Tougher Than the Weather

A forecast that has proven tougher to make, and certainly less accurate than the weather, is how new airplane sales will go in the future. But that doesn’t stop some companies from trying to see over the edge into the next decade.

The reason airplane engine and airframe manufacturers make forecasts, and rely on those forecasts, is that development of new models takes many years.

We all know that a new airplane requires at least four or five years from concept to first delivery, and many development programs recently have taken much longer. Depending on how you count, even the vaunted Boeing needed an extra three years beyond the proposed schedule to deliver the first 787. And many general aviation airplane development programs have not come much closer to their originally announced schedule.

The situation for new engine makers is even more precarious. An engine takes at least as long as an airplane to engineer, build, and certify. And the engine maker has to bet that the engine will work and spend the millions necessary to develop the engine before the airframe manufacturer can commit to making a new airplane. So it can easily be a decade or more before an engine maker sees the first dollar return on a new engine, though huge amounts of money are flowing out the door for engineering and development.

If the engine and airframe companies call the future wrong – and I don’t mean just next year – the decisions made today could be disasters with no recovery. As pilots we care about the weather a few hours, or even minutes ahead. These guys live or die with forecasts of market demand 10 or more years out.

Honeywell and its engine division that began life as Garrett has been making public at least part of its turbine airplane market forecast for more than 20 years at the annual NBAA convention. Honeywell interviews a large number of business jet operators asking about their airplane purchase plans to develop the forecast.

Honeywell’s forecast methods failed to predict the market crash for airplanes that followed the global financial meltdown in the fall of 2008. That put Honeywell in pretty good company because few saw a recession – or is it depression? – of that magnitude coming.

The peak year for deliveries came in 2008 when almost 1,200 business jets were delivered. This year just more than 600 are expected to fly away from factories. But the Honeywell forecast calls this the bottom year, and next year, 2012, will see a slight uptick or at least leveling of bizjet sales. That’s pretty much a repeat of last year’s forecast, just pushed one year ahead.

The rosy Honeywell forecast for the end of the decade ahead sees more than 1,200 bizjets being delivered in 2021 with a total value of about $30 billion. Almost two thirds of the value will come from large and long-range jets.

Embraer also makes a prediction but it relies on forecasts of global economic conditions rather than interviews with airplane owners about their buying plans. Airplane sales, as you would expect, track very closely with economic conditions.

Predicting how the economy of any country will behave is risky business, but trying to include the whole world, as airplane makers must since aviation is a global business, really tests any forecaster’s tools. But Embraer needs to make plans, and they share the forecast those plans are based on.

Embraer also calls this year the trough with steady growth in bizjet deliveries over the next decade reaching a total of more than 1,400 a year by 2021.

Why should we as pilots and airplane owners care about the future of the jet business? Because bizjets are the financial backbone of general aviation. Selling, flying, and supporting the business jet fleet keeps manufacturers in business, of course, but it also makes it possible for FBOs to be profitable, a parts distribution network to exist, and airports to have the necessary income.

Even piston airplane manufacturers such as Piper, Cirrus, and Diamond are betting future growth on jets. And the turboprop makers Socata, Pilatus, and the others also are part of that turbine world.

No matter what we fly our lives are better when the value of the general aviation fleet is growing. And the forecasts say that it will. I sure do hope the predictions are right.

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25 Responses to Tougher Than the Weather

  1. rdt7 says:

    I’d be curious what level of fuel prices they incorporated into their forecasts. And what if the carbon taxes that exist in Europe spread? I know this has less impact on companies and individuals that can afford jets, but I still wonder how the forecasters factored this in.

  2. Mac says:

    Since operators about their plans to buy or sell airplanes in the coming years the cost of fuel and other variables such as the carbon tax are part of those operator’s plans. Honeywell includes operators from around the world so various local issues such as taxes and fees should be a factor in those operator’s future buying or selling decisions.

    Embraer consults with financial experts who consider as many factors as are availalble to predict corporate performance, and overall economic conditions. Certainly the price of energy, and additional costs placed on the use of energy, are included in that forecast.

    So, the anticipated cost of fuel is included in the forecasts, but there is no report of price per gallon or that sort of specific. What will fuel costs be in 10 years? That is just one of many forecasting challenges.

    Mac Mc

  3. Doug MacDonald says:

    Mac, I have the utmost respect for your accomplishments as an aviation journalist but really…

    What the heck does this have to do with EXPERIMENTAL AIRCRAFT?????

    Last time I checked, EAA stood for Experimental Aircraft Association.

  4. Mac says:

    Hi Doug,

    Thanks for your kind words, but consider this: If we think of EAA as Every Aircraft Association we can bring all of general aviation under the EAA tent. GA is far too small to slice and dice and we all need each other. If business jets succeed, all of GA benefits. All of GA is important and we need to stick together to see it grow, or at least stop shrinking.

    I find it amazing and very encouraging that the GA association leaders have made several appearances together to discuss issues facing all of general aviation. If we don’t stick together, forces against GA can divide us. A good example of that has been recent attempts to put special fees only on turbine airplanes, or only on those who fly IFR. If that happens, it’s only time before those fees find their way down to every kind of airplane. The turbine fleet doesn’t need 100LL avgas, but the NBAA and others that represent mostly jets and turboprops are fighting to preserve the avgas supply just as hard as EAA an AOPA are. It is a new world of GA unity that is the only way forward.

    Bests,

    Mac Mc

  5. Jeff Boatright says:

    Mac,

    Like you, I hope that the projections for increased jet value turn out to be true. Like Doug, I respect your successes in previous endeavors and I thoroughly enjoyed being exposed to them. But also like Doug, I don’t understand your choice of venue for some of your blogging topics (or vice versa). Your response to him is a non sequitur. Whereas I completely agree with your statement:

    “All of GA is important and we need to stick together to see it grow, or at least stop shrinking.”

    that in no way means that I want to read about bizjet industry prognostications at an EAA website. Maybe it’s a great topic at Aviation Week and Space Technology or NBAA sites or some such. Nobody is holding a gun to my head to read your blog, and I do enjoy your prose per se, but to the extent that EAA is supporting your blog, it is displacing informed commentary EAA could support on topics EAAers care about.

    Also, I agree with your argument that what happens with bizjets eventually and tangentially affects my flying my Pietenpol, but I don’t think that EAAers being more educated about and having warm fuzzies about the bizjet bidness is going to advance that field, so even that aspect of discussing the topic in this venue doesn’t hold.

    But other than that, keep up the good work! ;)

  6. SkyGuy says:

    I agree with Doug…..I will never be buying or renting a jet. Can’t even afford a newer Cessna. Stick to the used piston airplane material…..our area of interest.

  7. John Davis says:

    Mac -
    I say, “stick with it.” I am relatively new to general aviation, but am lucky enough to be able to use it to grow our family business. In late 2010, I obtained my PPL and IFR certificates and will fly 175+ hours this year in a rented Cirrus SR20 (well, some of those hours are in a 182RG with a Garmin 750 – a fantastic IFR platform!) GA, without a doubt, has helped grow our business significantly. No plane, no gain indeed.

    Although the probability of me ever building my own airplane is quite small, I am still an EAA member that thoroughly enjoyed Oshkosh 2011, plan on attending Oshkosh 2012, and consistently rabidly digest Sport Aviation the moment it arrives (as an aside, the articles in Sport Aviation are significantly better than those in Flying or AOPA Pilot). I have the utmost respect for homebuilders and really dig that side of aviation. IFR business flying is, well, serious business, and it is far more fun to sometimes sit back and take in the awesomeness and passion of the homebuilt/warbird scene. The people involved in both are, without a doubt, the spirit of aviation.

    Please keep writing about all matters aviation. I absolutely agree that we are all interconnected. Without jets, I would have limited access to nice courtesy cars, business-oriented FBOs, and all the other amenities that jet-centered FBOs offer (and happily offer to piston single guys, btw). Conversely, without the experimental category, I would have no fun, no passion, and no Oshkosh!

    Without the *combined* efforts of the EAA, NBAA, and AOPA (all of which I support with my membership), we run the risk of being a very un-fun, uptight, bureaucratic copy of European aviation.

    We are indeed all interconnected.

    Cheers,
    //John

  8. Mac says:

    Hi All,

    If there was a forecast for piston airplane production, or for homebuilts, I would certainly want to provide it to you and comment. But the fact is, there just isn’t enough money in the piston end of the business to spend it on a sophisticated forecast.

    The business jet people are investing in general aviation, and in forecasts of the future, so that is what we have to report. And I do believe that what happens in one segment of general aviation applies to all. What Honeywell and Embraer have done is, or should be, interesting to all in general aviation because it is the best and only barometer we have.

    Mac Mc

  9. rdt7 says:

    It is a mistake to think that one form of aviation in this country is totally separate from another. Mac is correct. No jets – then no FBO’s, no GA airports, no Avgas etc. I for one, want to know what’s happening in every area of aviation – even though I’ll never fly a business jet. Like it or not, EAA long ago started representing all of aviation and not just experimental aircraft. I think its good to have one place where all of GA can come together and EAA is that place.

    • Jeff Boatright says:

      “It is a mistake to think that one form of aviation in this country is totally separate from another.”

      Agreed, so thank goodness nobody is making that mistake here.

  10. Bill Bryan says:

    Mac,
    Thanks for a very informative article..I like em all. grasshopper or big jet..keep them coming.
    Bill

  11. Marc says:

    Mac,

    So, so sad to read of yet another “big picture” spin on what we little folks are concerned about. We’re concerned about even higher fuel taxes that will go to subsidize IFR for the bizjets and airliners while we pursue our “low and slow” lifestyle. The (Texron)Cessnas, Bombardier’s and (General Dyanamics)Gulfstreams know what business they’re in and it really has NOTHING TO DO with general aviation – it’s Corporate Aviation, pure and simple. I’ve got no sympathy for the big guys. As far as I can tell they just lobby to increase the price of my flying (so theirs can be lower) and clog ATC so I can’t get a traffic advisory near the evening rush hour.

    My advice, Mac, would be to start flying VFR again, and use those corporate flying mags to light your December logs in the fireplace.

    • Bob says:

      Agree with Marc. The “if it weren’t for bizjets, GA wouldn’t exist” vibe is asinine. Of all the airports in the US (or the world), what percentage are big enough for the jet set? There are a lot of small strips, short strips, grass strips out there that haven’t and won’t see a single jet ever. And if EAA/AOPA/pick your favorite advocacy group continues to increase focus on those tied to the vast asphalt wastelands, those small strips will continue to disappear and the little guys will truly be in jeopardy because commercial airlines and the big jet crowd will scream and cry when they’re forced to integrate with the little bug smashers at O’Hare.

      Seriously — the ongoing reality is that as commercial airline service has grown, the big municipal airports become more “jet friendly” and less “small piston” friendly. So the pistons move to nearby reliever airports. Those relievers become popular with the bizjet/turboprop/large twin crowd, and the little pistons move to municipal/private strips. The visibility drops, and nobody cares about what we puddle-jumpers are doing.

      If EAA, and Mac by extension, is not speaking for us, who will?

      • Bob says:

        And, to respond directly to Mac’s comment:
        “If there was a forecast for piston airplane production, or for homebuilts, I would certainly want to provide it to you and comment. But the fact is, there just isn’t enough money in the piston end of the business to spend it on a sophisticated forecast.

        The business jet people are investing in general aviation, and in forecasts of the future, so that is what we have to report.”

        This pokes at the heart of what I think is the frustration with EAA’s new holistic approach. EAA used to be the sole undiluted/dedicated advocating voice for “pure” grassroots recreational/sport GA. The business and corporate crowd has the money, their own advocacy groups, advertising dollars, and the ear of AOPA and a number of magazines. EAA was the conduit and representative of “small GA” flyers. Now, they have joined forces with AOPA/etc. (not a bad thing) and jumped on the bandwagon of echoing the corporate/business drumbeats (not a good thing).

        To say, “homebuilts don’t have money for a study, so we’ll just broadcast what the jet manufacturers gave us” is the exact opposite of what EAA is for. EAA should exist to say, “this is what the small GA/experimental world is contributing to GA as a whole.” Otherwise, the little guys will be drowned out and steamrolled by the big money yet again.

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  13. Josh says:

    For what it’s worth, last time I checked, I get to fly my 172 from airports that were built or upgraded to attract biz jets. I seriously doubt that the ILS installations at a couple nearby uncontrolled airports were put in with the thought, “hey, I bet the airport gang will love coming over here to log practice approaches.” No, bizav is essential, and my hope is that the uptick in bizav is representative of GA as a whole!

    Collaboration is the new future of business and aviation.

    Keep the articles coming Mac!

  14. Gordon Arnaut says:

    Well, my beef with this is that the bizjet business hardly needs our support and sympathy…

    Don’t get me wrong, I’m all for bizjets…in fact I work in the industry…and they are magnificent machines…but my interest and that of most gys here I’m sure is purely on the technical and aeronautical side of things… If you are going to carp about the politics and economics of the bizjet business…well I think you can count a lot of us out…

    Yes there has been a bizjet downturn…but hey what about pistons…?…we’ve been in a downturn for 30 years now and I don’t see Mac or others making this a topic of discussion…

    Last year despite the downturn there were more turbine GA planes produced (bizjets and turboprops) than pistons…that’s like Chevy making fewer cars than Ferrari…

    By dollar value piston airplanes are now 2 percent of GA sales…according to the latest GAMA stats which are available in their databook on their website…two lousy percent…

    In 1979 there were 17,000 piston airplanes that rolled off assembly lines…compared to 800 last year…that is more than 20 times as many piston airplanes a year…

    how big of a slice were pistons then…?…by simple math it means we were probably at least 40 percent…but my guess would be much higher because bizjets and turboprops were not selling nearly as briskly as they do today…not nearly as many WALL STREET billionaires back then…

    So our little piston aviation industry is all but dead and gone now…and now we are supposed to cheerlead for the billionaires…?…because by golly we should be grateful that we can pick up their crumbs at their fancy FBOs…?

    Well…how a bout a word or two about what is happening to us…?…you know… the little guy who wants to own his own plane…?

    Last time I checked it was these same billionaires living it up in the bizjets that have taken over our economy and moved it to China and India…and given us half-million dollar piston singles that nobody can afford…

  15. Mac says:

    Hi Gordon,

    You are correct about the decline in piston aircraft production from the peak in 1979. Most of the the 17,000 plus airplanes built that year, and the many thousands built before that, are still flying. In fact, a 1979 model is pretty new in the piston fleet.

    Because airplanes–any airplane–live such a long useful life I like to compare used airplane activity to real estate. Because few houses are torn down there is a whole industry built around maintaining and improving them, and of course, selling them over and over again. Airplanes are much the same. The piston industry is more about maintenance and improvement than new construction in terms of volume.

    When will new piston demand grow? When there are more pilots, just like an increase in people and families creates demand for a new house. And pilots new to aviation are more likely to buy a new airplane than those of us who have been flying for many years.

    There are many problems facing all of general aviation, including piston airplane manufacturing, and they can all be made better if more people learn to fly. Growth solves almost every economic issue whether it be at the government, corporate or family level, and the pilot population has been going the other way.

    That’s why EAA’s primary focus over the next many years is growing the number of aviators. And that’s why EAA must work with all of aviation to attract new people to become pilots. If there are more pilots, everyone wins. If the pilot population keeps shrinking, nobody does.

    Thanks for your comments,

    Mac Mc

  16. Gordon Arnaut says:

    Hi Mac,

    I do agree that we need more pilots…no question about that…

    The problem is that the biggest cost of flight training is the cost of the airplane…and the cost of airplanes has quadrupled (in real dollar terms) over the last three decades or so…

    Look we are kidding ourselves big time if we do not start talking about this because personal aviation is on its way out…

    Here is some writing on the wall…in 1979 pistons were probably a lot bigger share of GA than turbine equipment…and a lot of those pistons were used for business…

    Since then we have seen an explosion in bizjet demand…especially the big cabin planes like the G5 and Global Express etc…while pistons are all but extinct…

    Used to be that business aviation meant the little guy moving up from piston single to twin to cabin class to perhaps turboprop or even light jet…

    Right now the large cabin jets are 60 percent of the market by dollar sales…if this trend continues, in a decade or two even the light jet may well be gone the way of the piston plane…then all we we will have left of “General Aviation” is billionaires cruising around in their G5s…

    There is not going to be any turning back if we think we are going to right this ship with a few more pilot starts each year…people get their license because they dream of owning their own plane…but that dream is gone now…

    And whenever I bring up this most urgent problem we are facing, I always hear “well we have thousands of those old planes made in the sixties and seventies…”… well great…but we need brand new light airplanes at an affordable price if we are going to have personal aviation going forward…

    I can’t say that any more simply…the only bright spot is the homebuilt segment, led by Van’s, which is truly one heck of a deal…and is why there are 7,000 flying already…

    But a homebuilt plane is not for everybody…if the EAA is going to do something then let’s start brainstorming about how we are going to bring out the $75,000 family airplane…if it was possible in the ’70s why on earth should it not be possible now…?…If we had to build 300,000 airplanes again like we did in WW2 why should it not be possible…?

    There is no good reason…other than the finance sector, “investors” and other non-productive elements of our economy (parasites really) that are dragging all of us down…but let’s say to heck with them, who needs them and do our own thing…that is what I would like to hear coming from the EAA…

  17. Dan says:

    Mac says;
    “That’s why EAA’s primary focus over the next many years is growing the number of aviators. And that’s why EAA must work with all of aviation to attract new people to become pilots. If there are more pilots, everyone wins. If the pilot population keeps shrinking, nobody does.”

    Now that I have read from a person that represents the EAA, that the primary focus of the EAA is to grow the number of aviators rather than build experimental airplanes, I will not be renewing my EAA membership next year. I will just keep building airplanes in my garage and hope that someone named Paul will start an organization that promotes homebuilt aircraft.

  18. Dan Horton says:

    Mac,
    With all due respect, who are you to tell the sport aviation world who we owe? Your previous soapbox presided over what we might argue was the death of conventional GA. Now you want to dilute the most successful segment of the piston world? Kindly take your viewpoint and…..retire again.

    BTW, I love the Experimental Aviation Association. Count me among those who want to take it back.

    • John Davis says:

      Dan Horton,
      Glad to see the misogynistic my-club-is-better-than-yours-attitude aspect of humanity runs strong in nearly every group of which I am a part. And here I thought that aviation was different after visiting Airventure for the 1st time in 2011.

      Tell you what – you can live on your own EAA-only island and refuse to collaborate with General Aviation as a whole. That way, you won’t be bothered by us certified-types (who may build an experimental someday) or bizjet guys. We will leave you well alone so you don’t have to talk to people for whom you refuse to see their point of view.

      The only stipulation is that you can’t come running to us when someone tries to close your airfield, or regulate user fees. Or impose TFRs at random. Or whatever else lobbyists of NIMBYists concoct in their scheming.

      Get a grip. Look around you. Less than 1% of the population are pilots. 85% of the airfields I fly into on business are dying quickly. When I look around the FBO, I am in the small minority of active pilots, let alone those under 30.

      Mac isn’t the one diluting – it is people like YOU that refuse to work towards the common good that are doing the diluting. GA needs *everyone* to pitch-in.

      The only way to be effective is to band together and fight as a team. EAA, NBAA, AOPA, we all have shared interests. If you don’t believe me then you haven’t been out of your local airfield area in far too long.

      But what do I know. I fly certified aircraft IFR for business. Maybe someday I will be successful enough to own a turbine airplane. I obviously have no interest in Sport Aviation…

      Best regards and keep the greasy side down,
      //John

      • Dan Horton says:

        John,
        I gather you are a successful businessperson…..meaning you concentrate on your core business and do it better than anyone.

        EAA’s business is sport aviation.

        Please don’t assume too much about motive or interest. My other hat says “AOPA”, and I’ve spent much blood and treasure defending my airport.

        Oh, BTW….”misogynistic” means “of or characterized by a hatred of women”. See the Greek root “gyn” in the middle? Mac has a mustache, and anyway, I don’t hate him. I simply think his vision for EAA is very wrong, and hope his tenure at the magazine will be short.

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