Looking at bizav growth in Asia, Africa and South America

US still leads but many ultra-high net-worth individuals live in these overseas areas and they don't want to ride the airlines.

By Marvin Cetron
President, Forecasting Intl

Honeywell 2013 graphic report of business aircraft market share sales.

Since the US is such a dominant market for corporate aviation it becomes easy to forget that other countries are quickly accepting the advantages of using business jets and are sharing the skies. At the end of 2013 the US had 12,051 registered bizjets, nearly as many as the rest of the world combined.

According to GAMA, more than 49% of the world's corporate fleet is based in North America and of those more than 9 out of 10 carry US "N" tail numbers. Nonetheless, important things are happening in corporate aviation's lesser markets.

Some of them will affect professional pilots wherever they fly. So for this edition of Position & Hold, we will be looking at corporate aviation's markets in Asia, Africa, and South America.

Honeywell forecasts shows bizjet growth

Honeywell's latest business aviation outlook foretells that for the long run there are good times ahead for corporate aviation, especially for the use of large cabin long-range business jets.

Through 2023 Honeywell expects to see 9250 deliveries of new business jets valued at over $250 billion. Operators plan to replace 28 % of their fleets with new jets by 2018. More than half will be big-cabin models, most with intercontinental range. On average, professional pilots will find themselves carrying more people farther in the years ahead.

Like any big-ticket item, executive jets go where the money is. There is more of it in the United States than Europe, more in Europe than in Asia, Latin America, or Africa. This helps to explain the relative abundance of private jets in the US compared with other regions. It helps too that America and Europe are politically stable.

This makes it relatively easy to invest in expensive long-term assets. However, in the business aircraft industry the emerging markets punch above their weight. This reflects their fast economic progress compared with the US and Europe. For airplane makers eager to build their bottom lines, selling to the growth states of Asia, Africa, and Latin America is like staking a claim to Klondike gold.

Look at the numbers. According to the World Bank, the American economy will expand by 2.8% in 2014 and 3% in 2016. Europe will be lucky to see 1% this year and 1.5% 2 years from now. The developing economies will grow by an average 5.3% in 2014 and 5.7% in 2016. Developing Asia—China, India, and some others—will expand by 6.7% this year, sub-Saharan Africa by 6.1%.

These regions will retain their growth advantage long into the future. The ASEAN nations of Southeast Asia are expected to grow by 5% to 6% annually for at least the next 20 years.

Many of the UHNWI live overseas

Honeywell 2013 report with pie charts explanation of what size business jet aircraft have been selling in both units and 2013 dollars.

Personal wealth also draws bizjet makers. Like yacht builders and exclusive couturiers, they track the population of "ultra-high net-worth individuals" (UHNWI), those with financial assets of more than $30 million, not counting their primary home. If anyone can afford a private jet, it is the UHNWI.

There are about 167,000 of them in the world, according to The Wealth Report. Only 1 in 4 live in North America. Some 60,000 make their homes in Europe. The remainder are widely distributed—over 41,000 in Asia, nearly 10,000 in Latin America, and 9000 in Africa and the Middle East where their numbers are heavily weighted toward the oil states. Again, growth rates count.

Over the 10 years ending in 2013, the number of UHNWI increased by 35% in North America. It is expected to add another 20% through 2023. In Asia, the number of UHNWI has risen by 89% over the last 10 years and will expand by 43% in the next decade. The uber-rich population is expected to climb by 42% in Latin America through 2023, 43% in the Middle East, and 53% in Africa.

These regions are where bizjet makers go to grow. At the very top end of the financial spectrum there were 2170 billionaires in the world, 60% more than in 2009, and their net worth has doubled over the period to a collective $6.5 trillion. The Billionaire Census predicts that their number will grow to 3900 by 2020.

Africa, Middle East and Latin America showing good growth numbers in bizjet sales

We see the result in the private aviation departments that employ most professional pilots. Honeywell reports that the North American business fleet has been expanding by less than 2% per year over the last 5 years.

In Europe, the bizjet population has grown by more than 5% annually but that rate is declining and will continue to slow. In contrast, corporate fleets have grown by more than 7% per year in Africa and the Middle East and by 12% per year in Asia and Latin America. This hints at the second benefit of the developing lands.

When the Western economies slow, the rest of the world soldiers on. "Latin America operates on a somewhat different economic cycle," notes analyst Brian Foley. "When Europe, North America and the Middle East were reeling from an economic crisis, Latin America helped to moderate the blow by steadfastly increasing its business jet fleet." The same is true of other developing markets.

When deliveries in North America and Europe slumped in 2010, they were up in Africa and the Asia-Pacific region as well as in Latin America. These developing lands are likely to become even more important in the decades ahead. In the 20 years ending in 2031, the World Bank predicts that merging markets will grow from $14.3 trillion, or 27% of the world's GDP, to nearly $40.5 trillion, or 41%.


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