Honeywell Aerospace has lowered its annual 10-year business jet delivery forecast forecast to 8,600 aircraft worth an approximate $255 billion. The avionics and engine maker’s 25th annual Global Business Aviation Outlook, released on the eve of NBAA 2016, is down approximately 6 percent from last year’s demand forecast of 9,200 units worldwide.

“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.” For this year, the company estimates worldwide deliveries of 650 to 675 new private jets, down from last year’s tally of 693. According to the report, the decrease is largely due to slower order rates for mature models and stabilization in aircraft deliveries to fractional providers.

Honeywell forecasts a further slight decline in 2017 before it expects deliveries will begin to pick up in 2018 on the strength of several new aircraft entering service.

Each year the company surveys hundreds of business aircraft operators to gain insight into their buying plans over the next five years. This provides the basis for the forecast, which is also based on a number of statistical models past the five-year survey window. “What we ask them is if they have a plan to buy a new airplane either to replace a current aircraft or expand your fleet in the next five years,” said Charles Park, Honeywell Aerospace’s director of market analysis. “If yes, what model and year would you most likely want to take delivery of the aircraft so we can get a timing factor on it, and usually when they time them later in that five-year window there’s less certainty associated with it.”

“The good news part of the story is that the operator surveys actually improved this year by several percentage points, [showing] pretty widespread improvement across the regions,” noted Park. “Good strength in North America, improvement in Asia, improvement in Europe, even improvement in Africa/Middle East, and that’s a little bit counter-intuitive given the geopolitical and economic climate that we find ourselves in currently.”

According to the survey, operators plan to make new jet purchases equivalent to approximately 27 percent of their fleets over the next five years either as replacements or additions. Of those plans, 21 percent intend to purchase by the end of next year, while an additional 18 percent expect to do so by the end of 2019. Based on the responses, super-midsize and larger aircraft are expected to account for more than 85 percent of all new business jet expenditures over the next five years.

For the latter half of the forecast window, Honeywell projects a 3 to 4 percent average annual growth rate, despite the lower short-term outlook as new models and anticipated improved economic performance contribute to industry growth. Among the new models expected to be at or reaching full production around that time are the Gulfstream G500 and G600; Cessna Longitude and Hemisphere; Bombardier Global 7000; and the Pilatus PC-24.

“In the first five years there’s a bit of a gap between airplanes that are being transitioned to new models right now, and the advent of those new models, and you have operator purchase plans that are timed in the latter half of that five-year window,” Park told AIN.

Regional Mix

Broken down by region, BRIC purchase plans rebounded off last year’s lows, reaching an anticipated replacement or addition to respondents existing fleets of just more than 32 percent in this year’s survey. Those purchase plans, which exceed the overall world planned purchase rate of 27-percent, mark the first increase for the countries in the last several years.

Brazil recorded the highest new aircraft purchase plans from a major market in the survey, while Honeywell also sees improvement in Chinese and Russian purchase plans, compared with last year’s results. “This surprised me that the BRIC strengthened as much as it did,” noted Park. “This is probably reflecting some optimism of Chinese economic growth stabilizing and maybe moving a little big beyond their current policies into a more relaxed business aviation environment.”

For the remainder of the Asia-Pacific market, new jet acquisition plans roughly doubled from last year’s survey, with respondents planning on purchases equal to 28 percent of their fleet over the next five years.

Interest has also increased in the Middle East and Africa. “At first blush you would think that oil prices really haven’t recovered to anywhere near what they were before 2014, although they have firmed somewhat, so we did pick up some improved interest rates out of the Gulf States this year,” explained Park. “The overall Middle East/Africa buying plan rate is still below the world average, but it did improve quite a bit over the 2015 reads, so that was a little surprising to me, and it’s a positive surprise.”

While Europe’s purchase expectations in this year’s survey rose to replace or add the equivalent of 30 percent of their current fleet with a new jet purchase in the next five years, a level in line with averages seen since 2009, its share of the estimated global five-year demand remained at 14 percent as the European fleet has not expanded in recent years largely due to the migration of aircraft into other regions.

Lastly, North America increased its projected share of global demand by four points from last year’s survey, to 65 percent. New jet purchase plans rose five points in the industry’s largest market, helping propel the world average of expected fleet replacement or expansion over the next five years to 27 percent.

Meanwhile, the pre-owned aircraft market remains a concern as inventory, particularly among young business jets, has begun to slowly creep up. “The overall levels are at a reasonable and historically acceptable level, we’re back down in the 10 percentile range. If you look back at 2009, they were up as high as about 16 percent,” Honeywell’s Sill told AIN. “I think the thing that is noticeable to us is the number of recent models that are available for sale. That could be a dynamic of people placing existing aircraft up for sale as they wait for the new models to come into play.”