remaining 25 percent, or 2,075 jets.

Bombardier’s Learjet 75, assembled in Wichita, is a midsize jet. And the bulk of Textron’s Citation product line are midsize and small jets.

Where the jets will go

North America will continue to be the world’s largest consumer of new business jets, accounting for 61 percent of all deliveries over the next decade, the forecast said.

That’s down 4 percent from its 2016 forecast.

Gaetan Handfield, Honeywell’s senior manager of market research, said all but one of the forecast’s five global regions saw decreases in new jet purchase plans for the next 10 years.

Latin America was the exception, and is forecast to be the world’s second highest region for new business jet deliveries – with 15 percent – through 2027. The higher demand will largely be driven by Mexico, Handfield said.

Europe will account for 14 percent of deliveries while the Asia Pacific region will account for 6 percent of deliveries.

Russia and China each pulled back significantly in their 10-year purchase plans, the forecast said.

The Middle East and Africa comes in last, with 4 percent of the world’s business jet deliveries. That’s mostly a function of stalling oil prices, Handfield said.

This story was originally published October 8, 2017 at 7:15 PM with the headline "It’ll be another year before there’s an upturn in biz jets, forecast says."