Bombardier’s market forecast – Part 2
During the EBACE trade show, Bombardier’s business aircraft division published its new forecast for the next 10 years. While reported data is clearly subject to current events, it nevertheless remains interesting in terms of the aircraft manufacturer’s short-term strategy.
In addition to its analysis on the future of the market by aircraft category, Bombardier also focused on regional sales forecasts for the period from 2016 to 2025. Although Bombardier’s deliveries were down by 10% in 2016, its study remains optimistic for the future.
In particular due to the forecast growth of the main economic driver, Gross Domestic Product (GDP) which is expected to see an increase of 3% by 2025. The analysis also expects recovery and stability over the coming 24 months for the main emerging countries particularly in Africa as well as in the Middle East and the Asia Pacific region. Predictably, the study commissioned by Bombardier reveals that three main regions will lead the sector: Asia, Europe and North America. According to the study, 8,300 aircraft will be delivered throughout the world over the next 10 years valued at over $250 billion.
North America: the leading global market
As with the figures published in recent years by GAMA (General Aviation Manufacturers Association), North America remains the most active region in all business jet activities. As the cradle of business aviation, the geographic zone remains a driving force in the strategic choices of manufacturers.
North America alone is expected to record deliveries of over 3,900 aircraft between 2016 and 2025 for an amount valued at over $105 billion. Bombardier forecasts annual economic growth of 2.2% during this period resulting in 2% fleet compound annual growth. 80% of deliveries will concern light and medium category aircraft.
Europe: still in the running
Despite the ongoing challenge of economic recovery which has lasted nearly a decade, Europe remains the second leading economic hub for business aviation. In this respect, the Bombardier study remains optimistic for the next 10 years estimating average annual economic growth of 2% and fleet compound annual growth of 7%. The fleet, which totaled 1,435 aircraft in 2015, is expected to exceed 2,835 aircraft within 10 years.
Accordingly, 1,530 aircraft will be delivered for a budget valued at $55 billion.
Light and medium category aircraft will account for 60% of deliveries according to Bombardier. Despite these figures and a fleet that is growing increasingly older, the study also factors in the retirement of 130 aircraft by 2025.
Latin America: the main unknown factor
Brazil the main economic driver of the region is still rocked by political troubles, and could even declare bankruptcy without major reforms resulting in its collapse, bringing down with it a portion of the region’s economic growth. However, Bombardier’s study forecasts 2.3% annual economic growth for this region. 790 business jets are expected to be delivered by 2025 boosting the current fleet of 2,000 units up to 2,500 aircraft.
The final figure takes into account the retirement of 300 business jets over a 10-year period. For Bombardier, Latin America is already the third-largest business aviation market and has proven itself to be a particularly mature market in less than a decade. Argentina, Brazil, Venezuela and Mexico will continue to account for over 80% of the region’s fleet.
China: a market with huge potential
In 2016, China accounted for 17.3% of global GDP according to the IMF. Yet, the country has undergone heavy reforms over recent years which will penalize the business aviation sector.
However, the country’s potential still remains important for the sector as recently highlighted by Philip G. Queffelec, founder of Sparfell & Partners: “Business aviation soared in China but came to an abrupt halt when the new laws came down. The market is currently on hold in Asia. In any event there is still huge potential.”
An opinion that the Canadian giant seems to share with expected deliveries of more than 700 aircraft between 2016 and 2025. These deliveries, which will result in annual fleet growth of 10%, are nevertheless subject to annual economic growth of 5.6%. In 2025, the total Chinese fleet is expected, according to the study, to amount to around 1,100 aircraft of which 90% in the medium and large category.
CIS: the other unknown factor
European Union sanctions against Russia as regards the crisis in Ukraine will have impacted the business aviation sector. This crisis also in part caused Bombardier to slow the pace of production in 2014 on the Global family – aircraft which are particularly well liked in the region.
However the crisis in Ukraine will have in particular reopened old wounds from the Cold War resulting in
renewed East-West tension and Moscow’s mistrust towards Western countries. While the exit to the crisis is mainly political, the economy still remains affected.
However, Bombardier once again is optimistic in this region which entered the business aviation market in the 1990s. This “young” business aviation market nevertheless has around 600 aircraft and is expected to expand its fleet to 980 aircraft by 2025. To achieve this, the aircraft manufacturer is counting on 2.2% annual economic growth and the retirement of only 15 aircraft. Based on its analyses, medium-category and long-range aircraft will represent 65% of deliveries between 2015 and 2025.
The Middle East: a promising market
Despite the past two lackluster years, the Middle East remains a solid and promising market. In spite of the decrease in oil prices and regional conflicts, the economic zone led by Saudi Arabia, the United Arab Emirates and Qatar is expected to report average annual growth of 3.3%.
Over the next decade, 350 deliveries are expected based on the study, i.e. 6% compound annual growth for a fleet which totaled 410 jets in 2015. Estimated at over $12 billion, these deliveries are also economically driven by the large distances separating the region’s main cities and difficult ground access, stimulating the supply and demand for the business aviation market.
By Frédéric Vergnères © Frédéric Vergnères