Forecast International Predicts Mixed Bag For GA

In a new study titled "The Market for General Aviation/Utility Aircraft 2007-2016, Forecast International projects that makers of general aviation and utility aircraft will turn nearly 27,140 aircraft worth approximately $22.55 billion over the next nine years.

The Connecticut-based market research firm, which excluded the production of business jets from this study (more on that later), anticipates that production of general aviation and utility aircraft will peak in 2007 at about 3,243 annual deliveries and then fall off gradually to a low of 2,452 shipments in 2011, with annual production thereafter hovering in a band between 2,400 and 2,600 units for the remainder of the forecast period.

"Strong economic growth led to continuous increases in production levels during the past five years, but this trend is unlikely to last for much longer," said Douglas Royce, aerospace analyst at the company. "The general aviation market has historically been highly sensitive to economic conditions, with the segment typically being the first in the industry to suffer during a prolonged economic downturn.  The economic boom of the past years may be slowing, and slower economic growth will lead to reduced production levels in the years ahead."

Forecast International also anticipates a decline in corporate demand for twin turboprops in favor of the fractional ownership of turbofan-powered aircraft. This trend is expected to accelerate with the appearance of the new class of Very Light Jets (VLJ) now coming online from makers like Cessna, Eclipse Aviation, Adam Aircraft, and others.

These VLJs offer the jet aircraft's speed and ability to climb above weather at prices that are competitive to those of twin turboprops, but Royce said that Forecast International does not expect to see demand for twin turboprops end altogether. "These aircraft offer far more spacious cabins than the typical VLJ, and not all operators will be willing to trade space for speed." 

Of the total number of aircraft produced, 22,477 piston aircraft will account for the vast majority of units produced (82.8 percent of the total). Turboprop aircraft manufacturers will turn out aircraft in lower numbers, for a total production of 4,660 units (17.2 percent of the total).

Turboprop value of production is projected to amount to $13.7 billion or 60 percent of the total, while the value of production of piston aircraft will amount to $9 billion or 40 percent of the total due to the much higher unit prices of turboprop aircraft.

"Overall, the number of piston powered aircraft in the United States is very likely to remain stable during the forecast period, and so the market for piston aircraft will likely be driven by the replacement of aging aircraft with newer models rather than strong growth in the market overall," Royce said. "International sales into new markets like Russia, India, and China offer the hope of high growth in the market, but the creation of the infrastructure and regulatory environment needed to stimulate demand for new aircraft in these nations is likely to be a decades-long process."

Royce noted that the price of purchasing and maintaining general aviation aircraft for private, non-commercial use is a serious obstacle to higher growth in the market. "Although the general aviation/utility market is expected to remain vibrant, we believe that production levels will peak in 2007 during a period characterized by what we believe has been extraordinary demand," he said.

And Speaking Of Bizjets...

Meanwhile, in a separate study, Forecast International says business jet manufacturers are enjoying a booming market for their products, spurred on by a proliferation of new aircraft models, an exodus on the part of business travelers from scheduled airlines, and lowered barriers to access to private jet travel via jet card programs and fractional ownership arrangements.

Though build rates in some segments of the business jet market may soon begin to stabilize, significant growth in other segments will lead to considerable opportunities for profit and expanded market share, according to the report entitled "The Market for Business Jet Aircraft."

Forecast International projects that 14,978 business jets, worth some $192 billion, will be produced from 2007 through 2016. The firm includes the new class of Very Light Jets (VLJ) in its projections, and predicts that 5,783 VLJs will be built during the 2007-2016 timeframe, accounting for nearly 39 percent (based on unit production) of the overall business jet forecast.

Forecast International expects annual business jet production to top 1,000 units in 2007, and exceed 1,200 units in 2008 and 1,500 units by 2011. The VLJs are expected to supply much of this growth, though other types of business jets will also contribute, such as the popular class of super mid-size business jets.

Taking advantage of the strong market, while also hoping to stimulate additional demand, business jet manufacturers are introducing all-new aircraft models as well as improved variants of existing designs. FI notes all of the established business jet manufacturers are currently revamping their product lines to some extent.

Not everything is good news within the business jet industry, however, and the Forecast International study points to a number of existing or potential problems. Demand in the key North American market has been cooling off somewhat, amid some signs of market saturation, though this is being greatly offset by robust growth in demand from other geographic areas, such as Europe, the Middle East, and the Asia/Pacific region

Still another potential problem in the industry, according to Forecast International senior aerospace analyst Raymond Jaworowski, is that "existing sizable order backlogs have resulted in capacity bottlenecks for certain manufacturers. As problems go, this is a nice one to have, but it can lead to customer frustration." To deal with the bottlenecks, some companies are expanding manufacturing facilities or adding to their lists of approved completion centers. Others may keep older models in production a little longer than planned in order to sop up excess demand and get aircraft to customers that cannot, or will not, wait for new models.

Another area of difficulty for the business jet industry involves the tax and regulatory arena. The US, for instance, is currently the scene of a fierce debate over the possible imposition of user fees on business and general aviation operators as a funding mechanism for the FAA. Such fees are being fiercely resisted by the business and general aviation community, as they would dramatically increase costs for such operators, but they are being pushed by the scheduled airline industry.

User fees may yet be defeated in Congress this year but, if so, according to Jaworowski, "the user fee issue would surely re-emerge sometime in the near future."

FMI: www.forecastinternational.com