Civil Aircraft : The Market for Business Jet Aircraft

In the second half of 2008, global economic and financial collapse brought a booming business jet market to a sudden halt. Business jet demand evaporated in late 2008 and early 2009. Orders for new aircraft became scarce, and cancellations of existing orders began to shrink sales backlogs. In addition, many customers deferred aircraft deliveries.

The massive wave of order cancellations and deferrals soon subsided, but new order activity remained weak throughout 2010 and into 2011, especially for light and medium business jets. The upper end of the market, where the large-cabin and long-range models reside, fared better. The larger jets tend to be purchased by very wealthy individuals and big corporations that are better insulated from economic conditions than the less wealthy customers that usually buy the smaller models.

In addition, the market for larger jets is geographically diverse, and has been buoyed by increasing demand for these aircraft in emerging markets in Asia, Eastern Europe, Latin America, and Russia. The market for smaller jets is heavily concentrated in the U.S., where market saturation and economic sluggishness have been stifling demand.

Nevertheless, momentum in the business jet market began accelerating somewhat in 2011, and this continued into 2012. Order activity picked up in all segments of the market, though the upper end of the market still significantly outperformed the lower end.

Signs of life even began appearing in the long-moribund U.S. market. In the first six months of 2012, business jet deliveries to customers in North America increased by some 20 percent compared to the same period in 2011. Traditionally, the North American market has been the locus of growth for the business jet industry. The return of U.S. customers to the market is thus a welcome and encouraging sign for the industry. This is especially true at a time when the growth of emerging markets, which helped cushion the impact of the industry downturn, is slowing.

Deliveries to customers in Western Europe also increased in the first half of 2012. However, Europe remains a significant concern due to the eurozone crisis and the region's severe economic and financial difficulties. The renewed momentum in the European business jet market could quite easily (and quickly) be thrown into reverse.

The increased momentum in the global business jet market in 2012 should not be overestimated, though. In general, the market remains sluggish and weak. Still, the outlook for the market can be characterized as cautiously optimistic. Economic recovery is continuing, albeit fitfully and slowly. Corporate profits, normally a primary leading indicator of business jet demand, are strong. Economic instability and uncertainty, though, are still leading corporations to hold onto large cash reserves rather than make capital expenditures such as aircraft purchases.

Strong corporate profitability is a sign of potential future improvement in the business jet market, however delayed. This latent demand bodes well for the future and, as the recent North American and European delivery figures manifest, is already starting to convert to actual demand. Continued economic improvement will only serve to increase business confidence and free up some of those corporate cash reserves.

Other positive signs for the market include increased business aircraft utilization and a steady decline in the number of used business jets for sale. The latter in particular is good news for manufacturers, as an oversupply of used jets tends to hold down sales of new jets.

In the meantime, manufacturers are refreshing and revitalizing their business jet product lines. Nearly all of the major manufacturers have at least one new aircraft in development, whether an all-new design or a derivative of an existing aircraft.This study is concerned with business jet aircraft. It should be noted, though, that other types of business aircraft exist, including turboprop-powered and piston-powered models. Turboprops in corporate use include the Daher-Socata TBM 850, the Hawker Beechcraft King Air, and the Pilatus PC-12. Pistons in corporate fleets include the Hawker Beechcraft Baron and the Piper Mirage.

Helicopters are also widely used for executive transport. Intermediate twins such as the AgustaWestland AW139, the Eurocopter EC 155, and the Sikorsky S-76 are particularly popular for use in this role.

Nevertheless, the business jet market is an entity unto itself. In general, business jets compete only against other business jets for sales. They usually do not compete against turboprops or pistons. The one exception is found at the lowest end of the business jet market, where Very Light Jets do sometimes compete for sales against corporate turboprops.

Methodology. In developing its business jet forecast, Forecast International takes into consideration all relevant market factors and industry data. These include, but are not limited to, the volume of aircraft orders, letters of intent, and other types of purchase commitments; OEM marketing strategies; changes in the business aircraft customer base (geographic and otherwise); historical and planned production rates; trends in aircraft capacity, performance, and operating efficiency; and the inventories of used aircraft for sale. In addition, general economic trends are studied, including GDP growth, inflation, and corporate profitability.

Included in this market analysis are production forecasts for business jet aircraft that are either in production or are expected to enter production within the next 10 years. These forecasts are the result of an exhaustive analysis of the business jet market that included both a comprehensive, macro-level evaluation of the market and a competitive analysis of the various individual business jets versus their direct and indirect competition.

In preparing this analysis, Forecast International divided the business jet market into eight classes that range from Very Light Jets at the low end of the market to corporate-configured airliners at the top. The aim was to place directly competing aircraft, as much as possible, into the same class. Limiting the number of classes to eight was an analytical judgment on our part. The market could easily be divided into several more classes, but we wished to avoid an unwieldy (and ultimately incomprehensible) number of subdivisions.

The eight classes and their constituent products are displayed below. The listed aircraft are those for which we have devised a production forecast. For a variety of reasons, we have not issued forecasts at the present time for a small number of proposed new business jets. Most of these aircraft will nevertheless be discussed within this study.

VERY LIGHT JETS (VLJ)
Cessna Mustang
Embraer Phenom 100
Honda Aircraft HondaJet
LIGHT BUSINESS JETS
Bombardier Learjet 40 XR
Bombardier Learjet 70
Cessna CJ2+
Cessna CJ3
Cessna CJ4
Cessna M2
Embraer Phenom 300
Hawker Beechcraft Premier IA
LIGHT MEDIUM BUSINESS JETS
Bombardier Learjet 45 XR
Bombardier Learjet 75
Cessna Latitude
Cessna XLS+
Embraer Legacy 450
MEDIUM BUSINESS JETS
Bombardier Learjet 60 XR
Bombardier Learjet 85
Cessna Citation X/Citation Ten
Cessna Sovereign
Embraer Legacy 500
Gulfstream G150
Hawker Beechcraft Hawker 900XP
SUPER MID-SIZE BUSINESS JETS
Bombardier Challenger 300
Dassault Falcon 2000S
Dassault Falcon SMS
Embraer Legacy 600
Gulfstream G280
Hawker Beechcraft Hawker 4000
LARGE BUSINESS JETS
Bombardier Challenger 605
Dassault Falcon 2000LX/LXS
Embraer Legacy 650
Gulfstream G350
LONG-RANGE BUSINESS JETS
Bombardier Global 5000
Bombardier Global 6000
Bombardier Global 7000
Bombardier Global 8000
Dassault Falcon 7X
Dassault Falcon 900LX
Gulfstream G450
Gulfstream G500
Gulfstream G550
Gulfstream G650
AIRLINER TYPES
Airbus ACJ318
Airbus ACJ319
Airbus ACJ320
Airbus ACJ321
Boeing 737 BBJ
Boeing 737 BBJ2
Boeing 737 BBJ3
Bombardier Challenger 800 Series
Embraer Lineage 1000