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16.04.2012

​by Bruno Goutard,  Analyst sector trends

This sector gives a hint about what the world would be …without China (or nearly). Indeed, in 2011, despite their decline, North America and Europe have delivered 71% of the general aviation airplanes,  whereas Asia-Pacific has accounted for only 15%, Latin America for 9% and the Middle East/Africa region for 5%, according to the General Aviation Manufacturers Association (GAMA).

 

 

aviation2_kc-panorama

The minor Asian weight reflects above all the marginal role played by China in this sector. Until recently, the domestic low-altitude airspace was almost entirely under the Chinese Air Force control (even owning a plane was illegal until 2003). The first reforms of the low-altitude airspace management system were accomplished only by the end of 2010, poretending a broader opening up for civilians. For instance, the fleet of Chinese business jets amounts to just of few hundreds planes whereas the American fleet stands at roughly 10,000 jets. This difference reveals the significant potential of the Chinese market, the 2nd economy in the world.


In the wake of this foreseeable expansion, Honeywell predicted in 2011 a business jet markets reaching $230bn over the next decade.

The current situation of the general aviation seems to be a rare relic of a past world. In other words, without a buoyant growth driver -  the Chinese economy- and thus in sharp contrast with commercial aviation.
 
According to GAMA, last year, general aviation deliveries went down by -3,5% vs 2010. A comparison with the recent prosperous years outlines the magnitude of the crises’ impact on this industry: in 2011, 860 piston-engine planes deliveries (around -65% / 2006, last peak), 324 business turboprops (-60% / 2008) and 681 business jets (-48% / 2008).
The noticeable resilience of the top-of-the range aircraft in the business jet segment (12 to 18 seats and mainly costing at least $30M) could explain the smoother downward trend of the sector revenue: stable over  2010-2011 (+0,4% to $19bn) but a relative 20% drop between 2011 and 2008.
 
The difference between the range of planes has also been felt in the annual order trends and thus in the orders books: stability and even strengthening of the order books in 2011 for the top-of-the range and stability in the best scenario and more surely deterioration for the other players.

The gradual stabilisation of the second-hand general aviation airplane market (still above the historical average) and a momentum, generated particularly by the emerging markets, could turn 2012/2013 into the starting point for a robust recovery in general aviation airplane manufacturing, mainly located in the Western (production: 73% in US and 20% in Europe), but nothing is certain.
Unsurprisingly, so far, a “China-free” world has been a world plagued by the American/European doldrums, without signs of recovery since the 2007-08 crisis and whose more favorable prospects will only become reality at mid-term, thanks to…China.
 
 
* piston-engine airplanes, turboprops and business jets ( aircraft with less than 18 seats)
** aircraft with more than 110 seats