Bombardier Bullish On Long-Term Bizjet Market
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Kerry Lynch
Despite the sharp economic downturn in 2009, Bombardier Aerospace believes business aircraft manufacturers will still deliver some 75 percent more aircraft in the next 10 years than they did in the previous 10-year period. Bombardier, which released its Business Aircraft Market Forecast during last week's Paris Air Show, predicted a market for 11,500 aircraft that will generate $256 billion in revenue from 2009-2018. This compares with 6,500 business aircraft valued at $122 billion delivered between 1999 and 2008, Bombardier said.
Bombardier noted that its forecast is tempered by the current economy. "The sharp contraction of the U.S. economy and ensuing worldwide recession during 2008-2009 is expected to cause a significant reduction in the near-term demand for business jets," the company said, projecting plane-makers will continue to record "negative" orders in 2009 with a significant number of cancellations.
Order intake is expected to dip to a low of 375 units in 2009, but eventually grow to 1,400 units per year by 2013, the company said. Orders reached a record 1,800 in 2007, and manufacturers were on a strong pace in the first half of 2008, with orders for 1,375 more aircraft.
"However, in the second half of the year, the economic downturn led to an abrupt drop in orders and a significant number of cancellations," Bombardier said, noting the light aircraft category was most affected. Industry backlog began to decline from the peak of $77.8 billion in the third quarter of 2008 to $69.7 billion in the first quarter of 2009. "Taking into account the soft order activity experienced to date in 2009, as well as the estimated level of aircraft cancellations and deferrals, the industry backlog is expected to continue shrinking in the short term."
Bombardier believes that the used aircraft inventory, a key indicator of the overall health of the industry, will begin declining in 2010 and return to historic levels of between 10 percent and 13 percent of the overall fleet during the forecast period. The percentage of the overall business jet fleet for sale on the used market "began to increase rapidly" in 2008, it said.
"Many aircraft owners either experienced difficulty or failed to sell their pre-owned aircraft, which, in turn, made them less likely to purchase replacement aircraft," the company said. "The growing number of aircraft on the preowned market is a leading indicator of the business aircraft market downturn that started in the fourth quarter of 2008."
Used Aircraft And Image Factors
Between 2002 and 2007 the used aircraft inventory, as a percentage of the fleet, decreased from 15.7 percent to 10.4 percent. From early 2008 to the first quarter of 2009, the level rose from 16.1 percent to 17.4 percent. "This increase was significant, especially in the second half of the year, when manufacturers' new order intake levels slowed dramatically."
Bombardier was optimistic about another key factor manufacturers cite in the current economic cycle - image. "Business jet usage suffered from considerable negative media coverage during late 2008 and into 2009, particularly in the U.S.," it said. "The resulting high-profile media coverage masked the fact that for the vast majority of owners and users, business jets are vital assets for increasing company productivity and competitiveness. Business jets are as much a productivity tool as smartphones and laptop computers."
But industry, led by the National Business Aviation Association and the General Aviation Manufacturers Association, has "responded vigorously" with the No Plane, No Gain education and advertising campaign, Bombardier said. The company "believes that unwarranted negative perceptions regarding business jets (in certain regions) will no longer be an issue once the market fully reassesses the positive benefits offered by business aviation."
The full version of this story appears in the June 22 Weekly of Business Aviation
Image credit: Bombardier
