Bombardier released here its first-ever forecast for the business aviation market segments in which it competes, and the Canadian company’s crystal ball is about as rosy as anyone else’s. As far as new products go, Bombardier Aerospace president and COO Pierre Beaudoin said only that “our first priority is the Learjet line.”
Excluding VLJs, Bombardier foresees the delivery of 9,950 business jets worth $228 billion between 2007 and 2016, up significantly from the 5,722 jets worth $104 billion delivered in the past 10 years. (The Honeywell forecast predicts more than 14,000 new business jets, including the heavier VLJs, between now and 2017.) At the end of last year, said Bombardier, the worldwide business jet fleet was estimated to be around 12,000. “With a yearly retirement rate of 0.5 to 1 percent of the fleet and deliveries as anticipated, the business jet fleet should grow to approximately 20,600 aircraft in 10 years. This impressive growth will put pressure on pilot training, service and maintenance facilities and all other aircraft infrastructures,” the forecast noted.
Business aviation thrives or dives on the health of the economy, and Bombardier refers to predictions by economics research house Global Insight to put the business aviation market in perspective: “The worldwide gross domestic product is forecast to grow over the next 20 years at a compound annual growth rate of 3.15 percent. By 2026, economies outside North America and Europe will account for 47 percent of the world’s combined GDP, up from the current 39 percent. Two of the faster growing markets and the two most important in terms of population, China and India, will nearly double their combined share of the world’s GDP to 15 percent from today’s 8 percent. Moreover, increased globalization is giving the business jet industry greater access to many of these markets.”
Corporate Orders: 78 Percent
Bombardier’s internal estimates show that corporations accounted for approximately 78 percent of business jet orders in 2006. U.S. corporate profit growth hit a strong 13 percent in 2006. “The Blue Chip consensus forecast for 2007 and 2008 is between 4.5 and 5.3 percent. The problems faced by the U.S. credit market, as well as the increase in energy and natural resource prices, if sustained, will eventually have an impact on corporate income. The forecast lowering of U.S. corporate profits might lead to relatively stable or slightly decreasing demand for business jets in the U.S. in the short term.”
Noting that orders have outstripped deliveries for the past three years, Bombardier places the current industry backlog at 30 months of production with a value of about $52 billion.The OEM’s share is $17.2 billion (as of July 2007) versus $12.2 billion as of January 2007, an increase of 41 percent.
On fractionals: “As fractional customer growth has now stabilized, estimated at 6 percent annually by UBS in 2006, the majority of current fractional deliveries are to replace older fractional aircraft. Fractional ownership programs’ demand for new aircraft has hence matured over the last 10 years and has stabilized at around 10 to 15 percent of traditional market deliveries. Bombardier forecasts that demand from fractional ownership programs should remain on the current trend and generate some 110 to 140 deliveries per year over the next 10-year period.”
Bearing in mind the concerns about the U.S. economy, Bombardier expects annual U.S. business jet orders to reach between 400 and 700 aircraft over the next 10 years, compared with between 175 and 250 jets per year in the still-growing European market. The OEM predicts that both ends of the market segment studied (light/superlight jets and large-cabin/converted airliners) will expand faster than the midsize and super-midsize segments.
Manufacturing operations in Mexico are expected to save the company significant money by no later than 2010, according to Bombardier Business Aircraft president Pierre Gabriel Côté. Reductions of 11 percent are anticipated for structures (Challenger 850 center fuselage) and 33 percent for electrical harnesses (Challenger 300 and Global Express).
Bombardier has signed with UK-based offset provider Climate Care to manage its new carbon-offset program, which will take effect as an option for new aircraft buyers in February. The cost to offset one-year’s average carbon emissions from the aircraft will be included in the purchase price, and the money will be invested through Climate Care in green energy projects. Bombardier is enrolling its demonstration fleet and PartsExpress aircraft in the program, an annual investment of more than $250,000.