Despite Soft Market, JPMorgan Still Bullish on Bizjets

 - September 25, 2012, 4:05 PM
Despite what it sees as "continued weakness" in the business jet market, JPMorgan believes that this segment will grow by 30 percent annually starting in 2013 due to an expected cyclical upturn and introduction of new models, such as the Embraer Legacy 500.

JPMorgan downgraded Embraer yesterday from overweight to neutral, in large part due to concerns about Embraer’s airliner business. However, the investment firm noted that “continued weakness” in flight operations and other indicators “are leading us to dial back our business jet delivery forecast,” but it still predicts healthy growth in this segment.

“Despite the reduction in our delivery estimates [for Embraer], we still expect strong growth due to new platforms and an assumed cyclical upturn,” JPMorgan said. “We see [Embraer’s] sales bottoming this year at approximately $1 billion, with about a 30-percent annual growth rate over the next two years to about $1.7 billion in 2014.”

Meanwhile, Embraer is also bullish on the business jet market in 2013 and beyond, according to Robert Knebel, Executive Jets vice president of sales for the U.S., Canada and Caribbean. He told AIN that his company’s new 10-year business jet forecast, to be released next month at the NBAA Convention, will show a $15 billion increase in North American deliveries. In its last projection, Embraer predicted $92 billion in business jet sales in North America between 2012 and 2021; it expects this to be $107 billion in the forthcoming 2013 to 2022 forecast.