If, this ain’t good then nothing ain’t good. Nearly two million individuals were added to the ranks of high net worth individuals (HNWI) in 2013! That is individuals with a net worth of $50 million or more. This is certainly music to the ears of all luxury segment products, big or small. The World Wealth Report 2014 released by Capgemini and RBC Wealth Management has noted that there was a 15 per cent increase in HNWI population. The global HNWI wealth is forecast to reach a new high of $64.3 trillion by 2016, representing 22 per cent growth from 2013 levels and approximately $12 trillion in new wealth.

Billionaires Worldwide

In March 2014, Forbes estimated a record number of billionaires at 1,645 worldwide, an increase of 219 over its 2013 estimate. The most significant growth occurred in Africa and Europe which, during 2013, saw a year-over-year increase of 45 per cent and 41 per cent, respectively. Looking at growth in the past two years, Africa’s billionaire population went up from 16 to 29, an increase of 81 per cent from 2012 to 2014. Latin America was in second place with the number of billionaires going up from 65 to 114, a growth of 75 per cent. China and the rest of Asia-Pacific were very close between 2012 and 2014, with China having 71 more billionaires than the rest of Asia-Pacific in 2014.

Aircraft deliveries to HNWls account for about one-third of the overall business jet market. Many of these deliveries are to HNWIs who have reached billionaire status.

Business Jet Market

Business jets may be a business tool, but at the core remains a luxury product and should certainly benefit from the growing trend of HNWIs. The correlation between the two is natural and according to a report by Markets and Markets, the global business jet market which in 2013 was valued at $20.9 billion, is expected to touch $33.8 billion by the end of 2020, growing at a CAGR of 6.86 per cent. According to the report, the business jet market can qualitatively be segmented into two major categories-branded charters including air taxis and fractional ownership. The air charter market has registered significant growth since its inception five decades ago. There were about 3,650 worldwide charter and air taxi fleet in 2013. The primary and consistent demand for chartered flights is from North America and Europe constituting 70 per cent of the total demand, Markets and Markets reported.North America accounted for the largest share (52 per cent) of the global business jet market in 2013. The already established infrastructural capacity and the highest number of older aircraft in the world are expected to be the cause of increased demand for new aircraft, thereby driving the growth in the North American region.

China and Other Emerging Markets

From North America to an emerging market, there is a soaring trend. China is a classic example. The Greater China Business Jet Fleet Report found that fleet totals throughout mainland China, Hong Kong, Macau and Taiwan grew from 203 business aircraft operating in the region in 2011 to 371 by end-2013. These are small numbers compared to North America and European fleets, but China, India and other new markets are going to drive the business jets industry.

In fact, the region’s compound annual growth rate of 34 per cent from 2007 to 2013, far outpaced the global rate of five per cent CAGR. The report said “More and more companies are also increasingly using business jets as a tool to support corporate international growth and integration.” According to the Deputy Administrator of Civil Aviation Administration of China, Wang Zhiqing, the number of general aviation companies established in 2013 was 189, a 41 per cent increase over 2012 numbers. Presently, it accounts for a meagre two per cent of the world’s business jets, but these figures are going to change dramatically in the years to come. All the business jet manufacturers are betting big on emerging markets, though it is going to be long haul.

Bombardier’s Forecast

The business jet industry continues to make progress towards a recovery from the steep downturn of 2009-10. Several market indicators continued to show improvement in 2013 while others remained relatively unchanged. Industry order intake saw incremental improvement in 2013 over 2012, allowing the industry to record a book-to-bill ratio of one for the second year in a row. Bombardier Business Aircraft posted a book-to-bill ratio of above one for the third year in a row. The level of pre-owned aircraft for sale, an indicator that is highly correlated with new business jet demand, saw strong improvement at the end of 2013 and has continued to improve during Q1 2014.

But despite the reduction in pre-owned inventory for sale, aircraft resale values remain relatively low. The gap between new and used aircraft pricing remains wide and is restraining demand from customers looking to trade in their existing aircraft against the purchase of new aircraft. However, Bombardier predicts that continued progress in the pre-owned market will lead to a recovery in resale values in the medium-term. Bombardier has forecast 22,000 business aircraft deliveries over the next 20 years.

Bombardier has stated that the air charter market has seen significant growth in the past 50 years since Executive Jet Aviation started the world’s first business jet charter company. At the end of 2013, the worldwide charter and air taxi fleet stood at almost 3,800 aircraft, spread across nearly 1,200 operators. Eighty of the charter and air taxi operators have aircraft fleets consisting of ten or more aircraft. The collective fleet of these large fleet operators has grown by 18 per cent over the period 2009-13 from 1,075 aircraft to 1,270.

Bombardier has forecast that for the period 2014 to 2033, the number of units likely to be delivered is light jets 9,100, medium jets 7,650 and the large jets 5,250.

Embraer’s Forecast for North America

Brazilian aircraft behemoth Embraer trimmed its global sales forecast over the next decade but raised its outlook for executive jet sales in North America. From 2015 to 2024, it has forecast that 4,620 business jets valued at over $120 billion will be sold in the North American market, up from its earlier numbers. Embraer said the shift is because emerging economies are cautious about their domestic economic situation. Embraer sees 850 jets sold in Latin America over the next ten years, down from 860 in the previous ten-year estimate, while the Asia-Pacific and China market should see 1,405 jets sold, down from 1,530.

“We will continue to see slow growth in coming years due to indecision over whether or not to buy new planes or replace existing aircraft, principally in the BRICS countries. The recovery in the market will depend very much on the American economy,” said Embraer Executive Jets chief Marco Tulio Pellegrini.

Cessna, Beechcraft Synergies

Textron Inc CEO Scott Donnelly has said that with the acquisition of Beechcraft Corporation and a new product development at Cessna Aircraft, Textron is well positioned to rise on future market growth. “We believe we will be in an excellent position to capitalise on the rebound in the business jet and overall general aviation market,” Donnelly said during a conference call with investors.

Textron said that fourth quarter results of 2013-14, should continue as new products such as the company’s Citation M2 and upgraded Sovereign get a full year of sales under their belt. Deliveries of both began in end 2013, with eight Sovereigns and 12 M2s helping add to Cessna’s fourth-quarter delivery total of 62 business jets. While that was nearly a 15 per cent increase over deliveries in the fourth quarter of 2012, Cessna’s year end Citation deliveries were down to 139 from 189 in 2012, Donnelly said.And while key indicators such as the used-jet market are looking positive, Donnelly projected 2014 to be relatively flat, though new products should drive some increase in deliveries this year.That will include deliveries of the company’s revamped Citation X, which is expected to attain certification by early second quarter this year. “These new products are the thing that will really drive growth,” Donnelly said. After the acquisition of Beechcraft in 2013, Textron is banking on the venerable King Air, besides other products, to perform. Overall, Textron set its 2014 guidance at a nine per cent increase in revenues, up to $13.2 billion.

Dassault Falcon’s Expansion Plans

Since the rollout of the first Falcon 20 in 1963, over 2,250 Falcon jets have been delivered. The family of Falcon jets currently in production includes the tri-jets the Falcon 900LX and the 7X as well as the twin-engine 2000S, the Falcon 2000LXS and the new Falcon 5X. This year, Dassault Falcon has registered good orders from Russia and the Middle East. It said that Russia continues to be a very strong market for Falcon jets. Dassault registered as many Russian orders in the first half as in all of 2013, leading the company to predict an excellent sales year in the region. Demand has been particularly strong for the Falcon 5X and the new ultra-long range Falcon 8X unveiled in May. Sales and deliveries have also been led by the popular Falcon 7X, more than 20 of which are currently flying with Russian operators.

“The flexibility, robustness and operating economy of the six models in our Falcon line have enabled Dassault to capture 40 per cent of the Russian large cabin market,” said Dassault Aviation Chairman/CEO Eric Trappier. “The Falcon 5X and Falcon 8X will permit the company to consolidate and strengthen this leadership position in the coming years.”

The Middle East is also expected to be a major market for the new Falcon 5X, due to enter service. “The business jet market in the Middle East shows promise for a healthy future,” said Eric Trappier, Chairman and CEO of Dassault Aviation. More than 30 aircraft have been delivered to customers in the region over the past five years, nearly doubling the regional Falcon fleet to 67 aircraft. Not just Russia and the Middle East, Falcon is finding buyers across the globe, powered by its sheer performance and value for money.

Gulfstream Banking on G650

Gulfstream has produced over 2,200 aircraft since 1958. It offers a comprehensive fleet of Gulfstream G150, G280, G450, G550, G650 and G650ER. At EBACE this year, Gulfstream talked about its popularity in Europe. Its fleet in Europe is 206 aircraft. “Traditionally, Europe has been a strong business jet market for Gulfstream,” said Larry Flynn, President, Gulfstream. “Our fleet has nearly doubled here in the last five years. Most of that growth has been large-cabin aircraft, but we have also seen significant mid-cabin growth since 2008. Europeans clearly like our aircraft and that includes our new flagship, the ultra-long range Gulfstream G650 and our new super mid-sized aircraft, the G280.” Despite its $65 million price tag, Gulfstream Aerospace’s top-of-the-line G650 is the most sought-after private jet on the market. Gulfstream says over 200 have been ordered so far and it’s strictly first come, first served basis. The G650 is positioned to appeal to the growing Chinese market, where customers prefer bigger, more expensive planes.

“There is now a sense we’re climbing out,” Ed Bolen, President of the National Business Aviation Association, said. “There’s a sense we can make it and companies have adjusted for this environment, and as the environment improves, we can improve, too. Still, I don’t think anyone is expecting huge growth.”