Bombardier Business Aircraft has scaled back its annual market forecast to reflect continued uncertainty in world economies. Over the next 10 years, through 2025, the Canadian airframer forecasts 8,300 new-jet deliveries—in the market segments in which it competes—with a combined value of $250 billion. Twelve months ago, Bombardier predicted 9,000 deliveries with a combined value of $267 billion—meaning that this year’s projections are, respectively, down by 8 and 7 percent.
Presenting its latest forecast at an EBACE show press conference on Tuesday, Bombardier reported that economic slowdowns in key emerging markets and reduced demand in the large-cabin sector are the main drivers of its reduced forecast for new deliveries. It was these trends that in May 2015 prompted Bombardier to reduce production rates for its Global 5000 and 6000 large-cabin jets, with resulting layoffs. But the company emphasized that by the end of 2017 it expects these negative trends to start reversing.
Bombardier sees North America accounting for the greatest number of new-jet deliveries between 2016 and 2025 with 3,930 aircraft. Europe is expected to be the next-largest market, with 1,530 deliveries—meaning that Asia, the Middle East, Africa, Russia & the CIS and Latin America between them will account for just over one-third of the anticipated total. Latin America is expected to be in third place for deliveries with 790, followed by China with 700.
“This annual forecast identifies longer-cycle trends that we use in our own strategic decisions, enabling us to react quickly and efficiently to constantly changing markets,” said Jean-Christophe Gallagher, Bombardier Business Aircraft’s vice president of strategy, marketing and innovation. “We have built our leadership position in aviation by continuously monitoring the market and making proactive business decisions based on macroeconomic analyses and our industry expertise.”
According to Bombardier market intelligence and analysis manager Thomas Fissellier, the forecast team expects the emerging markets to return to economic growth this year and next, contributing to a restored world annual GDP growth rate of 3 percent by the end of 2017. Historically, a 3 percent GDP rate has correlated with higher new aircraft order rates and strong business aviation activity.
Bombardier’s projections show anticipated large-cabin-jet delivery rates for the whole industry down by as much as around 10 percent from 607 in 2015 to between 540 and 560 in 2016. The company believes delivery rates in the medium and light categories will be fairly stable. Over the 10-year period, Bombardier forecasts 2,400 large-cabin deliveries (worth $130 billion), 2,800 midsized jets ($84 billion) and 3,100 light jets ($36 billion).
Orders in the jet segments forecast by Bombardier stood at 607 in 2015, which was just one percent up from the 601 in 2014. Last year actually represented the highest delivery rate since the last [pre-financial crisis] peak in 2008 and Fissellier described it as a “transition year.”
Fissellier explained that Bombardier’s forecast works on a so-called regression model that consists of the following three key variables, each with its own supporting driver listed in parentheses: pre-owned aircraft inventory (world GDP growth, MSCI equity market index, and interest rate spread); orders (world GDP growth, oil price, percentage of pre-owned inventory on market, and one-year residual aircraft values); and deliveries (world GDP growth, production capability and order backlog).
