GENEVA (Reuters) - Business jet makers, hit badly by the financial crisis, expect an upturn in mature economies such as the United States will encourage companies to once again buy new corporate planes or replace aging jets, executives said this week.
Many companies in North America and Europe, from carmakers to banks and tech firms, scaled back usage or sold their corporate jets in a bid to cut costs, resulting in a 50 percent drop in deliveries of business jets between 2008 and 2010.
The market for business jets, whose key players include Bombardier (BBDb.TO), Textron's (TXT.N) Cessna, Dassault (AVMD.PA) and Embraer (EMBR3.SA), was worth $22.34 billion in 2014. IHS Aerospace, Defence & Security forecasts this will increase 10 percent to $24.61 billion by 2018 thanks to a recovery in North America and Europe.
Market growth is expected to be driven by demand for smaller jets costing anywhere from a couple of million dollars up to around $26 million, IHS predicts.
"For a lot of businesses, a small corporate jet doesn't cost that much and isn't a particularly bad investment when you look at the cost of first-class tickets," Ben Moores, IHS senior analyst, told Reuters.
Bombardier, in its latest 10-year market forecast unveiled at the EBACE business aviation show in Geneva, forecast 9,000 business aircraft valued at $267 billion would be delivered over the next 10 years. Of that, about 3,400 will be jets in the light category.
In North America, the largest market by some way at over 40 percent of deliveries, fleets are expected to grow by an average of 2 percent a year, Bombardier predicts, tracking average annual economic growth of 2.6 percent.
"The North American market is clearly leading the way," Larry Flynn, president of General Dynamics-owned Gulfstream (GD.N), told Reuters on the sidelines of the EBACE show. "We see people replacing their fleet, getting newer airplanes".
Textron was similarly positive. "In our product family, we see good incremental growth," said President and CEO Scott Ernest.
It's not all good news for business jet makers, however.
Bombardier announced last week plans to cut 1,750 jobs in its business-jet division, due to weak demand from some of its key regions such as China, Russia and Latin America.
In China, fleets have grown by an average of more than 20 percent over the last 10 years, but slowing economic growth and a clampdown on corruption has held back demand recently.
Bombardier's market forecast shows a slower growth rate of 13 percent a year over the next decade in the country, which is expected to account for around a tenth of global deliveries in that period.
Gulfstream's Flynn said the economic growth slowdown was no surprise. "We are believers over there, we are still in that market and plan to be in market," he added.
Unlike North America, the Chinese market is dominated by medium and large business jets, costing up to $72 million.
"In terms of demand for our kind of business jets, China is better than what you might assume from reading the newspapers," said David Longridge, president of Boeing Business Jets.
Writing by Victoria Bryan; Editing by Pravin Char