Despite a dip in near-term purchase expectations, Honeywell Aerospace believes new aircraft models and long-term regional growth will help create a market for 9,450 new business jets valued at $280 billion through 2024.

Honeywell’s 23rd annual Business Aviation Outlook marks a slight 2-3% increase in anticipated deliveries but a 7-8% increase in value over its 2013 forecast. This is a turnaround after Honeywell had lowered its outlook in 2013.

The forecast anticipates an improved market long-term, even though operators surveyed had scaled back their expectations for fleet replacement within the next five years. Operators in 2013 had suggested they plan to replace 28% of their fleets over a five-year period. This year that dipped to 23%.

Even so, Honeywell is seeing a number of encouraging signs, with purchase plans rebounding in Europe after years of uncertainty and continued strong growth in Brazil. Honeywell forecasters also believe the market will be buoyed by a number of new models that will reach or are just now reaching the market – in all categories. Also playing a role in the strengthening market, Honeywell says, is the return of deliveries to fractional operations after years of little activity.

The predicted $280 billion value, though, reinforces the continued growth of the large aircraft segment, which is anticipated to account for 46% of all deliveries through 2024. Honeywell is also seeing a firming of pricing in the market, factoring in modest list price increases in its forecasted market value.

For this year, Honeywell is forecasting between 650-675 business jets, marking single-digit growth over 2013. Honeywell believes that modest growth will continue again in 2015. This growth is coming as fractional deliveries have picked back up and pre-sold positions for new models sustain production lines. In addition, Honeywell points to anticipated global economic growth during that time.

Tempering further growth are the lowest purchase expectations in several years. But Honeywell believes the 23% is in line with norms that existing before 2006 of 25% or less. The expectations were softer near-term, with 19% coming by the end of 2015, 14% in 2016, and 22% in 2017.

The business jet market is remaining split with demand heavily focused on larger-cabin aircraft, from super midsized through the ultra long-range aircraft.  The larger-cabin group is expected to account for 75% of the value of the market near-term and represent 60% of the unit growth and 85% of the growth in dollar value through 2025.

“The strong desire for larger-cabin aircraft with greater range and advanced avionics is seen again in this year’s survey,” says Brian Sill, president of Business and General Aviation for Honeywell Aerospace.

But the growth is not limited to this category, Sill adds, saying “We are also seeing some improved interest in midsize and small-cabin models this year.” In fact, in the 2014 survey, small and midsize aircraft increased their share of the purchase expectations for the first time in several years. 

These improvements come as numerous new models, from the Embraer Legacys to the HondaJet and Pilatus PC-24, enter the market. “Historically, newer models create buzz,” Sills says, and the survey results underscore that with interest peaking for several of those models. Beyond the announced models, a number of unannounced projects are in the works, which should stretch out this demand, says Charles Park, market analyst for Honeywell.

Interest regionally has shifted over the last year. North America will remain the strongest market, but its share has dipped slightly from the 61% predicted in 2013 to 59% predicted in the 2014 forecast. Five-year purchase expectations there fell below world expectations to 22% after remaining at about 25% for five years.

But the market’s significance to the industry is unquestionable, Honeywell says. “New aircraft acquisition plans in North America are still significant given the region’s overall size,” Sill says. “Coupled with projected gains in fractional fleet deliveries, North American demand should still support industry volumes.”

Europe Rebound

Encouraging to Sill was a jump in Europe’s purchases expectation to 31%. Europe’s share has returned to 18%, back in line with historical norms, Honeywell says. This is up 6 points and puts it back as the second strongest market for business jet demand. Europe is still facing its struggles with political tensions and uneven economies. This is particularly true with Russia as sanctions expand over the Ukraine crisis. 

Operators in the closely followed BRIC region (Brazil, Russia, India and China) readjusted their purchase expectations in this year’s survey from 42% to 29%. This is still above the 23% world average, bolstered by Brazil, Honeywell says. Unlike North America, more purchases in the BRIC countries are anticipated short-term, with 45% coming in the next two years. But overall interest is tempered from past years, particularly in Asia-Pacific. New purchase expectations were half that of last year’s anticipated 24% at 12%. “Disappointing growth figures from several major regional economies, higher levels of regional tensions and government austerity initiatives have muted operator enthusiasm.” 

 But long-term the region is considered important, particularly as fleets have been growing at double-digit rates over the past five years. Compared with the rest of the global market, growth is still brisk. “We should be so lucky to have their ‘slow’ growth rates,” Park notes.

Operators in the Middle East and Africa also lowered their expectations to 18% fleet replacement, down from 26% last year. Honeywell says this move is unsurprising given the political upheaval and conflict in the region this year, along with the dipping of oil prices and the health crisis. Latin America overall remains above the world average at 28%, but that is 11 points below last year.