By Chad Trautvetter
Business jet demand “remains weak, but is not getting much worse,” JPMorgan Investment Research noted in its latest business jet monthly report. This sentiment is reflected in its forecast of 2 percent growth in business jet deliveries for next year.
While OEM backlogs decreased somewhat in the third quarter, JPMorgan has seen some “bright spots” in the market, including at the higher end where its analysts soon expect further fleet orders to be announced by Bombardier and Gulfstream. But for aircraft at the smaller end, where demand is more concentrated in the U.S., “President Obama’s re-election should not help bizjet sentiment, and tax policy could weaken demand at the margin. Moreover, decelerating corporate earnings growth does not bode well.”
JPMorgan noted that Hawker Beechcraft’s plans to exit the business jet market “would be a positive for the remaining players, particularly Cessna and Embraer.” It expects Hawker to deliver 27 jets this year, and a decline to zero would represent a 0.4 percentage point headwind to market growth next year.
Meanwhile, pre-owned business jet inventories of in-production models crept up by 0.1 percent to 10.6 percent last month “and has not moved from the 10.4 to 10.6 percent range in the past six months.” Nevertheless, average asking prices surged 2.6 percent month-over-month, the strongest price movement in percentage terms since 2008.