Global Business-Jet Deliveries May Hit Record 1,400, Then Drop

By Courtney Dentch

Oct. 4 (Bloomberg) -- Worldwide deliveries of business jets may rise as much as 7.7 percent to a record 1,400 aircraft next year, before slower global growth cuts demand, Honeywell International Inc. said today in its annual industry forecast.

Executive-jet traffic is falling in the U.S. and growing slower in Europe, foreshadowing reduced demand, said TK Kallenbach, Honeywell's vice president of marketing and program management. Output may decline in 2010 and 2011 before new planes and overseas demand rekindle orders in 2012, he said.

Rising corporate profits in recent years and emerging market growth in China and Russia bolstered orders for Textron Inc.'s Cessna and General Dynamics Corp.'s Gulfstream planes, stretching backlogs to more than three years and insulating deliveries due in 2009. Aircraft production lags behind economic trends by about two years, and shipments will slow in 2010 and 2011 as the current financial crisis filters through the system.

``We do see a peak in 2009 in new aircraft deliveries and a downturn in 2010,'' Kallenbach said in an interview. ``As the global economic health gets better, that's when we get the pickup.''

The U.S. is in its deepest financial crisis since the Great Depression, and fuel costs are up 29 percent over last year. Kallenbach said the ``fuel prices were already on people's minds'' in the latest survey, conducted between May and August.

Honeywell Forecast

Morris Township, New Jersey-based Honeywell released the forecast two days ahead of the National Business Aviation Association trade show that starts Oct. 6 in Orlando, Florida. It is the world's largest maker of aircraft controls and supplies engines, navigation and communications systems for planemakers including Gulfstream and Empresa Brasileira de Aeronautica SA.

The forecast, Honeywell's 17th annual, is based on a survey of 1,900 corporate flight departments and tracks order expectations for business jets with a gross take-off weight of less than 50 tons.

The decline in traffic as seen in the U.S. is starting to spread to Europe and may affect Russia as well, said Richard Aboulafia, an analyst with aviation consultancy Teal Group.

``Europe and Russia are in generally the same bad shape as America,'' Aboulafia said in an interview before the forecast was released. ``Not in the Middle East, which helps, but it's just not enough to keep the numbers high.''

17,000 in Decade

Honeywell expects 17,000 new corporate aircraft, valued at $300 billion, to be delivered in the next decade, up from last year's projection for 14,000. The industry is forecast to deliver 1,300 planes this year. The first-half total was 543 business jets valued at $9.8 billion.

About 75 percent of the 1,200 new orders placed in the first half of the year came from outside the U.S., with long-range planes such as Bombardier Inc.'s Challenger outpacing smaller light and very light jets.

Deliveries in the Asia Pacific region are expected to climb as much as 12 percent in the next year, leading the growth. Europe, including Russia, will rise 10 percent, Latin America will gain 6 percent, and the U.S. will grow 4 percent, Kallenbach said.

To contact the reporter on this story: Courtney Dentch in New York at cdentch1@bloomberg.net.