* Sees shift in demand toward larger, longer-range aircraft
* North America represents smaller slice of demand
* Sees value of worldwide deliveries up 9 pct in 2012
By Scott Malone
Oct 28 Demand for corporate jets has begun to
recover from a post-recession low and is likely to rise over the
next decade, with $250 billion worth of new aircraft delivered
by 2022, according to a forecast by Honeywell International Inc
The forecast projects that companies will increasingly
choose larger aircraft capable of traveling longer distances,
driven by the desire to use private jets in international travel
and to transport larger teams of people, Honeywell said in its
forecast, released on Sunday.
The total value of corporate jets delivered worldwide in
2012 will rise 9 percent from 2011, said the diversified U.S.
manufacturer, which makes engines used in the aircraft. Major
makers of business aircraft include Textron Inc's
Cessna, General Dynamics Corp's Gulfstream, Canada's
Bombardier Inc, and Brazil's Embraer SA.
Honeywell expects similar growth levels and demand patterns
"It's all about range. To have more range you have more
fuel, more fuel requires bigger wings, bigger wings mean bigger
fuselage," said Rob Wilson, president of Honeywell's business
and general aviation operation. "So you will get a larger cabin
with the higher range requirements. In addition, when you're
going to be on an airplane for 12, 14 hours, you need a certain
amount of volume to prevent you from going a little stir-crazy."
A Honeywell survey found that 69 percent of spending on new
aircraft in 2012 was for large-cabin jets.
Morris Township, New Jersey-based Honeywell based its
forecast on interviews with 1,500 operators of corporate jets,
as well as other economic data sources.
BREAKING THE EARNINGS LINK?
Sales of corporate jets have traditionally closely tracked
growth in corporate profits -- when times were good, companies
invested in aircraft; when conditions worsened, they pulled
back. That cycle played out in the last recession, with orders
falling sharply in 2008 and 2009, then steadying.
The current wave of third-quarter corporate earnings reports
has largely showed a decline in profit among companies in the
Standard & Poor's 500 index, with analysts expecting the
group's collective earnings to fall 1.9 percent in the quarter,
according to Thomson Reuters I/B/E/S.
Wilson, however, argued that with North America representing
just 53 percent of expected corporate jet demand over the next
five years, the correlation between U.S. corporate profits and
jet sales may not be as strong as in prior cycles.
"The linkage to corporate profits may have been more of a
hangover from when we saw the market being much more dominated
by North American companies," he said. "With that now being half
the market, we don't see the linkage being as strong, we see
other facets globally that drive it."
Honeywell's survey found growing demand for corporate jets
in Asia and Latin America.
Corporate jet makers have suggested in recent weeks that
demand could pick up after the Nov. 6 U.S. presidential
elections and Congress's year-end "fiscal cliff" deadline
passes, as jet buyers will then have a clearer sense of the
"Our primary customers are small, mid-sized businesses.
There's no question that a lot of these guys are looking at a
very uncertain next few months, right?" Textron Chief Executive
Scott Donnelly told investors on an Oct. 17 conference call.
"People will wake up the morning after the election, they may be
happy, they may be unhappy. But to some degree people are going
to have to dust themselves off and say, 'You know what? I've got
to get on with my life.' ... It takes some uncertainty off the
table and that is probably good for the market."