2H10 ‘Crucial’ Period for Bizjet Makers, Says JPMorgan

 - September 7, 2010, 12:21 PM

“Elevated used inventory, attractive used pricing and macro uncertainty continue to hold down demand for new business jets,” JPMorgan Equity Research noted in its latest business jet monthly report, issued this morning. “As a result, OEMs are eating further into their backlogs, and if these don't stabilize in the coming quarters, further [production] rate cuts seem likely.” However, the risk is not the same across all categories, with demand for large-cabin jets continuing to outpace that for light jets by a “striking” degree. Bombardier's second-quarter conference call last week provided “further supporting data points” as Learjet and Challenger backlogs continued to decline while the Global backlog ticked up. “We're not ready to say that large business jets are out of the woods as orders remain anemic overall, and the next two quarters will be crucial in determining whether further rate cuts are necessary,” said the firm. As for pre-owned jets, JPMorgan said used inventory of in-production models edged up to 11.8 percent in August versus 11.6 percent in July, with all categories showing increased inventories. “We believe this increase is a bump in the road and expect that inventories...will continue to decline gradually,” it added. Meanwhile, average asking prices for pre-owned jets increased 1.3 percent in August, reaching $11.4 million. JPMorgan also reported that business aircraft flight activity for July increased 7.7 percent from a year ago.