Demand for new business aircraft in Europe is riding high on a wave of economic growth that is particularly strong in the former communist eastern states. The market is being fanned by the bolstered buying power of customers paying in euros and British pounds as the U.S. dollar continues to languish on international currency exchanges.
These were the broad conclusions of two well-respected market forecasts issued last October by Honeywell and Rolls-Royce at the 2006 National Business Aviation Association convention in Orlando, Fla. This week’s European Business Aviation Convention & Exhibition here in Geneva is expected to provide tangible evidence of these buoyant market conditions.
Honeywell’s latest annual survey of existing business jet operators shows European firms replacing aircraft or expanding fleets at a rate of just over 25 percent of their existing number of aircraft, continuing a trend that has prevailed since 2001. The study asked some 1,400 corporate flight departments operating “more than 10 percent of the worldwide turbine-powered fixed-wing aircraft” about their buying plans for the next five years.
“Six consecutive years of strong purchase intentions in Europe is a great track record, and an indication of the value operators derive from business jets,” concluded the U.S. avionics and engine manufacturer’s president for business and general aviation Rob Wilson.
Nonetheless, the anticipated business aircraft growth rates in Europe are expected to be outstripped in key emerging markets over the next decade, with Asia expected to generate fleet growth just short of 60 percent. Honeywell forecasts that the Middle East and Africa will boost their combined fleet just over 47 percent, while Latin America will increase by just over 30 percent. By contrast, demand from the relatively mature North American market is expected to constitute growth of 21 percent over the same period.
Overall, the manufacturer predicts deliveries of around 12,000 new business aircraft worth $195 billion over the next 10 years to 2016. It puts the 2006 worldwide fleet at just over 13,400 units flown by 8,450 operators–representing a 5.3-percent compound annual growth rate since 1981.
Importantly, Honeywell reported that customers have a particularly strong interest in enlarging their fleets, as opposed to just replacing current equipment. Where capacity is being replaced, the OEM reported that European operators see larger cabins as their most pressing requirement, followed by longer range. In contrast, the age of existing aircraft is the main consideration for the overall global industry, followed by requirements for longer range. Higher speed, greater comfort and upgraded avionics and engines technology are other leading reasons across all regions, according to Wilson.
Considering the breakdown of five-year new-aircraft demand (excluding fractional-ownership programs), Honeywell estimated that Asia will account for 12.8 percent of deliveries, just ahead of Europe (12.6 percent). Latin America will account for 9.8 percent of deliveries, with 4 percent going to Middle East/Africa, leaving the predominant North American share at 60.7 percent.
Rolls-Royce Ups Growth Prediction
In a longer term 20-year forecast, Rolls-Royce also has predicted that the recent strong demand for new business jets will continue, with the UK-based engine maker now saying its revised 2007 analysis will show higher near-term requirements. In its forecast last year, Rolls-Royce anticipated the 2006 production at more than 800 new aircraft and the actual deliveries numbered 885 units. Accordingly, marketing vice president Alan Stiley told EBACE Convention News the Rolls-Royce 2007 near-term forecast likely will be amended upward to include even greater numbers of aircraft than expected 12 months earlier.
Highlighting a decline in North American demand, down from 77 percent of new business jet deliveries in 2003 to 55 percent last year, Stiley said the continuing market characteristic is “dominant rest-of-world demand that will not ease any time soon.” Rolls-Royce attributes this to the relative weakness of the U.S. dollar against other currencies, which has made aircraft cheaper outside North America, and to growth among other economies.
Stiley explained that business jets–most of which are made in the U.S.–have
become more affordable in Europe, while wealth-distribution patterns elsewhere mean that economic growth has increased the number of potential customers. The manufacturer foresees requirements for 16,400 “traditional” business jets during 2006-25, complemented by demand for 7,500 very light jets (VLJs), in a market worth almost $350 billion.
Overall, Rolls-Royce predicted a $70 billion market for 51,000 engines over the next 20 years. With more than 5,000 business jets already at least 20 years old, it forecasts the retirement of 4,700 aircraft by 2025.
In projecting demand trends by class of aircraft, the OEM has excluded VLJs, for which it does not provide engines and which account for a low proportion of overall engine market value. But VLJs have been included in the company’s overall forecast of requirements because they might become a disruptive factor in the market, for which it wants to collect data. “Including a small number of air taxis, we assume VLJs are an evolution, not a revolution,” concluded Stiley.