Honeywell Pegs Sales at $90 Billion, 6,800 Aircraft Over Coming Decade

Deliveries of new business jets will total nearly 6,800 aircraft, valued at over $90 billion, in the next 10 years, according to Honeywell Aerospace's ninth annual Business Aviation Market Outlook. North America and Europe will remain as the fastest growing markets, with new aircraft and fractional ownership continuing to drive the market. The outlook for the next five years shows 44 percent growth over the previous five-year period

Honeywell Aerospace's BAMO study projects a steady near-term market for traditional business aircraft, with a gross take-off weight of less than 100,000 pounds. The survey indicates a potential cooling of near-term order levels, offset over the next few years by already high backlogs, the impact of new and derivative aircraft models entering service with corporate flight departments, and by rapidly expanding fractional ownership plans. After cresting in 2000, deliveries will remain near the 600-aircraft level before climbing again toward the end of the decade.

The demand for airline transport category aircraft configured as business jets will be similar to 1999 levels, with about 150 aircraft, worth approximately $6.6 billion, projected for delivery between 2001 and 2011.

Backlogs remain near the record high levels established in 1999. First half of 2000 deliveries of turbofan aircraft rose 27 percent over first half 1999 levels, with a 25 percent increase in dollar values. Honeywell Aerospace expects operators to take delivery of approximately 740 new business jet aircraft in 2000 (up from 638 a year ago), and 697 in 2001.

The latest survey is based on input from nearly 1,100 flight departments in North America, Latin America, Europe and, for the first time, Asia. The survey results revealed, not unexpectedly, that operators' expectations for the purchase of new turbofan-powered aircraft fell short of the record levels of 1999. Despite the drop, high backlogs and fractional ownership growth should result in a five-year world market extrapolation for new business jet deliveries 3 percent higher than last year's forecast for the same period. Honeywell Aerospace's outlook for new deliveries in the five-year period 2000-2004 is for some 3,100 to 3,200 aircraft -- a 44 percent increase over the previous five-year period, when over 2,200 new jets were delivered.

A major contribution to the strength of the outlook, despite lower traditional purchase expectations, comes from the fractional ownership market. The fractional segment continues its rapid growth by extending the benefits of business aviation to many new customers. Current fractional operations account for more than 4 percent of the global business aircraft fleet. Honeywell projects that by 2011 the fractional ownership fleet will comprise 9 percent to 11 percent of the world's active business aircraft. On an annual basis, fractional demand contributes around 15 percent of annual deliveries in the near term, but will continue to increase to 20 percent to 25 percent by 2011. Fractional ownership is expanding business aircraft ownership well beyond the historical operator population, but despite record growth, Honeywell Aerospace believes only a small percentage of this market has been developed.

Participation in fractional ownership plans by traditional corporate operators remains relatively limited. The survey noted a small decline of 6 percent in fractional interest from traditional flight departments as a supplement to their existing service. Overall interest remains limited from traditional operators, but no trend has yet emerged. About 10 percent of traditional flight departments also indicated uncertainty as to the future possibility of participating in a fractional program leaving some room for growth.

By Rob Hewson