No 'Gloom and Doom' in AlliedSignal's Forecast

AlliedSignal remains bullish on business aviation despite economic problems in Asia and Russia that threaten a worldwide business downturn.

The pre-NBAA order backlog of over 1,000 business aircraft is equal to about two years of solid production, according to Joe Leonard, president of AlliedSignal Aerospace marketing, sales & service. He credited new products and the popularity of fractional ownership programs as fueling the continued prosperity.

The U.S. economy also remains robust (although slowing). North America remains the main market for business aviation aircraft, Leonard said. It's now responsible for 72% of the business aviation aircraft operated around the world.

The airlines also are lending their business aviation brethren a hand-although unintentionally. Surveys show the "misery index" for business travel on airlines continues to increase, exacerbated by crowded terminals, high load factors and deteriorating service, Leonard said. As a result, business aircraft purchase expectations remain at "record high" levels in the U.S.

Sales are only slightly lower in Europe, where businesses are concerned about the effect of a common currency and high unemployment, he said. The outlook in Latin America is less positive, however, where there are several concerns including banking uncertainties in Brazil.

Overall, AlliedSignal sees a market for 6,500 new business jets worth $78 billion over the next 10 years. These figures don't include demand for "corporate jetliners" like the Boeing Business Jet, of which an estimated 170 will be delivered, worth $7.6 billion, between 1999 and 2009. Not surprisingly, entry level, light and light-medium jets are estimated to be responsible for almost 60% of all unit deliveries over the next 10 years. Medium and medium-large jets make up the second-largest category at 1,540 units.

AlliedSignal does not take its annual projections lightly, and devotes considerable personnel and computer resources to the project, Leonard said. The company makes significant investment decisions based on survey forecasts in its engine, avionics and auxiliary power unit sectors, he said.

By Paul Proctor