The forecast incorporates a 20-year outlook of the business jet industry, bombardier’s long-term vision of the business jet market and an in-depth look at the market drivers in the major regions of the world.
Industry recovery continues
The business jet industry is progressing well on a prolonged and gradual recovery from the steep industry downturn of 2009-2010. Many market indicators continue to improve.
Industry order intake grew over 2010 levels and the industry book-to-bill ratio also improved. industry deliveries were relatively flat, year-over-year. While pre-owned inventories continue their gradual decline, residual values remain depressed and trade-ins of pre-owned aircraft continue to be active.
Aircraft utilization is increasing gradually but remains below pre-recession levels. the recovery in business jet orders has been stronger in the Large category while the Light category continues to lag. stock markets improved during 2011, but remain very volatile. Corporate profitability and the number of billionaires worldwide are at record levels. U.s. the economy experienced continued growth in 2011 and showed signs of improved market confidence, with increased business jet orders. Certain emerging markets, notably China, continued to grow strongly and were very active for business jet orders during 2011. The European economy continues to cause widespread uncertainty.
Market confidence needs to be fully restored for industry business jet deliveries to increase substantially and enable the industry to realize its full potential.
Industry deliveries are not expected to improve significantly in 2012. With increasing confidence and stronger economic growth, Bombardier believes business jet deliveries will return to sustained growth starting in 2013.
Business jets provide fast, flexible, safe, secure and cost-effective access to travelers’ destinations of choice. In addition to the time saving and flexibility gained when using a business jet, there exist other less quantifiable, but equally important benefits. This include:
- On-demand flight schedules
- The ability to discuss business privately during flights
- More direct access to company’s sites (which may not be served by scheduled airlines)
- Reduced fatigue on a company’s frequent travelers
Nexa Advisors has conducted studies between 2009 and 2012 to evaluate the impact of business jet ownership on large, medium and small companies, as well as government agencies. They found that companies using business jets are most likely to outperform non-users on revenue growth, share price growth, profitability and employee satisfaction. Nexa Advisors also came to the conclusion that business jet use among government agencies clearly improves taxpayer value.
Noted investor Warren Buffett, CEO of Berkshire Hathaway, stated: “Berkshire has been better off by me having a plane available to go and do deals or whatever it may be. A lot of times it doesn’t work out. But net, it’s a plus. We have done things I wouldn’t have done if we hadn’t had a plane.”
In an increasingly competitive global marketplace, business aviation is a tool that contributes directly to growth.
Historical market performance
Over the past 40 years, the industry has been characterized by cyclical performance in deliveries. From 1965 to 1995, business jet deliveries increased at a 4% cAGr, where most of the growth occurred in the primary market, the United States. At the end of the 1990s, business jet purchases accelerated in other regions of the world, and as a result, world deliveries increased by 9% per year on average during that period.
2004 to 2007
Following the 2001-2003 downturn, the U.S. economy regained its momentum and the demand for business jets rose significantly between 2004 and 2007. New markets for business aircraft, such as Europe, Asia and the Middle East, also began to generate substantial demand. moreover, the launch of new, innovative aircraft spurred demand even higher.
The near-collapse of the financial markets at the end of 2008 precipitated a sharp downturn in business aviation and new business aircraft orders. Order intake stalled in Q4 2008 and remained very low. the inventory of pre-owned aircraft for sale increased dramatically and residual values declined sharply.
Bombardier estimates that more than 800 orders were canceled in the Light to Large categories in 2009. That forced manufacturers to juggle order deferrals and cancellations, and led them to decrease production rates and deliveries. The bottom of the market in terms of demand was reached in the first half of 2009.
From mid-2009 until mid-2012, the market has made progress on many fronts: credit availability is less problematic, business jet usage is rising and gross orders are up. Moreover, cancellations are back to relatively low levels. As of Q1-2012, pre-owned inventory is also down significantly at 13.6%, 4.2 percentage points below its mid-2009 peak.