Upgrade to SI Premium - Free Trial

Honeywell cuts business jet deliveries outlook as pandemic hits aviation

October 6, 2020 9:04 AM

By Allison Lampert

MONTREAL (Reuters) - Honeywell Aerospace (NYSE: HON) on Tuesday cut its outlook for business jet deliveries, but held out hope that most future orders would escape the punishing effect of the COVID-19 crisis that has battered the aviation sector.

Honeywell's 2020 business aviation outlook forecasts up to 7,300 new business jet deliveries worth $235 billion from 2021 to 2030, down 4% from the same 10-year forecast a year ago.

Yet 80% of business jet operators surveyed in the outlook say their aircraft purchase plans have not been affected by COVID-19, it said.

Corporate planemakers like Canada's Bombardier Inc , U.S.-based General Dynamics Corp's (NYSE: GD) Gulfstream Aerospace, and France's Dassault Aviation SA (OTC: AVMD) are closely watching to see if a summer rebound in corporate flights will last and generate demand for new aircraft.

"We are seeing corporate customers expressing interest in growing their fleets so they can fly more executives and others privately, to safeguard employees' health and prevent disruptions to their business," Scott Neal, Gulfstream’s senior vice president of worldwide sales, said by email.

Private flights, which carry smaller groups and promise wealthy passengers less risk of exposure to the coronavirus, have generally fared better than those of commercial airlines, with operators like NetJets and VistaJet reporting improved demand this summer.

Still, many forecasters remain cautious about the business jet market with deliveries expected to decline by 25% to 30% in 2020 due to the pandemic. The industry, which delivered 809 business jets in 2019, has still not recovered since its peak of 1,317 deliveries in 2008, analyst Brian Foley said.

Honeywell's outlook expects new aircraft deliveries to rebound to pre-pandemic levels by the middle of the decade.

Honeywell, a supplier to the aviation industry, expects business jet usage to recover to 2019 levels by the second half of 2021.

By comparison, global airlines believe it would take until 2024 for passenger traffic to return to pre-crisis levels.

Boeing Co (NYSE: BA) on Tuesday forecast 43,110 commercial aircraft deliveries over the next 20 years, down 2% from 44,040 projected a year ago.

Results from Honeywell's closely watched survey do not support the hypothesis that a decline in commercial travel has led to an increase in business jet purchases, said Shantanu Vaish, Honeywell Aerospace's director of strategy and industry marketing.

Still, demand for business travel remains unknown for both commercial airlines and corporate planemakers and operators.

In a recent survey, a majority of Global Business Travel Association (GBTA) companies said they expect their employees to return to in-person events in 2021.

Companies interviewed by Reuters said their employees are traveling far less and usually with airlines.

CAE (NYSE: CAE), the world's largest civil aviation training company, said its employees fly commercial but only for limited essential travel.

GE Aviation, a division of General Electric Co (NYSE: GE), said the company is seeing a slow but steady increase in travel.

GE Aviation employees fly on the company's two Honda jet business aircraft, mostly when commercial flights are not readily available. But most travel continues to be on commercial airlines.

(Reporting by Allison Lampert in Montreal; Editing by Steve Orlofsky and Matthew Lewis)

Categories

Reuters