JPMorgan: Good Reasons for Bizjet Market Optimism

 - October 8, 2009, 10:59 AM

According to a monthly business jet report issued by JPMorgan this week, the pre-owned market recovery continues though new jet demand is expected to lag. JPMorgan said used inventories fell 50 basis points last month, to 13.6 percent of the in-service fleet, the “second consecutive meaningful decline and further evidence that we are past the cyclical trough in the used market.” The investment firm predicts that pre-owned inventories will decline further in the coming months, though not necessarily in a straight line. Average asking prices for used business jets slipped again, declining 1.8 percent last month. Prices, on average, are 24 percent below the peak last November. “We expect prices to continue falling until inventories, which remain elevated, decline further,” said JPMorgan aerospace analyst David Nadol III. In addition, “We expect a significant lag between improvements in the used market, where inventories remain far above last cycle’s peak, and a pickup in demand for new jets, and we believe this downcycle has further to run,” he said. JPMorgan said it expects the NBAA Convention this month to be quieter than in recent years due to weak order activity and no expected new aircraft launches, “although some optimism due to [improving] used market conditions is warranted.”