Firm Predicts Tough BizAv Recovery
Benet Wilson
All meaningful indicators - utilization, prices, used aircraft availability, and corporate profits - show a prolonged and painful downturn for business aviation, according to a new report from Fairfax, Va.-based Teal Group.
Business aircraft have been hit harder by the economic crisis than any other aerospace market, said the report, written by Richard Aboulafia, Teal Group's vice president of analysis.
Aboulafia's forecast assumes a three-year downturn. "The key demand drivers - economic growth and corporate profits - will only recover in late 2010. It will take some time to reduce record inventories of available jets," he wrote. "This means new business jet deliveries won't start to recover until 2012. The trough year of our forecast - 2011 - will see business jet deliveries reduced by 40 percent relative to 2008. Our forecast then calls for a five-year recovery period with 10 percent growth per year starting in 2012."
Using these assumptions, the report forecasts production of 12,768 business aircraft worth $195.9 billion (in 2009 dollars) over the next 10 years. This includes 9,300 business jets worth $153.9 billion, 575 corporate versions of jetliners and regional jets worth a combined total of $29.6 billion, and 2,893 business turboprops worth a total of $12.4 billion.
In looking at traditional business jets, more than 50 percent of these by value will be class four and five high-end models, the report said. "At the other end of the spectrum, we are downgrading Very Light Jets (VLJs) from 'oversold' to 'irrelevant,'" the forecast said. The report counted just 2,272 VLJs, including 1,095 Mustangs, 915 Phenom 100s, and 262 HondaJets - and nothing from anyone else.
The report compared the current state of the industry with 1999-2008, which saw the production of 10,568 business aircraft worth $159.2 billion, also in 2009 dollars. This includes 7,696 jets worth $134.5 billion plus 381 jetliners and RJs worth $14 billion and 2,491 turbopops worth $10.7 billion.
While the predictions still call for increases in the next 10 years, they are far less optimistic than Teal Group's forecast last year, which called for 18,401 business aircraft, including 14,289 jets, worth $270.6 billion in 2008-2017. The last forecast also stated that "We're still concerned about using these unusually good times as a forecasting base year." This has proven to be a serious problem in most business aircraft forecasts over the past two years, including the Teal Group's, wrote Aboulafia. "When the market resumes its growth, it will start from a much lower base," he observed.
Gulfstream and Bombardier will be the market leaders for traditional business jets, at 24.8 percent and 23.2 percent, respectively, by value of deliveries, the report said. Cessna (19.2 percent) and Dassault (16.8 percent) will be in the second tier. Beechcraft will have 8.8 percent and Embraer 6.4 percent, said the report, with Honda having the remaining 0.7 percent. These figures exclude turboprops, jetliners, and corporate regional jets, it added.
Photo credit: Mike Vines
