Corporate executives are increasingly seeking jets that can fly as far as New York to Shanghai and cruise just under the speed of sound, tilting the market toward the biggest, most luxurious models.
Jets sold over the 11 years through 2022 will average $25 million per plane, according to a study by Honeywell International Inc., up 8.7 percent from an estimate of $23 million last year. The market is likely to reach $250 billion for the 11-year period, up from $230 billion in a similar period through 2011.
“It has to do with the global growth patterns and the need for companies to reach out to other parts of the world to do business and to do it productively,” said Robert Wilson, president of the Business & General Aviation unit of Honeywell, which released the survey before this week’s National Business Aviation Association conference in Orlando, Florida.
Demand for jets that don’t need refueling on intercontinental flights is propping up the market after deliveries of mid-size and light planes fell last year. Canada’s Bombardier Inc. is leading the drive with the Global 8000, which will travel 7,900 nautical miles (14,631 kilometers).
General Dynamics Corp.’s Gulfstream is set to deliver the first G650, which travels 7,000 nautical miles and boasts a top speed of Mach 0.925, this year.
Those jets have $50 million-plus price tags, more than 10 times models that can’t make it across the U.S. without refueling. Of jet deliveries last year, heavy jets rose by 2.8 percentage points to 41 percent while light jets’ share of deliveries slipped 3.1 percentage points to 40 percent, according to JPMorgan Chase & Co.
Gulfstream already is studying the next jet product even before buyers get to fly the G650, its longest-range plane, Chief Executive Officer Larry Flynn told journalists at the conference.
“We look at it on what the customers want to pay for and then go build what they want,” Flynn said. “So far, they like bigger cabins, they like faster airplanes and they like the range. So more of that is in the future.”
Large plane sales have been buoyed by big companies that have better weathered weak growth and can afford long-range jets, said Brad Thress, chief of business jets for Cessna, a unit of Providence, Rhode Island-based Textron Inc. Earlier this year, Cessna announced its longest-distance jet ever, the Citation Longitude, with a range of 4,000 nautical miles.
The rapid growth for jets in emerging markets also favors large planes, Steve Ridolfi, president of Bombardier’s business-jet unit, said in an interview. In countries like China, corporate jets are used mostly by company owners who travel to Europe or the U.S. Also, China doesn’t have the general-aviation airports and services that allow more use of small aircraft for domestic flights.
“These emerging markets grow first from the top. It’s the billionaires who buy first, and then you go down the pipe,” Ridolfi said in an interview. “So when you talk about China, it’s big airplanes first.”
In the next five years, the number of jets in China will increase an average of 30 percent per year, Wilson said. Russia will grow 15 percent and India 18 percent per year. Participants in the survey of 1,500 companies with private fleets pointed to range as the top reason for choosing an aircraft, Wilson said.
From 2012 through 2022, large jets are forecast to account for 42 percent of planes sold and 69 percent of the total dollar cost, Wilson said. Mid-size jets will make up about 28 percent and only a fifth of the dollar value.
Light and mid-sized jets, which sell best in mature markets like the U.S. and Europe, will rebound when smaller companies have more clarity about the U.S. taxes and budget cuts, Europe’s recession and the slowdown in Asia, Thress said. Many people start out with a light jet, such as the four-seater Citation Mustang, and then trade up for larger ones as their business grows, he said.
“The interest is out there,” Thress said in an interview. “We just think that people could use a little bit of confidence and stability in the economy.”
The longer-range jets from Bombardier and Gulfstream have created more competition for customers of Boeing Co.’s business jets, which have less range at 6,200 nautical miles although about three times the cabin space, said Steve Taylor, president of Boeing’s business-jet unit.
“While we’re still pretty different products, there are some customers in between those products,” Taylor said. “When they were able to do city pairs we couldn’t, well, that would drive some customers across.”
Embraer SA’s Lineage 1000, which has a range of 4,400 nautical miles, is the Brazilian company’s longest-range plane, leaving it without an aircraft to match the ultra long-range G650 and Global 8000, Ernie Edwards, president of Embraer’s executive jet unit, said in an interview last night in Orlando.
“We know that we have a gap in our product portfolio that we one day will fill,” he said in an interview. “But, there’s no immediate plan to fill that. At some point in the future we may announce something.”
Altogether, Honeywell forecasts deliveries of 680 to 720 new business jets this year compared with 683 planes last year, excluding Boeing and Airbus SAS private jets. Purchase expectations for new jets weakened in Asia, which makes up about 4 percent of the world fleet, Wilson said. In Latin America, which has about 10 percent of the world fleet, they rose.
NetJets Inc., the private-jet unit of Warren Buffett’s Berkshire Hathaway Inc., ordered as many as 120 of Bombardier’s longest-range Global aircraft last year in a deal valued at $6.7 billion. The Columbus, Ohio-based provider of private jet services also placed a $9.6 billion order in June for as many as 425 new mid-size aircraft from Cessna and Bombardier on expectations that market will eventually rebound, Pat Gallagher, chief of sales at NetJets, said in an interview.
For now, flying farther and faster is what’s in demand, he said.
“We’re doing a lot more flights to Russia and Brazil and China and other faraway places than we used to,” Gallagher said. “As companies start to do business more globally, they need aircraft that can get them there.”