“Lower inventories and higher utilization suggest a recovery in new jet demand is approaching, though weak used pricing continues to weigh on the market for new jets,” J.P.Morgan North American Equity Research said in its latest business jet monthly report. According to the firm, pre-owned business jet inventory was flat last month on a sequential basis, though inventories are still “down nicely” year-over-year. Pre-owned pricing trends were also little changed.
Citing a disclosure in Bombardier’s annual report that 2014 trade-in commitments are $1.45 billion versus $400 million last year, J.P.Morgan anticipates that “many used jets will hit the market” this year, “so demand will need to continue to pick up to support the market.” It noted that new models are key drivers of demand.
Pre-owned inventory was 8.9 percent of the in-production fleet last month, “in line with January,” said J.P.Morgan’s aerospace analysts. Large-cabin jet inventory increased but was offset by falling midsize jet inventory, while light jet supply remained flat. Inventory of young business jets landed at 5.5 percent, down 2.2 percentage points from a year ago.
Meanwhile, average asking prices decreased 1.1 percent month-over-month, while pricing was off 13 percent from a year ago. Light jets held up “relatively well” with average asking prices remaining flat, but large-cabin jets “drove the February decline.”