Strong Interest in Larger, Longer Range Aircraft

Expected Timing of European New Jet Purchases Leads Other Regions

EBACE, GENEVA, May, 4, 2010 - Honeywell (NYSE: HON) provided an internationally focused revisit of its 18th annual Business Aviation Outlook incorporating recent industry performance data. Honeywell’s 2009 operator survey showed that over the next five years, up to 34 percent of all new jet purchase plans in the world could come from Europe, the Middle East and Africa.

These findings reflect a significant increase over Honeywell’s prior survey results. In Europe, five-year new jet buying plans of 59 percent increased by more than 19 points compared to surveys conducted prior to the economic downturn, a new record high despite sluggish economic performance present at the time of the survey.

In the Middle East and Africa, five-year new jet buying plans of 55 percent increased by more than 10 points from pre downturn levels, also setting a new record.

The Middle East, Asia and Africa regions usually rank as the areas with the highest purchase expectations but they are now joined by Europe despite the effects of the global recession.

International demand now accounts for more than 50 percent of the new aircraft purchase plans projected over the next five years. Honeywell forecasts that the regional mix of deliveries will continue to reflect this global shift in share.

“Emerging markets, like Eastern Europe, the Middle East, and Asia are expected to lead the global recovery after 2010,” said Rob Wilson, president, Business and General Aviation, Honeywell Aerospace.

For 2010, Honeywell Aerospace forecasts deliveries of roughly 700 new business jets, down from peak deliveries of 1,139 in 2008. Based on operator survey responses, long-term buyer interest has increased. However new purchase plans are currently timed later in the five-year planning window, suggesting that by 2011-2012 there will be significant deferred demand that will improve the outlook for order intake and new jet deliveries.

Among all global regions European operators signaled the earliest plans to resume significant new jet purchase activity, followed by Asia and the Middle East. The North American region remained the most conservative and exhibited considerable uncertainty as to the specific timing of planned new jet purchases.

“Honeywell’s surveyed operators said their new purchase plans were less affected during the five-year horizon in key international markets within Europe, the Middle East, Africa and Asia – we expected this to be the case, given many of these economies did not experience as deep a contraction as was felt in the U.S.,” said Rob Wilson, president, Business and General Aviation, Honeywell Aerospace.

“The relatively stronger levels and timing of international purchase plans suggest planned demand will improve both order intake and new jet delivery rates by 2011-2012, similar to what the industry experienced in the last cycle,” Wilson said. ”There is still a solid pipeline of new high-value models supporting long-term growth and our survey indicates that international demand will remain significant.”

Strong New Jet Purchase Plans in Europe, Middle East, Africa, and Asia
Most of the increase in Europe, the Middle East, Africa, and Asia purchase plans came from increases in the fleet replacement category. Fleet expansion demand fell in all regions except Asia, which was up less than one percent compared to last year. Russia, the Middle East and selected African economies continue to benefit from improved oil prices and burgeoning trade with China and Asia, and operators surveyed in these regions expect to be active buyers. Operator plans-to-buy are timed sooner in Europe, the Middle East, Africa and Asia than in Latin America and North America. European fleet levels are substantial so early purchase plans in Europe may lead the overall demand recovery. Fleets in the Middle East, Africa and Asia are relatively small so even high planned purchase rates yield smaller absolute numbers of new jet purchases until the fleets expand at a future time.

European purchase plans had posted a nearly nineteen-point gain in the 2009 survey versus the year earlier, and they are now comparable to other emerging regions as well as historically strong for Europe. Total replacement and expansion plans are just under 59 percent for the region in the 2009 survey after topping 40 percent last year.

“Clearly the less severe contraction in parts of Europe, coupled with rebounding energy prices bolstering Russia have acted to support a stronger outlook toward new jet purchases in the region,” said Paolo Carmassi, president, Europe, Middle East and Africa, Honeywell Aerospace. “Though few purchases are planned immediately, the operators surveyed say they intend to schedule up to 80 percent of their demand between 2010 and 2013, much more front loaded than any other region. European operators indicated a broad mix in the class of new jets they are considering for purchase with 43 percent planning for large cabin models and the remainder split equally between small and medium cabin models.”

Confidence in Middle Eastern and Asian economic growth in the intermediate and long-term also remains high, boosting interest in larger, longer-range aircraft with better operating economics. Concerns over new duty time restrictions and carbon emission regulations were voiced in this region as well. Middle Eastern and African operators showed strong interest in large cabin aircraft with 61 percent of planned purchases in that class, and 30 percent opting for medium cabin models. Asian plans also favored large cabin jets with 43 percent of planned demand in that class. Mid-cabin models were the next most popular with a 36 percent share indicating intended purchases.

European purchase plans had posted a nearly nineteen-point gain in the 2009 survey versus the year earlier, and they are now comparable to other emerging regions as well as historically strong for Europe. Total replacement and expansion plans are just under 59 percent for the region in the 2009 survey after topping 40 percent last year.

Global Purchase Expectations Improve in Latest Survey
“The improvement in overall purchase expectations is remarkable and indicative of the increasingly global nature of the industry and of improved outlooks for economic recovery in a number of regions outside North America,” Wilson said.

Honeywell’s 2009 survey indicates a potential demand for more than 5,000 aircraft globally during the 2010-2014 period, excluding demand from fractional ownership or branded charter start-up businesses and piston aircraft owner trade-ups into jet aircraft. The strong survey results are welcome; however an immediate recovery in deliveries is less probable, since this potential demand has to be translated to orders, and in turn increases in production which will take some time to implement if purchase intentions remain solid. Clearly operators around the world are looking beyond the current economic climate and anticipating a return to improved business conditions.

The level of optimism varies somewhat by region, but it is certainly behind the stronger purchase plans reported this year,” Wilson added. “While these results appear remarkably upbeat, it should be noted that the timing of planned purchases in the five-year window is heavily shifted in most regions to the post-2010 timeframe.”

Fleet Replacement Drivers
Chief reasons to replace current aircraft remain relatively consistent with prior surveys; with age, cabin size and range improvement all listed as important criteria in every region. As might be expected in the current economic climate, a desire to replace current models with more efficient or lower operating cost models gained prominence this year. New technologies in avionics and engines are also leading reasons for aircraft replacement in every region.

European operators were particularly interested in larger cabin models, as mentioned above and also in lowering operating costs, likely reflecting continued expansion of business relationships beyond Europe proper, and the expected cost of fuel and other proposed regulations.

“Flight economics and technologies are the top two drivers in new aircraft decisions,” said Carl Esposito, vice president, Marketing and Product Management, Honeywell Aerospace. “We have invested in enabling technologies for customers to improve their operating efficiency. “Technologies for the NextGen environment are here now, with upgrades in flight management systems, situational awareness, traffic surveillance and data communications. Capabilities such as Required Navigation Performance (RNP), synthetic vision and Wide Area Augmentation System-Localizer Performance with Vertical Guidance (WAAS-LPV), teamed with improved cabin comfort, extended range, broader mission capability and safety systems will enable even more productive and cost-efficient business jets.

Used Jets and Flight Operations Levels
In the near term, the used jet environment remains challenging. Over the last year, asking prices have begun to rapidly decline, first for older used models, but more recently, newer model jets have begun to see significant price erosion.

Average pricing is estimated to be 20-to-25 percent lower than a year ago after several years of gradual increases. The 2009 survey recorded a further decline in planned used jet purchases over the next five years, which may add continued pressure to pricing of older less economically attractive models. Recent inventory levels into 2010 have seen a slow decline after particularly strong increases from 2008 into early 2009.

Business Jet Flight Activity Leads the Recovery
While business jet flight operations were sharply lower in early 2009, both Europe and the U.S. have seen recoveries beginning in the latter part of last year. Based on Eurocontrol and FAA operational data, we have seen net positive growth in both regions for several months now after double digit declines posted for the full year 2009, combined business aircraft operations in Europe are up 5 percent in the first quarter of 2010 after declining nearly 14 percent in 2009. In the U.S., operations have risen nearly 17 percent year-to-date after falling 18 percent in 2009. Both regions began posting positive growth in the fourth quarter of 2009 and have sustained their growth momentum into this year. We expect to see continued strong performance well into the year due to the weak comparison bases in 2009; however flight activity generally precedes more generalized improvement in the industry so the gains are encouraging. Honeywell does expect a modest slowdown in growth in the second quarter, particularly in Europe due to the effects of the Icelandic volcanic ash cloud on flight operations.

Global Economy and New Product Pipeline Favor Recovery and Long-Term Growth
“Based on the historical relationships between the global economies, new model value and the business jet segment, there is every reason to believe that demand for business jets will begin to recover 12 to 18 months after a global economic recovery begins,” Wilson said. “Recent economic performance around the world would suggest that recovery is underway, despite some trouble spots. This expectation is also consistent with the 2009 survey based on demand timing.”

Overall, Honeywell believes that the longer-term outlook for business aviation is still positive. The company said its update process factors the survey findings together with statistical model analysis, manufacturer insights, backlog levels and timing to produce the current outlook.

Honeywell predicts delivery rates will remain soft in 2010 and the peak-to-trough decline will be in the range of 40 to 45 percent compared to 2008 deliveries. By 2012, a combination of deferred demand and global economic recovery will cause demand for new jets to improve. The pipeline of new high-value models also supports the long-term growth scenario and international demand will remain significant.

“A year ago, it appeared that the large industry backlog would act as a buffer to any moderate economic contraction and reduce the volatility in new aircraft deliveries. As the extent of the recession worsened and the insidious nature of the credit crisis was revealed, it became evident that industry backlogs were insufficiently firm to provide short-term buffering,” Wilson said.

Despite significant cancellations and deferrals, there are still several thousand aircraft on order – many scheduled for delivery post 2010. Assuming economic recovery progresses, it is still likely delivery of these aircraft will be taken, providing a boost to shipment levels as we move into the 2011-2012 period.

Honeywell Aerospace’s “Customer Benefit Index,” a key component of the long-range forecast, which tracks the perceived value offered by business jets to fleet owners and operators, also has a favorable long-term trend based on many new production models and development programs in the pipeline – even after taking account of several recent program delays and cancellations.

“Evaluating these customer values along with the purchase plans from the 2009 operator survey still supports a more positive long-range outlook for the industry,” Carmassi said.

Fractionals
Owners of fleets serving fractional shareholders and jet card purchasers have reduced demand sharply in the current recession. Fractional fleet operators still account for about 10 to12 percent of the backlog for business jets, but have drastically curtailed current new aircraft additions in the face of net share sales erosion.

New jet deliveries to fractional fleet operators were off more than 80 percent in 2009. In the first quarter of 2010, no new jet aircraft have been delivered to major fractional providers. Sales of new ownership shares have continued to deteriorate further after 2009 posted a 52 percent loss. As a result, Honeywell is projecting much lower deliveries into this segment for the next few years as excess capacity is worked off and shareholder levels are rebuilt.

Replacement demand for new aircraft contributes a significant share of new jet purchases in the fractional industry which should support some improvement in new jet deliveries to the sector by 2011-2012. This sector’s higher utilization and its desire to maintain a consistent passenger experience with newer aircraft and hold down operating costs leads to replacement at shorter intervals than is typical for traditional operator groups.

Fleet Expansion Continues
Even though the industry has experienced a severe contraction, global business jet fleets continue to grow. Current demand conditions aside, world fleet growth maintained a six percent CAGR since 2004. Across geographic regions, Europe, the Middle East, Africa and Asia have lead the way with double digit five-year growth rates of 14 percent in Europe, nearly 11 percent in the Middle East/Africa combined and almost 16 percent in Asia. Strong growth rates in emerging regions are partly due to relatively small fleets which exhibit significant rates of increase off relatively small absolute numbers of aircraft additions.

The European figures are all the more remarkable in that the European fleet is the second largest in the world and has experienced several periods of very slow fleet growth historically when mature business aircraft were shifted from Europe to other regions offsetting new deliveries into Europe.

Methodology
The Honeywell Aerospace Business Aviation Outlook and the purchase expectations it summarizes are a snapshot of expected business aircraft sales at a point in time and reflect fleet operators’ views of current events, such as political and economic conditions, fuel costs and changes in regulations, taxes and user fees that would affect expected sales in the near term.

Honeywell Aerospace’s Business Aviation Outlook does not reflect the impact of unforeseen events such as a war, major economic shock, fuel crisis or new regulatory restrictions. The outlook is based in part on Global Insight’s baseline economic forecast assumptions that call for world economic growth rates above three percent in 2010.

Based in Phoenix, Arizona, Honeywell’s aerospace business is a leading global provider of integrated avionics, engines, systems and service solutions for aircraft manufacturers, airlines, business and general aviation, military, space and airport operations.

Honeywell (www.honeywell.com) is a Fortune 100 diversified technology and manufacturing leader, serving customers worldwide with aerospace products and services; control technologies for buildings, homes, and industry; automotive products; turbochargers; and specialty materials. Based in Morris Township, N.J., Honeywell’s shares are traded on the New York, London, and Chicago Stock Exchanges. For more news and information on Honeywell, please visit www.honeywellnow.com.

This release contains certain statements that may be deemed “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, that address activities, events or developments that we or our management intends, expects, projects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are based upon certain assumptions and assessments made by our management in light of their experience and their perception of historical trends, current economic and industry conditions, expected future developments and other factors they believe to be appropriate. The forward-looking statements included in this release are also subject to a number of material risks and uncertainties, including but not limited to economic, competitive, governmental, and technological factors affecting our operations, markets, products, services and prices. Such forward-looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by such forward-looking statements.

Media Contact:
Bill Reavis
602-365-2055
bill.reavis@honeywell.com
Honeywell Aerospace Media Center