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Honeywell Bizav Outlook 2009-19 Analysis

What a difference a year makes! Twelve months ago Honeywell was predicting a record year ahead- and sales of 17-000 new business jets by the end of 2018 with a total value approaching $300 billion. This year’s forecast is far less grand. Honeywell is now forecasting a continuing downturn for at least another year- followed by a protracted recovery and a new business jet market totaling just 11-000 units from 2009 through 2019 - with an estimated value of $200 billion.

Mike Potts   |   1st December 2009
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Mike Potts Mike Potts

Mike Potts is a writer and consultant who has been involved in aviation for more than 30 years....
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11-000 bizjets forecast for delivery between 2009-2019- but where’s the shortfall?

What a difference a year makes! Twelve months ago Honeywell was predicting a record year ahead- and sales of 17-000 new business jets by the end of 2018 with a total value approaching $300 billion. This year’s forecast is far less grand. Honeywell is now forecasting a continuing downturn for at least another year- followed by a protracted recovery and a new business jet market totaling just 11-000 units from 2009 through 2019 - with an estimated value of $200 billion.

That’s a reduction of more than 35-percent from the previously predicted size of the market over the next ten years- both in unit sales and in dollar volume. Moreover- Honeywell does not believe we will be returning to a market like we saw in 2008 until late in the next decade. This is more than just a two- or three-year down cycle followed by a return to prosperity. This is a major realignment of expectations over the entire period of the Honeywell forecast.

It’s not too surprising that this year’s Honeywell forecast is down from a year ago. Last year Honeywell forecasters were pretty much set up to fail by the timing of events beyond their control. In the days and weeks immediately before Honeywell released its 2008 forecast- the United States’ economy was experiencing its most significant upheaval since the onset of the Great Depression in the 1929-1930 timeframe.

The results of this economic turmoil were already severely impacting business aviation sales on the eve of the 2008 NBAA Convention – the time when Honeywell traditionally presents its forecast. Things were turning bad so fast at that point that Honeywell even considered not presenting its forecast.

To its great credit- Honeywell went forward with its presentation- noting that while the events then unfolding would affect the near-term predictions- the global trends on which the long-term forecast was based were still operative and valid. And- in fact- in this year’s forecast Honeywell noted that many of the factors driving jet sales buying decisions are still operative- although the actual purchase execution for many customers is likely being pushed back by several years.

In the shortest term- Honeywell’s 2008 Forecast was absolutely correct. It said 2008 would be a record year for jet sales- and it was- with deliveries totaling 1-288 jets (as reported by the General Aviation Manufacturers Association). After that- though- things didn’t go so well. Honeywell had thought 2009 would also be a record year. It will not be. As of the first nine months- Business Jet deliveries were down by 37.8 percent from the 2008 totals- and nobody is expecting the last quarter to be any better.

Armed with updated data collected earlier this year- Honeywell agrees. In its new Forecast Honeywell is projecting 2009 deliveries will finish in the 750 to 800 range. The depth and speed of the downfall this year came as a surprise to Honeywell- according to Rob Wilson- president of Business and General Aviation- Honeywell- who presented the Forecast both this year and last.

“We didn’t expect the backlogs to disappear like they did-” Wilson said at this year’s presentation- noting that during the past year some customers had walked away from million-dollar deposits securing business jet orders. “We hadn’t seen anything like that before.”

For several years- Honeywell had been forecasting a slight downturn in the market toward the end of the first decade of the 21st century- to coincide with a general economic contraction expected to occur in the normal ebb and flow of business after a period of extended prosperity. The current downturn is consistent with that contraction- but no one expected it to be accompanied by volatile fuel prices- a financial crisis and a worldwide credit crunch that- for a time- made it difficult for even the most creditworthy companies to finance new aircraft.

As a result- the downturn has been much more severe than anyone predicted. Based on Honeywell’s research- the hard times are going to be with us for a while longer. Honeywell expects the downturn will continue into the coming year with the jets for sale market continuing to sink as much as 10 to 12 percent further- bottoming-out below 700 units for 2010. Then things should start to get better- but slowly.

What Honeywell is now projecting is a recovery cycle that will look much like the market build-up that occurred between 2003 and 2008. Wilson did not offer delivery projections by year- but based on Honeywell’s Business Jet Delivery chart presented as part of the Forecast- 2011 will be about like 2009 and deliveries won’t top 800 units annually until 2012.

After that- growth will continue to be gradual- with deliveries not reaching the 1-000 mark until 2015. If Honeywell’s projections are correct- we won’t see another year like 2008 until at least 2017. That’s a significant change from a year ago- when Honeywell thought deliveries would easily top 1-000 units per year- even during the downturn it thought would begin after 2009 and last into 2012.

The net effect of this re-defined recovery is to take about 6-000 business jets out of the forecast. It’s hard to tell from Honeywell’s description exactly what markets will fall short to account for this reduction.

Discussing the markets by region- Wilson noted that in North America many buyers are shifting their purchase plans into 2011 and subsequent years- but nonetheless said overall buying plans in the region remain stable. In Europe he described purchase expectations being at an all-time high. In Asia- Africa and the Middle East- Wilson observed purchase expectations also remain high.

Nonetheless- Honeywell foresees a total market 35 percent smaller than it was expecting a year ago. So- where did 6-000 airplanes go from last year’s forecast to this one? Geographically it’s hard to tell- but comparing the aircraft category projections of last year’s forecast with the current one- it’s clear to see where Honeywell expects the reductions to occur.

• Long and Ultra-Long Range Jets: A year ago Honeywell was projecting 2-300 aircraft in this category. This year the number is 1-500- or a reduction of 35 percent. Deliveries in this category will average 120 to 140 per year- down from a projection of 240 per year in last year’s forecast. The reduction would have been greater still- but for the addition of a class of ‘Very High-Speed’ aircraft to the segment.

• Large Jets: This year’s forecast projects 1-000 deliveries in this category for the period- down from 1-400 in the 2008 forecast- or a drop of about 28 percent. A year ago Honeywell thought deliveries in this class could reach 120 units per year. Now it is expecting about half that number annually between now and 2012.

• Medium and Medium-Large Jets: Expectations for this category are down nearly 47 percent – more than any other group in the forecast. A year ago Honeywell’s 10-year projection for the Medium and Medium-Large category was 4-500 aircraft. This year’s forecast projects a total of just 2-400 for the forecast period. In the next two or three years Honeywell expects deliveries in this category to total 150 to 180 units a year- down from more than 300 of these airplanes that were delivered in 2008.

• Light and Medium-Light: This is another hard-hit category- with projected expectations down 40 percent in the 2009 Honeywell forecast. This year Honeywell predicts 2-400 aircraft will be delivered in this category between 2009 and 2019- but a year ago forecast 4-000 deliveries in the 2008-2018 timeframe.

• Very Light: Honeywell expects this category will “continue to build momentum off a base of over 200 units in 2008-” but apparently not as much momentum as expected last year. A year ago Honeywell had thought sales in this category could reach 400 units annually by the end of the forecast period. Now it thinks that number will be about 300.

The above are the categories that make up Honeywell’s Forecast. With reductions of 800 units in the Long and Ultra-Long Range grouping; 400 in Large; 2-100 in Medium and Medium-Large; 1-600 in Light and Medium-Light; and 1-200 in Very Light- the total reduction from last year’s forecast to this year’s totals 6-100 jets.

Honeywell did not offer an explanation for why the 10-year forecast should drop so drastically- and- in fact- did not present any comparison between this year’s total and last year’s. But then- Honeywell has never compared previous forecasts with the current outlook.

As it has in recent years- Honeywell also offered observations about two categories that are not technically part of its official forecast: Personal Jets and Business Liners. ‘Personal Jet’ is Honeywell’s category for the class of very light jets that included the Eclipse 500- the Adam 700- Diamond Jet- Cirrus and the Piper Jet. A year ago Honeywell had thought Personal Jet sales might total 4-000 to 5-000 units- but its revised projection is for “somewhere between 1-000 and 1-500” Personal Jets - a reduction of approximately 75 percent.

‘The Business Liner’ category- by comparison- was essentially unscathed - slipping from 250 airliner-based business jets for the forecast period last year to 240 this year. So that’s the market as Honeywell sees it as of the end of the third quarter in 2009.

Clearly this outlook is disappointing compared with a year ago- but it’s not disastrous. We have to remind ourselves that three or four years ago this forecast would have been welcomed with enthusiasm.

We can also take some encouragement in noting that Honeywell’s projections for the five years of record growth we’ve just experienced were somewhat conservative. In most years the market actually grew faster than Honeywell said it would.

Read more about: Honeywell | Aircraft Sales Trends

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