Anything older than a minute ago is probably irrelevant to most of the daytrading crowd, but those of us who are long should find this encouaging.

It shouldn't matter whether those rosy times arrive earlier than expected, or only after a long, gradual ascent. If you're long you can afford to smile at current market turmoil, collect your dividends and in time you'll be well rewarded for your patience.

Demand is a funny thing. It can go away for a period of time, but when the economy picks up a bit and financing becomes a little easier, those customers who put off purchasing a jet in the downturn, are still there. And financial institutions can only hold back from lending for so long because that's how they make money:
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Forecasters predict rosy future for business jets

May 4, 2010
Source: Rotorcraft Aircraft, Business Aviation Aircraft

Just as harsh economic circumstances diluted last fall’s U.S. National Business Aviation Association Convention, the 2010 European Business Aviation Convention & Exhibition (EBACE) here in Geneva is exposed to continuing recessionary winds. Nevertheless, current market forecasts by several manufacturers paint a generally optimistic picture.

For example, Bombardier believes Europe will remain a major source of demand for business aircraft, and Honeywell predicts orders will reach record levels in the next five years.

The past decade has seen Europe emerge as a strong business jet market, according to Bombardier, whose forecasts focus on light, midsize and large aircraft (but generally not very light jets). Its current outlook estimates that the region accounted for 34 percent of worldwide orders in 2008, compared with 29 percent from North America.

At 10.2 percent, Europe is seen as supporting stronger 2009-18 compound annual growth than markets in Africa, Latin America, the Middle East and North America–growth equivalent to that in Asia and Australasia. The 1,700-unit European 2008 business jet fleet will have expanded to some 4,500 by 2018, according to the Canadian manufacturer.

While most of Europe entered recession about a year later than the U.S., European orders are expected to recover once economic growth resumes. “The [region’s] growing business jet installed base will create a significant replacement market in coming years,” reports Bombardier. Its market analysts expect predict delivery of 3,040 aircraft during 2009-18 to be second only to the 5,400 forecast to join the North American fleet.

Based on a survey of randomly selected flight departments about their expected use and purchase plans over the next five years, Honeywell predicts that Europe will represent 27 percent of demand from corporate and charter operators compared with 48 percent in North America. “European operators expect to purchase an all-time high of nearly 59 percent of the current fleet during the survey period” to support replacement and growth, according to the avionics and engines maker.

Honeywell expects resurging European currencies (relative to the U.S. dollar) to act “as a strong incentive, along with predicted economic growth and business expansion in Russia and Eastern Europe after 2010.” However, this prediction was made before the recent devaluation of the British pound. The U.S. group’s forecasts indicate that aircraft age is the largest driver for new European orders, involving more than 30 percent of decisions, followed almost equally by cabin size and operating cost considerations.

Looking further afield, Bombardier remains confident about the “strong potential” for the business jet industry over the next 10 years despite a significant reduction in near-term demand following the sharp contraction of the U.S. economy and ensuing worldwide recession during 2008-09. “As the economy recovers, orders for business aircraft will increase, which should sustain deliveries,” it predicts.

Bombardier believes emerging markets in China, India, Russia and the rest of the Commonwealth of Independent States (CIS) will grow at between 11 and 16 percent annually. Worldwide, it sees about 11,500 business jets being delivered during the 2009-18 period, with orders for 12,550 units being offset by withdrawals from service.

Over the next 10 years, the most recent Honeywell forecast anticipates a “serious near-term dip” in global business jet deliveries before a “gradual climb back” to annual rates above those of 2008’s production peak. Despite the downturn in use and a scaling back of flight departments, the company sees grounds for optimism as deliveries increase beginning next year.

“As we look at five-year plans for new aircraft, 40 percent of existing fleet operators indicate they are going to buy new or replacement or [additional aircraft] in the next five years,” Honeywell’s current forecast says. It concedes that more of these aircraft will be purchased in the latter part of the period, adding, “People have a positive view, but [it] is more long term; there is still a strong, robust demand for business aviation.” Overall, Honeywell forecasts deliveries of up to 11,000 new business jets during 2010-19, down 35 percent from the 17,000 the company suggested in its 2008 forecast.

In its latest 20-year global business aircraft forecast, engine manufacturer Rolls-Royce argues that current market realities need to be assessed for their impact on long-term market demand. “Overall, we will lose one or two years’ worth of growth that we would otherwise have seen without the recession,” says the report.

The UK-based group says the market stabilized at a low level after mid-2009. Finance was once again becoming available, order cancellations had slowed, the used aircraft market was seeing increased transactions and stock market indices were rising. It concludes with “There is, therefore, increasing confidence that the market will recover, with deliveries ramping up by 2013.”

Rolls-Royce believes that long-term trends will continue. “A shift away from the North American market will persist as the numbers of high-net-worth individuals in Asia, Europe, and the Middle East continues to grow,” it predicts.

Bombardier recognized that the industry’s cyclic nature can generate pessimistic views that subside after the market recovers. “Manufacturers face a tough short-term period due to the lack of available credit, numerous order cancellations and the reduction of production rates,” its forecasters maintain.

Nevertheless, it sees future perspectives remaining solid. “We strongly believe that the current industry challenges, such as negative perceptions and the high level of used aircraft inventory will fade in the short term. Medium- to long-term growth will be fueled by manufacturers continuing to design and market new aircraft to drive value to customers.” Bombardier expects “significant” demand from U.S. customers to replace aircraft, as well as from market entrants in Eastern Europe, Latin America and the Middle East and Africa.