Analyst: Signs Encouraging for Business Jet Demand
December 1, 2014
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  • Business jet demand appears to be firming up, and that will favor Textron Aviation, a aviation analyst wrote in a report to investors on Monday.

    The number of used business jets up for sale, a key indicator of demand for new jets, declined this month over October. It was the 10th month that the number of used jets for sale was below 10 percent of the total fleet.

    In November, for example, 9.2 percent of the total business jet fleet was up for sale. That’s near the all-time low of 9.1 percent in January 2008, Cai von Rumohr, an analyst with Cowen and Co., wrote.

    The number of business jet departures are also starting to increase, although trends vary by manufacturer, he said.

    In addition, the asking prices for used Cessna business jets have held stable for the past four to five months, von Rumohr said.

    Cessna business jet dealers reported in a check by von Rumohr that demand for jets has been more positive than in recent months.

    “Dealers don’t expect meaningful lift in pre-owned prices unless inflation accelerates, but there’s broader agreement that prices have bottomed with mention of selectively higher transactions for younger models, which are in short supply,” von Rumohr wrote. “Potential sellers also seem more willing to list their planes; and incoming calls have picked up.”

    The health of the used market is a key indicator of new business jet sales.
    Von Rumohr expects Cessna’s book-to-bill ratio, the number of orders for new jets versus the number delivered, will move above 1.0 in the fourth quarter, or one order for every delivery. It’s been stuck in the 0.9 to 1.0 range, he wrote.

    Demand for Gulfstream business jets, meanwhile, appears healthy. Von Rumohr expects Gulfstream will end the fourth quarter with a book-to-bill ratio of 1.25, or 1.25 orders for every Gulfstream delivered.

    Demand for the G650 continues to be strong with reports of jets being sold for more than the sticker price of $65 million, von Rumohr wrote.

    But dealers warn of softening demand for used G450s and to a lesser extent, the G550, he wrote. Dealers report that it takes a longer time to close deals and prices are weaker as supply on the market increases, he wrote. It’s also impacted by weakness in China and Brazil.