AirInsight Business Aviation Forecast 2023-2032

Ahead of next week’s NBAA Business Aviation Convention and Exhibition in Orlando, we present the AirInsight Business Aviation Forecast 2023-2032.  The forecast is summarized in the following video presentation and discussion about the forces driving the industry over the next decade. The slide deck from our presentation is available for the personal use of our subscribers upon request.

The remainder of this post is a detail of the major points of our forecast:

BUSINESS JETS – CAUTIOUS OPTIMISM

AirInsight’s business aviation forecast projects deliveries of 7.841 new business jets from 2023-2032, compared with 6.993 delivered from 2012-2021. This does, however, include the personal jet segment and Cirrus Vision Jet, which was not introduced until later in the prior period, accounts for a significant portion of the difference in units delivered between the two ten-year periods.

The pandemic fueled a switch to business aviation for a group of new customers – which begs the question of whether they will remain long-term business aviation customers or return to flying the airlines. We don’t yet know the answer, but the short-term booked-to-bill ratios are positive for all of the major general aviation manufacturers. Longer-term, we expect attrition of about half of these customers back to lower utilization levels for business aircraft now that the global pandemic seems to have waned.

Storm Clouds on the Horizon

Despite the positive booked-to-bill ratios, the key business aircraft players are having a difficult time with supply-chain issues and labor shortages throughout the industry. After being forced to reduce staff during the global pandemic, many are finding it difficult to hire staff to return to pre-pandemic levels, and the experience levels for those newly hired do not match those who were let go. As a result, there is a shortage of highly skilled staff.

Compounding that issue is inflation, and the reaction of central bankers around the world to raise interest rates quickly, in our opinion likely to cause a mild economic recession. Compounding the economic difficulties are higher fuel prices caused by the war in Ukraine, and increased economic uncertainty in the European Union. We are projecting a moderate recession in the 2023-2026 time frame, with the key OEMs trying to ramp up deliveries to capitalize on the short-term order bubble while hoping the orders are not going to be canceled.

Environmental concerns are also growing significantly, with the French government criticizing the use of business aircraft, despite having Dassault and Daher as France-based OEMs. We believe they will likely try to constrain demand for business jets through tax increases and constrain operations through regulations that make it more difficult to travel by business jet. While this has not happened yet, the warning signs are clear, and the political winds are increasingly populist. That makes business jets an easy target as they are associated with the global elite and the top one percent. As a result, we expect new constraints to begin from the 2026 time frame on a patchwork-quilt basis, rather than a uniform international framework.  That will impact the demand for business jets on a country-by-country basis, and change demand patterns.

The most readily available solution, the use of Sustainable Aviation Fuel (SAF), is constrained by capacity. Today, all of the SAF in the world would account for under two percent of all business jet operations. Clearly, growth in SAF production is needed to make a substantial difference, and while many SAF and refining projects are underway, we don’t expect supply to cover more than fifty percent of the market until 2028, and eighty percent of the market by 2035.  Jet-A aviation fuel will remain an environmental pariah, with higher taxation quite likely, for the remainder of the forecast period. It is going to be more expensive to operate business jets, either using SAF or being taxed for the relative difference in cost. With higher costs comes lower demand.

Between the economy, externalities including the Ukraine War, environmental concerns, and near-term shortfalls in ramping production, we believe the next decade will be as difficult for the business aircraft industry to navigate as the prior decade, which featured strong economic growth prior to the global pandemic.

Our long-term view for the business aviation forecast is relatively flat. We don’t expect the industry to return to the volumes in 2007 and 2008 for the foreseeable future, with only a small bump-up in deliveries to accommodate post-pandemic demand, followed by a pattern of limited growth.

During the business aviation forecast period, demand is changing, with large and intercontinental jets achieving higher growth due to recent investments in new aircraft that have just or will soon enter the market. The following chart compares the last full decade with our projections for the next ten years.

We expect large and medium-sized jets to grow at a faster rate than small and very light jets over the next decade. On a market-by-market basis, we expect some major changes. The large and intercontinental jets will be paced by innovation, with the recently introduced Bombardier Global 7500 and Global 8000 joined by the G700 and G800 from Gulfstream and the Falcon 10X from Dassault. New aircraft typically generate significant initial interest and sales, and the next few years will be quite busy for the intercontinental jet segment.

The mid-sized jet segment will include a new model from Dassault, the Falcon 6X

scheduled to arrive in 2023 with a wider cabin than other aircraft in its class. With a clear differentiating characteristic, we expect the Falcon 6X to become a successful program.

The light end of the market continues to feature two very strong programs, the Embraer Phenom 300E and the Pilatus PC-24. Each has a following, and we expect a refresh to the Phenom 300, perhaps a Phenom 400, in the late 2020s.

The very light segment of the market will include a new model from Honda to be revealed at NBAA, as well as the successful Cirrus Vision, which offers a jet transition for pilots of its piston engine models.

The following chart tracks deliveries by segment by year in our business aviation forecast:

The converted airliner segment is a niche market, with few projected sales from Airbus and Boeing. While Embraer dropped the Lineage 1000 version of its E-Jet in its product line-up, there is the potential to offer the more-efficient E2 models should market interest emerge. During its media days in May, Embraer indicated it is looking carefully at market opportunities but will only offer a new product if it means disruptive technology and better efficiency.

Business Jets Market Share

Our forecast of deliveries, by manufacturer, over the ten-year period of our business aviation forecast is shown on the following pie chart:

Textron will lead the way in deliveries, but with a mix of smaller jets, will fall short of the billings that Gulfstream and Bombardier generate at the top of the market with higher priced aircraft. Dassault will gain ground during the forecast period, and re-capture some of the market share it lost over the last two decades with its two new products.

Outlook by Manufacturer

Bombardier has invested heavily in its Global family of aircraft, with four young models, including the Global 5500, 6500, 7500, and 8000 models. The Challenger 650 is in need of an upgrade, and we anticipate a new model in the 2027-2028 time frame to shore-up declining sales. The Challenger 3500, with a recent upgrade, will likely be due for a refresh in the 2030-2031 time frame. Our projections by model follow:

Cessna, a unit of Textron Aviation, will continue an array of light jets in the marketplace, all based on the Citation design that began life in the 1970s. We expect that Cessna will introduce an all-new light jet in the 2030 timeframe, perhaps using hybrid technology, as it maintains market leadership in light jets. Our projections by model follow:

Dassault Falcon Jet is introducing two new models to the marketplace and making a concerted effort to update its aging product line. The Falcon 6X will have the widest cabin in its class, and the forthcoming intercontinental Falcon 10X will have the widest cabin of any purpose-built business jet. Our projections by model follow:

With a strong track record for new model development on time and on budget, Embraer as a relative newcomer two decades ago has reached the status of a major player in business aviation and effectively replaced Hawker in the marketplace with newer and more efficient products. The Phenom 300 has been a remarkable success, and we believe Embraer will continue that success with a refresh late this decade. The Praetor upgrade to the Legacy series changed the value proposition in its market niche and has been successful. While Embraer as an organization was heavily impacted by the canceled merger with Boeing, it has invested in Urban Air Mobility and is poised for further future investment in business aviation.

Gulfstream has a series of recent and new models that will provide five large jets, from the forthcoming G400 to the existing G500 and G600, with the forthcoming G700 and G800 replacing the popular G650 series to provide five relatively new models, each of which should achieve market success. While competition is stiff with Bombardier’s Global and Dassault’s Falcon 10X, we expect Gulfstream to remain the market share leader in larger and intercontinental jets through the forecast period. Our forecast for Gulfstream by model follows:

The remaining players, Cirrus, Honda, and Pilatus, each have a unique market niche. The Cirrus Vision is aimed at the owner-flown market. Pilatus PC-24 has unique short-field and unimproved field strengths as a utility aircraft in addition to business jet operations, and Honda is rumored to be introducing a new model at NBAA 2022. Our forecasts for these three players follow:

The converted airliner market is a unique niche, and with Airbus and Boeing each having difficulty in ramping-up short-term production, a market with limited supply. Nonetheless, given the high pricing for these aircraft in executive configurations, these can be lucrative sales for large OEMs. However, their need to deliver aircraft to airline customers has a higher priority, and the business jet category is an add-on rather than a focus for both Airbus and Boeing. Our projections for each follow:

TURBOPROPS AND AGRICULTURAL AIRCRAFT – SOLID GROWTH BUT CHANGING MIX

Our ten-year business aviation forecast for the turboprop and agricultural segment calls for 6.103 aircraft from 2023-2032, up from 5.615 in the prior decade, an 8.7 percent increase in deliveries. We have segmented our forecast into five categories – single-engine business turboprops, multi-engine business turboprops, single-engine utility turboprops, multi-engine utility turboprops, and agricultural aircraft (whether turboprop or piston).

The mix of business turboprops is changing dramatically. Single-engine turboprops are growing at a 31 percent rate over the forecast period while multi-engine turboprops decline by 54 percent. While the net result for business turboprops is relatively flat, it reflects a major shift in the marketplace away from the Beechcraft King Air family, which has been the mainstay of multi-engine turboprop sales. The King Air 90 has already been dropped, and lower sales for the remaining 260 and 360 models indicate a continuing decline in sales in our forecast. On the single-engine side, the Beech Denali will join the Piper M Series, TBM 960, and Pilatus PC-12 in the fastest-growing segment of the market.

Utility turboprops are steady, growing slightly from the prior decade in our forecast. The Cessna Sky Courier dominates the twin-engine segment, while the Daher Kodiak 900 is expected to capitalize on improved performance and gain additional sales in the single-engine segment. The Cessna Caravan will continue to move forward and will be one of the first turboprops with an electric conversion program. A key question is whether the factory will follow with an electric version.

Our business aviation forecast by market segment is shown in the following graph: