JPMorgan: Economic Weakness Could Stall Bizjet Recovery

 - June 12, 2012, 3:45 PM

JPMorgan economists have lowered their global GDP growth forecast for the second half of this year by 0.5 percentage points, to 2.1 percent. “If it persists,” JPMorgan Equity Research said in its just-issued business jet monthly report, “the disappointing economic data should pressure new bizjet demand, further postponing a recovery in a market in which 2011 deliveries were still about 40 percent below the 2008 peak.”

The firm’s aerospace analysts also said that data points could soften amid “macro concerns, as they have during the past two summer slowdowns.” Over the last two summers, the pre-owned business jet inventory bottomed in July before rising by as much as 0.8 percentage points over the next three or four months. Additionally, U.S. flight operations growth stagnated in the second half of last year and has yet to recover, JPMorgan analysts noted. In fact, flight ops declined by 0.6 percent year-over-year in April.

Last month, pre-owned inventory of in-production models fell by 0.1 percentage points, to 10.6 percent, on a month-over-month basis. Meanwhile, average asking prices dropped 0.9 percent from April and “a bottom remains elusive.”

However, there is a silver lining: the $9.6 billion NetJets order announced yesterday is a “bright spot,” according to the JPMorgan aerospace analysts. “The market often views fractional operators’ orders as less firm, but we still see this as a positive development, especially for Bombardier and Cessna.”