Photographer: Duncan Chard/Bloomberg

Luxury-Jet Market Value Seen Slipping for First Time Since 2009

  • Shipments in 2015-2025 forecast at $270 Billion, a 3.6% drop
  • Emerging markets drag on plane demand, Honeywell survey shows

Global long-term spending on private jets is starting to slow for the first time since 2009 as slumping commodity prices sap demand in emerging markets, according to an industry forecast.

Deliveries for the 11 years ending in 2025 will be valued at $270 billion, Honeywell International Inc. said Sunday in its annual survey of the luxury-aircraft market. That’s down 3.6 percent from last year’s comparable projection, and snapped a streak of gains since the last U.S. recession ended.

The decline reflects weakness in Brazil, Russia, India and China, the group known as the BRIC countries, and the impact of political conflicts in the Middle East and Africa, according to Brian Sill, chief of Honeywell’s business and general aviation unit. Delays in some new plane models are also pushing back demand, he said.

“The flattish theme continues,” Sill said. “Some of the headwinds we see in the BRIC countries are being offset by North America, which continues to be strong.”

Honeywell, a maker of avionics and small jet engines, released the results at the annual trade show for the National Business Aviation Association in Las Vegas, the industry’s biggest annual forum.
Jet shipments will drop 2.6 percent to 9,200 planes, according to Honeywell, whose forecast had predicted fluctuations in deliveries but no drop in the planes’ list value in the post-recession years. Large planes that had spearheaded the recovery are now seeing slower growth.

Those aircraft, including the Gulfstream G550 and Bombardier Inc.’s Global 6000, had found favor among company executives in emerging markets who have to fly long distances to financial centers such as New York and London.

China’s economic slowdown -- third-quarter expansion of 6.9 percent was the least since 2009 -- has had a knock-on effect for jet demand across Asia, said Charles Park, director of marketing analysis and planning at Honeywell’s aerospace unit. A government austerity plan and corruption crackdown is also hurting sales there, he said.

Sluggish Europe

Europe is treading water as the region grapples with sluggish economic growth and weakening currencies, while Latin America showed surprising strength, based on fleet managers’ plans to purchase jets, Park said. Mexico, the region’s largest business aircraft market, is driving demand, he said.

U.S. buyers are emerging as more crucial for planemakers such as Embraer SA and Textron Inc.’s Cessna. The U.S. accounts for about 80 percent of Cessna’s deliveries, said Kriya Shortt, Textron’s chief of sales and marketing. At Embraer, about 70 percent of deliveries have gone to the U.S. this year, up from less than 60 percent in 2014.

“The U.S. represents a higher portion of the opportunity,” Embraer Executive Jets Marketing Director Luciano Froes said in a telephone interview. “It’s a market that is very prone for the midsize and super-midsize cabin planes and we’re well positioned there.”

One positive sign for planemakers: The supply of used jets, which can draw customers away from new models, has dropped to about 9 percent of the fleet from about 16 percent in 2009, Honeywell said.

This year’s deliveries probably will total 675 to 725 planes, excluding converted airliners and entry-level aircraft, Honeywell said. That probably will drop next year, Park said, before new models including Dassault Aviation SA’s Falcon 5X, Gulfstream’s G500 and Bombardier’s Global 7000, start arriving in 2017 and 2018, Park said. The industry peaked at 1,136 shipments in 2008.

“We’re just slogging along,” said Janine Iannarelli, president of Par Avion Ltd., a Houston based plane brokerage. “There is a shortage of buyers, there’s limited activity and prices keep correcting.”

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