LAS VEGAS, Nov 15 (Reuters) - Sales of business jets are expected to slow next year as weakening economies and simmering political tensions delay corporate purchases, according to a forecast by Honeywell International Inc.
New jet sales are likely to fall by less than 10 percent in 2016, reversing recent gains that pointed to a slowly reviving market, Honeywell said in its 24th annual survey of corporate flight departments.
“Because of current unsettled conditions around the world, people are responding in a more wait-and-see fashion,” said Charles Park, director of market analysis for Honeywell, an aerospace components supplier.
“That’ll impact our near-term order and delivery trend.”
The survey of more than 1,500 non-fractional business jet operators also showed expectations for 675 to 725 new jet deliveries this year, up from 692 in 2014.
The gain in 2015 is due to new super midsize models coming to market from Bombardier Inc, General Dynamics Corp unit Gulfstream and Embraer SA, and a new Cessna jet in the medium-size class, said Brian Sill, president of business and general aviation at Honeywell Aerospace.
But Honeywell trimmed its 10-year outlook, saying the global market will need 9,200 business jets worth $270 billion over the next decade, down from the 9,450 jets worth $280 billion it forecast last year.
Honeywell’s Sill said the sales slowdown won’t prompt it to cut capacity since the declines are modest.
“We expect similar or slightly higher delivery levels in 2017, followed by more robust growth in 2018,” Park said.
The weak sales stem from slower economies in emerging markets, Honeywell said, noting that an expected gain in sales to fractional jet companies will only partly offset the decline. It also reflects some purchasers waiting for new models entering service in the next two years.
Latin American purchases are expected to remain above average despite economic weakness in Brazil. But sales in Europe, Asia and North America are expect to be flat to lower.
Modest upticks in demand in Russia and China aren’t enough to compensate for the overall weakness. Sales growth is being crimped in part by anti-corruption efforts in China and low oil prices in Russia, Park said.
As they delay purchases, some corporate fleet managers are planning to upgrade existing aircraft with better avionics, cabin improvements and satellite connectivity for communication and navigation.
Large cabin business aircraft are the most popular, accounting for 81 percent of sales value. Buyers also are looking for modern avionics, faster cruising speeds and longer range, Honeywell said. (Reporting by Alwyn Scott; Editing by Alan Crosby)