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Rockwell Collins: business-jet demand is set to return
China, India markets set the stage for huge growth with airspace liberalization
By Christopher Hinton, MarketWatch
Last Update: 4:29 PM ET Nov 3, 2009
NEW YORK (MarketWatch) -- Rockwell Collins Corp. saw increased stability for business-jet demand during its fiscal fourth quarter, setting the stage for growth in aftermarket services and new aircraft orders by mid-2010, said Chairman and Chief Executive Clay Jones.
And the market is expected to grow further now that China has relaxed approval for private domestic flight-plan applications to a matter hours from six days, making business jet use more affordable and available, Jones said in an interview with MarketWatch.
"It's a very important pivot point because there is a huge growing market that was prohibited," he said. "They had less than 50 business jets registered within the entire country up until this time...to think of a country like that, growing like that, with less than 50 business jet aircraft! This was a very important first step."
Jones declined to project when sales might pick up for China, saying not all the pieces are yet in place.
"And I think India is not far behind," he said. "They have not liberalized their airspace, but it's another emerging country where we can see international growth."
The Cedar Rapids, Iowa, supplier of aviation equipment gets more than half of its annual revenue from the commercial aircraft market, which includes business jets. Some of its major customers include General Dynamics' GD Gulfstream, Textron's TXT Cessna and Boeing Co. BA.
Business jet builders, along with their commercial aircraft counterparts, have been under pressure over the past year as the recession and troubled credit markets rolled back corporate spending and demand.
Last month, Honeywell International predicted 2010 deliveries for the industry would fall to below 700 from an estimated 750 to 800 this year. Last year manufacturers delivered 1,139 new jets.
But signs are pointing toward a trough. Just last week, Textron and General Dynamics said they think they have seen a bottom to the sharp rise in deferrals and cancellations seen earlier in the year.
"Business jet utilization rates are coming back very strong," said Rockwell Collins' Jones. "Mid-summer they were down 28% to 29%, now they are down about 8%, year over year, so they are using the business jets more."
Business jet activity will likely be flat next year compared to 2009, but by 2011 there should be a "nice upturn," he said.
Rockwell Collins COL is predicting revenue from business-jet manufacturers to be down about 30% for the next fiscal year, but aftermarket activity is expected to pick up by the middle of the year as utilization increases.
Customers that delayed discretionary maintenance and retrofitting to save money will begin purchasing those kinds of services again, and that's the first step toward a broader aerospace recovery, Jones said.
"When demand comes back in, corporations, small businesses, and high-net wealth individuals that want to move around, are going to want these aircraft," he said.
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