fleet report 2018: the state of the industry
March 12, 2019
From data provided by JetNet LLC and insights from the likes of Honeywell, JSSI and Jetcraft, Volker K. Thomalla takes stock on the state of the global business aircraft fleet
The good news: according to new market intelligence, the worldwide business aircraft turbine fleet is growing. The better news: this growth is set to become more dynamic in the near future.
According to JetNet LLC, the leading provider of corporate aviation statistics, between December 31st 2017 and December 31st 2018, the global business aircraft fleet grew by 1.4%, from 37,284 units to 37,792. This includes 22,273 jets and 15,519 turboprop-powered aircraft – representing a split that has remained roughly the same over the last decade.
Concurring to the Jet Support Services, Inc. (JSSI) Business Aviation Index for the third quarter of 2018, Business Aviation flight activity continuously increased from 2017 to 2018. This increase was seen in all regions except Asia. Furthermore, the majority of mid- to long-term demand is coming from new aircraft sales, as older aircraft need more maintenance and thus become less attractive to operate.
The JSSI index tracks utilization of approximately 2,000 business aircraft worldwide and reports average flight hours flown on a monthly basis by region, industry and cabin type. This data supports the trend of sustained growth in flight activity. According to JSSI’s data, average flight hours exceeded the 30-hour ceiling for the second consecutive quarter, reaching levels not seen since 2008 when the global financial crisis began and flight hours took a deep dive.
“This positive trend in aircraft utilization demonstrates a high level of confidence in current economic conditions,” says Neil W. Book, president and CEO of JSSI. “The continued growth this year, with back-to-back quarters of flight hour averages not seen since 2008 and a year-over-year increase of 5.7 percent, is a testament to today’s demand for private travel.”
Honeywell Aerospace traditionally releases its annual Global Business Aviation Outlook on the eve of NBAA-BACE, which took place in October in Orlando, Florida. (The Outlook excludes personal and very light lights like the Cirrus SF50 Vision, bizliners and turboprop aircraft). This was the 32nd issue of the Outlook – of which 27 were released to the public.
This year, Honeywell’s market researchers say that the future looks bright. According to the report: “The business jet industry is expected to experience strong growth in the short to medium term, supported by several new airplane models coming to market and an improved used aircraft environment.”
The research team forecasts up to 7,700 new business jet deliveries, worth $251 billion, from 2019 to 2028 – up 1 to 2% from the 2017 10-year forecast. “A better used-aircraft market environment, coupled with the entry into service of many new business jet platforms, will lead to higher deliveries in 2019 after a virtually flat year in 2018,” says Bill Kircos, vice president, Global Marketing, Honeywell Aerospace. “We are excited about the used market and about new and innovative aircraft models that will not only drive solid growth in 2019 and 2020, but also have a significant impact on new business jet purchases in the mid and long term.”
Key findings in Honeywell’s 2018 Outlook include that operators plan to make new jet purchases equivalent to about 20% of their fleets over the next five years as either replacements or additions to their current fleet. This represents a 1% increase compared to what was predicted in the 2017 Outlook. The short-term purchasing outlook is rather promising for the OEMs: of the total purchase plans for new business jets, no less than 14% are expected to occur by the end of 2019 and another 16% by 2020, with yet another 24% scheduled for 2021.
According to Honeywell, operators continue to prefer larger-cabin aircraft, ranging from the super midsize through ultra-Long range, which are expected to account for more than 87% of all expenditures and 62% of all units of new business jets in the next five years. Midsize business jets will account for 10% of all units (7% value), while small cabin jets will only account for 6% of all expenditures, but 28% of all new business jets.
As the used aircraft market has improved, the average asking prices have increased slightly compared with 2017. The total number of jets for sale that are less than 10 years old is significantly lower than in previous years. Honeywell finds that only 5% of the younger jets in the installed base are currently for sale. This is well below the historical average of about 8% that was reached in 2017 for the first time since the recent recession – very positive news for new business jet sales. In North America, the decline in young used aircraft inventories has led to a record-low of only 4% of the installed base being for sale, while Asia has the highest percentage of recent model used aircraft for sale, at slightly more than 7% of its installed base.
Honeywell’s longer-term forecast through 2028 projects a 3-4% average annual growth rate for business aircraft deliveries. “New models with improved economic performance and anticipated favorable exchange rates for international customers will spur the growth,” notes the Outlook.
Fleets Around the Globe
North America will maintain its market dominance in the foreseeable future. The region not only features the largest installed fleet, with 21,339 aircraft in the US and 1,314 aircraft in Canada (together representing 65% of the global fleet), it will also feature the highest global demand. Honeywell estimates that 61% of the global business aircraft demand in the next five years will come from North American operators. It comes as no surprise that the short-term demand will be higher in this region, too. About 36% of operators responding to the survey plan to schedule their new purchases within the first two years of a five-year horizon. This is 3% lower than last year’s survey, but much higher than the worldwide average of 30%.
The European Business Aircraft fleet increased by 2.2% last year, to 3,981units, including 1,296 turboprop aircraft. European operators don’t seem to be too impressed with the uncertainties surrounding Brexit, as they have increased their new jet purchase plans significantly. In fact, according to Honeywell, purchase expectations in Europe have increased to close to 33%. This is a 14% increase compared to 2017. But European operators are more cautious about the timing than their North American counterparts. Only 26% of new jet purchases are expected in the next two years (2019 and 2020), while more than 45% are scheduled for 2022 and beyond.
Purchase intentions in Europe are the highest in the United Kingdom and Germany.
Germany was surprisingly active this year, once again expanding its fleet by 24 aircraft from 726 to 750 units – representing a 3.5% growth rate. France regained a position in the ranking of the top ten business fleets by countries. The country’s 2018 increase in turbine business aircraft, from 432 aircraft to 450, secured it a number eight ranking, ahead of China with 446 aircraft and bumping South Africa out. The United Kingdom held its number eight position in the ranking with 502 aircraft, an increase of 10 aircraft in 2018. If Russia ever comes back as a market, it will certainly add some considerable demand to the forecast and thus have a positive influence on the overall market.
The Asia-Pacific region has a fleet of 2,670 turbine. This represents a decrease of 1.2% compared to 2017 – the result of a decrease in the Chinese business aircraft fleet. The region features the lowest purchase plans in five years. According to Honeywell’s market research, it is impacted by unfavorable exchange rates and geopolitics. The US – China trade conflict could be an issue in the near future, potentially influencing new aircraft sales.
The good news is that this decrease in numbers seems to be a one-time thing, as Honeywell’s Market Outlook forecasts stable new jet acquisition plans for the region. 12% of operators in the Asia Pacific region plan to acquire new business jets over the next five years, representing a 7% share of global new jet demand. And despite a setback this year, there really isn’t any doubt that in the long-term China remains a very promising market for all types of business aircraft.
According to JetNet’s 2018 statistics, South America has a business aircraft population of 3,409 aircraft, of which 1,974 units are powered by turboprop engines. Compared to 2017, this is a healthy increase of about 1.4% or 50 units. The year before, the region experienced a slight decrease in business aircraft numbers.
This turn-around correlates with a significant increase in aircraft purchase plans in Brazil. The country, which accounts for nearly half of the Latin American business aircraft fleet, recorded twice as many mentions for new aircraft purchase plans in Honeywell’s 2018 Outlook compared to the previous year.
Venezuela has the second-largest business aircraft fleet in Latin America, with 765 units. Surprisingly enough, this number did not fluctuate despite the deep political and economic crisis the country is experiencing. In fact, the country held its number five position in the top ten business fleet ranking.
Middle East and Africa are suffering from political tensions between, for example, Saudi Arabia and Qatar, to name just one conflict. Honeywell projects a share of only 4% of the global demand coming from this region. This number is at the lower end of the historical range of 4 to 7% attributed to the Middle East and Africa.
Larger-cabin aircraft up to bizliners dominate this regional market, whereas midsize and light jets are a clear minority and – as it is the case for light jets – are mostly used for training. 14% of respondents to Honeywell’s survey said they will replace or add to their fleet with a new jet purchase, down from 18% last year, with most planning their acquisitions past the five-year horizon.
Australia and Oceana have a population of 766 business aircraft, of which 231 are powered by jet engines and 535 by turboprop engines. This is an increase of 21 aircraft, which is in-line with increases in recent years.
Down-under follows a slow, but steady growth path that should continue for years to come. This is because business aircraft in Australia play a vital role in providing medical support to people living in remote locations. The Royal Flying Doctor Service (RFDS) operates 71 aircraft alone, nearly 10% of the whole region’s fleet! The most recent type in the RFDS fleet is the Pilatus PC-24, which was delivered by the Swiss manufacturer in December 2018. Nowhere else has such a high percentage of business aircraft being used in humanitarian services than in Australia.
Jetcraft Optimistic in its Outlook
Jetcraft, a global leader in Business Aircraft sales and acquisitions, released its 10-year market outlook for the business aircraft industry in October last year. Their outlook is even more optimistic than Honeywell’s. Jahid Fazal-Karim, Owner and Chairman of the Board at Jetcraft, sees 2018 as a milestone year: “2018 has been a real turning point for Business Aviation, as we have now successfully navigated through our industry’s most difficult period. This year’s forecast predicts the continuation of our current business cycle of steady and healthy growth, driven by an increase in wealth creation and the demand for larger and more expensive aircraft.”
Jetcraft forecasts deliveries of 8,736 units over the next 10 years, representing $271bn in revenues based on 2018 pricing. North America will clearly continue to lead, accounting for 60% (5,241 units) of predicted new deliveries over the forecast period, with Europe expecting 18% (1,572 aircraft), and Asia-Pacific 13% (1,136 units).
The increase in wealth creation over the past decade has – according to Jetcraft – spurred growth in family offices that are now offering a wide variety of specialized services, including Business Aviation. Together with the increase in block charter and fractional programs, Jetcraft says this is exposing more UHNWIs to the industry than ever before. Their forecast predicts that the large jet category, comprising of super large, ultra-long range and bizliner segments, will constitute 32% of total units (2,778) and 64% of total revenue over the next decade. All new aircraft model programs, both announced and projected, during the forecast period are exclusively widebodies.
“Predicted unit deliveries in the large jet category account for a huge proportion of total revenues in the industry, demonstrating the trend towards larger, long range aircraft to support today’s global business needs,” adds Fazal-Karim says.
A Buyer’s Shopping List
Honeywell’s market researchers note that modern, high-tech avionics are high on the business aircraft buyer’s priority list. This is for obvious reasons: New regulations like the upcoming ADS-B mandate in the United States, Canada and Europe will speed up the need for replacing older business aircraft. The final rule dictates that effective January 1, 2020, aircraft operating in airspace defined in 91.225 are required to have an Automatic Dependent Surveillance – Broadcast (ADS-B) system that includes a certified position source capable of meeting the requirements.
This regulation goes into effect less than a year from now and there will be no extension to the deadline. For some older aircraft like the first generation of business jets, there are just no economically viable solutions to make them compliant. In other words, they must be retired and replaced by aircraft that meet ADS-B requirements.
Another factor that buyers must consider when choosing an aircraft model is faster cruise speed, with most buyers requiring Mach 0.85. Buyers want aircraft to go faster because they want to fly further. Thus, extended range is a factor that has become more and more important, not only in the long-range and ultra long-range class, but in every class.
The OEMs are responding accordingly by extending the range when updating an aircraft. But operators are also cautious about operating cost. Thus, these new jets not only have to offer better performance, more comfort and a higher productivity, they also need to provide better reliability and maintainability than their predecessors. And not to be forgotten on the modern buyer’s shopping list is a lower fuel burn.
All of these factors are taken for granted, but the overwhelming deciding factor for a buyer already operating an aircraft is brand experience. If the aircraft support and service functions according to the operator’s expectations, the OEM can expand a very high degree of brand loyalty. If something does not work as expected with a product, brand loyalty is less important.
New Kids on the Block
The number of aircraft models that owners and operators can choose from is still rising. With new business aircraft from several manufacturers in development and/or in the certification process, the choice will become even harder. Textron Aviation has the largest installed aircraft fleet of all OEMs. The company just achieved provisional type certification (PTC) for its newest super-midsize jet, the Citation Longitude. It will set new standards in its class. NetJets has announced its intention to purchase up to 175 aircraft of this type during NBAA-BACE in October.
Textron is also working on the Citation Hemisphere, the largest ever-built Citation. However, the company has paused the development of the aircraft type due to technical problems with Safran’s Silvercrest turbofan, but Textron is optimistic that the French engine manufacturer will solve the problems and provide them with a reliable engine that meets all specifications. The company will decide how to proceed with the new jet in July of this year.
The problems with the Silvercrest engine led to the cancellation of Dassault Aviation’s planned Falcon 5X. In February 2018, Dassault presented the successor, the Falcon 6X, which will be powered by two PW800 PurePower turbofans from Pratt & Whitney Canada. The Falcon 6X features the tallest and widest cabin in Business Aviation and a 5,500 nautical miles range.
The PW800 also powers Gulfstream’s newest offerings in the market, the G500 and the G600. While the G500 was certified in July 2018 – and has since been delivered to its first North American and international customers – the G600 is still in the final stage of FAA-certification. It is scheduled for an entry-into-service this year.
Bombardier Business Aircraft has finished certification of its largest Business Jet, the Global 7500, in November 2018 and started deliveries a month later. The Global 7500 is the largest and longest-range business jet ever produced by the Canadian manufacturer. It offers a 7,700 nautical mile range and a four-zone cabin.
In May, the company, announced two smaller siblings of its flagship, the Global 6500 and the Global 5500. Both aircraft are powered by Rolls-Royce’s new Pearl 15 engine. In conjunction with some aerodynamic refinements of the wing, both long-range jets offer a top speed of Mach 0.90 and a 13% lower fuel burn. This converts to a range of 5,700 nm for the Global 5500 and 6,600 nm for the Global 6500. Both aircraft should be certified and celebrate their entry-into service later this year.
On the other side of the business jet spectrum, Embraer introduced two new aircraft at NBAA-BACE in October: the Praetor 500 and the Praetor 600, which complement the OEM’s midsize line-up. According to Embraer, the aircraft will be “the most disruptive and technologically advanced aircraft to enter the midsize and super-midsize categories”. The new jets are based on the Legacy 450 and the Legacy 500, which Embraer will continue to produce. Both are powered by two more powerful Honeywell HTF7500E turbofans and feature new winglets as well as additional fuel capacity.
The 20.995 $US million Praetor 600 offers its operators a range of 3,900 nautical miles, which is an increase of 775 nm compared to the Legacy 500. The Praetor 500 features a range of 3,250 nm, an increase over the Legacy 450 range of 350 nm. The Praetor 500’s price tag shows 16.995 $US million.
Embraer has also integrated new technologies into the cabin to make the aircraft more productive than ever. An Upper Tech Panel that displays flight information and offers cabin management features also available on personal devices through Honeywell Ovation Select is standard equipment, as well as high-speed connectivity through Viasat’s Ka-band with speeds of up to 16Mbps and IPTV. This has never been put in any midsize or super-midsize business jet.
Pilatus Aircraft started deliveries of its PC-24 Super Versatile Jet last year. The Swiss manufacturer delivered over 20 aircraft of this type in 2018 and is expected to open the order book again later this year.
The Best is Yet to Come
Not taken into considerations are more visionary aircraft like the supersonic Aerion AS2, the Spike S-512 and others that will eventually become real aircraft within the next decade. While they wouldn’t produce high numbers, they would certainly change the cumulated value of the fleet. But they are not included in any of the forecasts today as there is no fixed schedule for certification or first delivery of these breakthrough business aircraft.
However, each of these new aircraft will contribute in the mid- and long-term to new business jet acquisitions because they offer better economics, better performance, better connectivity and more comfort. “We’re confident that the lessons we learned over the past decade will ensure sustainable growth for Business Aviation in the years to come,” says Fazal-Karim “Ours is an enduring industry, and one with a buoyant future ahead.”
In other words, the best is yet to come.
PITCH UP FOR THE ROTORCRAFT INDUSTRY
According to statistics provided by JetNet LLC, the helicopter industry has enjoyed increasing numbers for several years now. At the end of 2018, the civil helicopter fleet stood at 31,965 units, an increase of 461 rotorcraft or 1.4%. Since 2014, the overall market growth dynamic hasn’t changed. Although there were changes in the demand in different segments and in different regions, with the western helicopter fleet taking a pounding in 2016, global demand has seen steady growth.
One of the main drivers in helicopter demand was China. According to data from Airbus Helicopters, the Chinese rotor fleet has nearly tripled over the last five years. Looking at 2018 numbers, it doesn’t seem like the country has appeased its appetite for helicopters yet. The number of civil helicopters in the country has grown from 837 at the end of 2017 to 953 a year later. This is an impressive growth rate of nearly 14%. While China shines as the most dynamic helicopter market in terms of growth rate, its total fleet size is far from being at the top. With 953 helicopters, China has climbed to the seventh position in the ranking of the top ten countries based on fleet size.
Maintaining its market dominance is North America, who saw its helicopter fleet grow from 12,773 units to 13,157 in 2018. The region’s share of the global helicopter fleet is at about 41%. Not surprisingly, the United States and Canada hold the top spots on the afore mentioned top ten list, with a total of 9,393 and 2,370 helicopters respectively. North America even widened the gap between the runner-up Europe in the last 12 months. The gap between the North American and the European fleets has grown from 5,886 helicopters at the end of 2017 to 6,152 units at the end of 2018. This proves that the North American market is more dynamic than its European counterpart.
Despite China growing quicker than other countries, Asia as a region isn’t growing as quickly as expected. 4,036 helicopters – or 12% of the global fleet – call Asia home. A year before, this number stood at 3,845, which is an increase in fleet size of 4.9%. Australia and Oceania account for 2,892 units, or 9% of the worldwide civil rotorcraft fleet. The number of helicopters in the region has grown from 2,700 units a year ago.
In terms of pistons versus turbines, as of the end of 2018, there were 9,584 piston-powered helicopters in the worldwide fleet and 21,926 turbine rotorcraft (8,796 multi engine turbines and 13,130 single turbines).
In terms of market share, there’s one dominant name in the piston rotorcraft segment: Robinson Helicopters. The company has a global market share in this segment of 87.3% (8,367 units), followed by Schweizer, which Sikorsky took off the market last year with a market share of 7.4%, and Enstrom with 5.3%.
According to JetNet LLC’s data, Airbus Helicopters had a 42.5% share of the global civilian turbine helicopter fleet in 2018, followed by Bell (formerly known as Bell Helicopters) with a fleet share of 35.9% and Leonardo with 9.7%. These numbers include all active helicopters of the OEM’s predecessors (thus Agusta Westland branded helicopters are added to Leonardo’s tally). Sikorsky has defended its fourth-place position with a market share of 4.1%, while MD Helicopters and Robinson Helicopters have a market share in the global turbine helicopter fleet of 3.3% each.
Honeywell Aerospace took a glimpse into the crystal ball and published its 20th annual “Turbine-Powered Civil Helicopter Purchase Outlook”, which focusses on 2018 to 2022 helicopter deliveries. The Honeywell team of market research forecasts between 4,000 and 4,200 new civilian-use helicopters. This number is in line with the previous outlook, where the company projected deliveries of 3,900 to 4,400 helicopters in a five-year period.
“In addition to better global economic conditions expected in the coming years, potential positive impacts of US tax reform on new helicopter demand and lower volatility in oil and gas-related markets have helped fleet managers confirm what they told us last year,” says Ben Driggs, President Americas at Honeywell Aerospace.
According to the survey, the factors influencing what make and model an operator chooses when deciding on a new aircraft are changing. Cabin size and range are declining as decisive factors, while factors like brand experience and performance are becoming more and more important.
Helicopters are an invaluable tool for social and economic development. They help save lives as ambulance helicopters or protect lives as police helicopters. They advance economic developments to transport personnel to remote locations on land or over water, and they make life easier when used for personal transportation for people who need the speed. They are also an indispensable tool for the oil and gas industry, as no other means of transport can provide safe and fast transportation to offshore platforms.
With the progress that has been made in the development of alternative energy sources, the need for helicopters has become even greater. Offshore wind parks are becoming an increasingly important market for helicopter manufacturers. Airbus Helicopters sees the support of wind farms as a separate business segment that enjoys dynamic global growth. The manufacturer forecasts a demand for up to nearly 1,000 helicopters with a combined value of nearly €9 billion ($10.23 billion) in the next 20 years.
With wind turbine output rising, leading to a higher rate of electricity production, wind park operators rely on efficient, rapid-response logistics systems with the high availability needed to keep losses to a minimum should a malfunction occur. The advantages of helicopters transporting technicians to an offshore wind park compared to ship are clear: helicopter transport means that personnel avoid problems with seasickness caused by travelling by sea in rough weather conditions. The probability of mistakes being made by seasick technicians is considerably higher than in the case of healthy technicians.
Helicopters also have a speed advantage over support ships. As new wind farms are being built further and further from the shore, this speed advantage increases. A helicopter can cover 40 nautical miles in 20 minutes, meaning it can reach the site and return to shore faster than a vessel.
“Helicopters are an integral part of any logistics concept for offshore wind farms,” says Dennis Bernitz, Head of Western Europe Sales at Airbus Helicopters. “Our helicopters can complete missions for wind farms in a particularly quick, economical, safe and environmentally friendly manner. Helicopters can be used to deploy technicians or medical personnel, even in rough seas, and can also transport operating personnel between the shore and the wind farm.”
Honeywell’s Regional Overview
North America: Purchase plans were stable in the survey, with 13% of respondents saying they would either replace or expand their fleet with a new helicopter over the next five years. More than 50% of planned North American purchases were identified as light single-engine models, while roughly 20% of new planned purchases were for both light and medium-twin product classes.
Europe: Compared to 2017 results, purchase plans were stable in this year’s survey. Nearly 22% of respondents said they would either replace or expand their fleet with a new helicopter over the next five years. Both light single-engine and medium twin-engine classes captured roughly 35% of total mentions for new helicopters. 12% of respondents indicated plans to purchase heavy-twin helicopters, up by 10% from last year.
Latin America: Results for 2018 show higher fleet replacement and growth expectations than 2017. Above the world average, the region’s purchase plans increased by more than 12% from last year. Latin America had the leading rate of new aircraft purchase plans globally, with 35% of respondents saying they would either replace or expand their fleet with a new helicopter over the next five years. Brazilian purchase plans increased to 35%, reflecting better expectations for economic growth. Respondents in this region favored light single-engine models, which represent more than 50% of their planned purchases, followed by intermediate and medium twin-engine classes.
Middle East and Africa: This region had the lowest new purchase rate globally, with only 10% of respondents’ fleets expected to get a new helicopter replacement or addition. Purchase plans were 12% points lower compared to 2017 survey results. Close to 75% of planned new helicopter purchases were light single-engine models.
Asia Pacific: Overall buying plans were up 1% point when compared with 2017. More than 18% of respondents said they would either replace or expand their fleet with a new helicopter over the next five years. Light single-engine and medium twin-engine helicopters were the most popular classes, both capturing about 35% of mentions for new helicopters. Despite limited inputs, new helicopter purchase plans were up by 9% points in China, increasing to more than 21% compared with last year’s results. Plans were down by more than 40% in India.