U.S. corporations including McDonald’s Corp. and BlackRock Inc. are starting to return to the business-jet market after putting off aircraft upgrades since the recession five years ago.
Buyers are opting for larger, longer-range planes even with global shipments poised to fall in 2013, Honeywell International Inc. said in its annual industry forecast today. Jet deliveries in North America, anchored by the U.S., also will increase as a share of the world’s total, the study found.
The U.S. comeback marks a turnabout from recent years, when chief executive officers deferred fleet renewals as the worst slump since the Great Depression crimped profits and made corporate aircraft a low priority — and potential public- relations embarrassment. Now Fortune 500 CEOs are shopping again and hunting for the most luxurious models.
“They just basically went dormant during the downturn and now they’re coming back on,” said CEO Larry Flynn at Gulfstream Aerospace, the General Dynamics Corp. unit that makes the new G650 jet. “It’s a significant market opportunity.”
Global deliveries in the so-called super-midsize segment and larger will rise more than 10 percent this year and by less than 10 percent in 2014, according to Morris Township, New Jersey-based Honeywell, whose products include business-jet engines. It released the forecast at the National Business Aviation Association convention in Las Vegas.
Biggest Cabins
The category includes planes such as Bombardier Inc.’s Challenger 300 and Gulfstream’s G280, each seating about 10 people, on up to models such as the G550 and the G650, which is able to seat as many as 19 people. Planes in the super-midsize class and bigger will account for more than 80 percent of business-jet spending “in the near term,” Honeywell said.
They’re a bright spot in a market that continues to dwindle. Global deliveries in 2013 will be in a range of 600 to 625 aircraft after last year’s 649, according to Honeywell’s survey, which is based on a survey of 1,500 corporate flight departments.
Once seen as a coveted corporate perk, business jets became symbols of business arrogance in 2008 when U.S. automaker CEOs flew to Washington in private aircraft to lobby Congress for federal assistance to the industry.
“The stigma attached to bizjets during the recent recession and a focus on cost cutting among corporate customers are two reasons we see demand lagging corporate profit growth,” Joseph Nadol, a JPMorgan Chase & Co. analyst in New York, said in an Oct. 14 report.
North America
Honeywell projects that North America will make up 61 percent of global deliveries during the next five years, up from 53 percent in the 2012 forecast for the first increase “in recent history.” Companies plan purchases equal to 28 percent of the region’s jet fleet in that span, according to the survey, up from about 25 percent and matching the world average.
Europe, Asia and the Middle East will all see a smaller share of shipments, while Latin America was unchanged at 18 percent, according to the forecast, which didn’t give raw numbers.
“The biggest installed base of corporate jets is in the U.S., and a fair amount of those are with the Fortune 500 companies,” Gulfstream’s Flynn said in a telephone interview ahead of the NBAA expo. “They’re not new to business aviation, so there’s a fleet replacement opportunity.”
McDonald’s, BlackRock
Upgraded planes are beginning to appear in U.S. corporate fleets. McDonald’s, the world’s largest restaurant chain, purchased a Bombardier Challenger 605, which carries as many as 13 passengers, in February to replace an existing jet, said Rebecca Hary, a spokeswoman for the Oak Brook, Illinois-based company.
BlackRock, the world’s biggest money manager, bought a Gulfstream G550 in December, according to Federal Aviation Administration registry records. Starbucks Corp. purchased a G550 in June, and health-care products maker Johnson & Johnson, bought one in August, the FAA records show.
Jim Olson, a Starbucks spokesman, didn’t respond to e-mail and telephone messages seeking comment about the plane for the world’s largest coffee-shop operator. Ernie Knewitz, a Johnson & Johnson spokesman, referred questions back to the FAA document, and Brian Beades, a BlackRock spokesman, declined to discuss the company’s jet.
Even with Honeywell paring its 10-year forecast for business-jet deliveries to 9,250, down from 10,000 in 2012, large aircraft have an important niche, said Rob Wilson, president of the company’s general aviation unit.
“You have companies that need to do more business over longer distances and with more people,” Wilson said. “If you superimpose on that lower interest rates and company access to debt markets, you have all the ingredients for a steady, robust demand increase.”
That shift toward bigger planes is paying off for Gulfstream, which began delivering the G650, its newest jet, in December. CEO Flynn said demand is so great that buyers have a four-year wait. Its range of 6,000 nautical miles (11,100 kilometers) is almost twice that of a Boeing Co. 737-800 jet.
“My phone rings off the wall with customers who want it sooner,” Flynn said.
