Business aviation market valued at 13 879 aircraft worth US$310 billion over next decade


Manufacturers will deliver 13 879 business aircraft worth US$310.3 billion over the next decade, including 10 249 business jets worth US$249.5 billion, 568 business airliners worth US$42.3 billion and 3 062 business turboprops worth US$18.6 billion, according to the Teal Group.

In their recently issued business aviation forecast the group stated that the business aviation market would grow by 6% this year, 8% next year and at 12% between 2014 and 2018 as the industry recovers.
“Compared with prior market recoveries that have exhibited 15- to 17-percent compound annual growth rates, this is a conservative forecast,” said Teal vice president of analysis Richard Aboulafia. “Our conservatism is largely based on the likelihood of greater financial caution in the aftermath of the global credit crisis of 2008/2009.” With this growth rate, he added, “We won’t see a recovery to the 2008 peak deliveries level until 2015.”

Of the traditional business jets in the forecast, Teal expects 65 percent of them, by value, to be large-cabin, ultra-long-range or bizliner models. “This is up from 50 percent before the 2009 market drop,” Aboulafia noted. “This change reflects our belief that the bottom half of the market will not recover faster than the top half, implying a permanent shift in favour of more expensive models.”
“The last ten years (2002-2011) saw production of 10,886 business aircraft worth $198 billion,” Aboulafia said. Of the traditional business jets in Teal’s forecast, 65% of these (by value) will be high-end models, which, “is up from 50% before the 2009 market drop, implying a permanent shift in favour of more expensive models.”

With the recent economic downturn, competition is fierce in the business jet aircraft industry. According to a new report by the US International Trade Commission, entitled Business Jet Aircraft Industry: Structure and Factors Affecting Competitiveness, deliveries dropped 57% from 1 121 aircraft in 2008 to 485 in 2011. The decline is a result of customers’ lower profits and the scarcity of credit, which has particularly hit light and very light business jet field.

However, the future of the business aviation community is looking more rosy. The United States and others are recovering from the recession, although economies in Europe are still struggling. “There are signs of market turnaround,” Aboulafia. “Key leading indicators offer encouragement. Corporate profits and other global wealth indicators are up very nicely. Used jet availability has fallen to a healthy level.”

However, he cautions: “Pricing is still soft, and there are still a few dark clouds in the world economy that could complicate the recovery, but there are enough positive signs to believe that the market is poised for a modest, but welcome, turnaround.”

Aboulafia said deliveries of jets costing up to US$25 million fell by a “catastrophic” 56.4% between 2008 and 2011. “US demand is now less than half of the business jet market by value. For the business jet market to fully recover, US demand needs to resume its growth, or at least return to its earlier healthy levels,” he added.