Slump in Biz Jet Sales Expected

A slump in business jet sales was predicted by Forecast International on the eve of this week’s National Business Aviation Association meeting in Orlando. However, that is not very alarming since most other forecasts had already predicted a 2011-2013 slump. Forecasters at yesterday's NBAA press conferences said the slump will now be between 2009 and 2012.
The company’s forecast indicated that a third of all sales over its forecast period between 2008 and 2017 will be very light jets, making it one of the most dynamic industry sectors. Some 5,600 very light jets (VLJ) are expected to be sold during the period.
Forecast International's new study, The Market for Business Jet Aircraft, projects that annual production will suffer a three-year decline, starting in 2010, dropping to a level of 1,515 units by 2012. Growth is expected to resume in 2013, with yearly production exceeding 1,700 units by 2017, the final year of the time period covered by the study.
Though the new study anticipates a decline in business jet production between 2010 and 2012, this decline is expected to be relatively shallow, with the industry emerging in very good shape. The Forecast International projections indicate that production will drop by only about seven percent over the three years, thus paling in comparison to the double-digit production decline experienced in the industry's last downturn in 2002-2003.
The study lists a number of reasons for the downturn of the upcoming market. One is the strong order books enjoyed by manufacturers, which include large numbers of orders for models still in development that are targeted for service entry after 2010. Another is the increased diversity of geographic demand for business jets. According to Forecast International senior aerospace analyst Raymond Jaworowski, "Though the U.S. is still the largest single geographic market for business jets, non-U.S. customers now account for more than half of business jet sales. Robust sales in other parts of the world will help offset slowing sales in the saturated U.S. market."
Also helping to fuel business jet sales will be continuing dissatisfaction with scheduled airline travel, as well as the popularity of fractional ownership and jet card programs that enable easier access to private jet travel.
One factor has yet to be tallied for its impact on the migration from scheduled to business jets and that is the imposition of the plethora of new fees which could overcome the decline in the scheduled airline hassle factor now that capacity has been cut and congestion will likely decline as well.
This year and next, will continue the business jet’s sales boom. Forecast International expects annual business jet production to reach nearly 1,400 units in 2008, and exceed 1,600 units in 2009. Overall, Forecast International projects that 15,936 business jets, worth an estimated $223 billion, will be produced from 2008 through 2017.
The business jet market has experienced tremendous growth since 2004 and, though the growth track continues, the question on the minds of nearly everyone in the industry concerns how long the good times will last, said the company. While continuing to rack up strong sales, business jet manufacturers are sitting on high order backlogs and cannot get aircraft to their customers quickly enough. Manufacturers and completion facilities are bumping up against capacity limits, while customer waiting times for new aircraft are lengthening. Indeed, Aviation Today’s VLJ Report observed that many aircraft trackers are finding a robust market with those who hold early delivery positions, especially on VLJs.
Nevertheless, warning signs are appearing that seem to indicate that a market downturn is on the way. The United States and parts of Europe are experiencing an economic slowdown. U.S. corporate profits are down. Fuel costs were surging. New fees and operating regulations may soon be imposed on business aviation operators. Large numbers of business jets delivered in recent years have led to conditions of market saturation in the U.S. And the inventory of used business jets for sale has been growing in recent months, often a sign of a weakening business jet market.