2011 holds promise as a turnaround year
Feb. 10, 2011, New York, N.Y. - In its monthly outlook on the business aircraft market, J.P. Morgan senses the market is looking for a turnaround in bizjet OE demand this year, and they see a reasonable chance for this to occur, with a pickup in demand underpinning their forecast for an 18 per cent increase in deliveries in 2012.
Feb. 10, 2011, New York, N.Y. – In its monthly outlook on the business
aircraft market, J.P. Morgan senses the market is looking for a
turnaround in bizjet OE demand this year, and they see a reasonable
chance for this to occur, with a pickup in demand underpinning their
forecast for an 18 per cent increase in deliveries in 2012.
Q4 data points mixed but slant slightly positive
While Gulfstream’s estimated net book-to-bill improved to 1.3x, Q4 is seasonally strong, making it too early for a definitive judgment on demand. Cessna deliveries came in strong, most excess inventory appears to be gone, and the tone was incrementally positive, but backlog still declined nearly $500 mln q/q.
Used jet inventories remained flat, asking prices increased 2.1 per cent
Used jet inventory, measured by “aircraft for sale as per cent of active fleet,” remained flat at 11.3 per cent in January, staying within the range of 11.3 per cent -11.9 per cent for the ninth straight month. Inventories are 300 bps off the peak of 14.3 per cent, 120 bps of which occurred last year. Heavy and Light jet inventories were flat for the month, while Medium jets (-10 bps) also had nominal movement. 13 of 24 tracked models witnessed decreases in inventories, 9 saw increases, while Citation X and Hawker 400/Beechcraft 400 inventories remained flat.
Average asking price increased 2.1 per cent to -$11.0 mln in January, after touching the lowest level since Aug-97 in December. The price increase was driven by Heavy jets, which saw a jump of 4.3 per cent, offsetting declines in Medium (-1.9 per cent) and Light jet (-1.8 per cent) prices. Average asking prices witnessed a another decline of 11 per cent in 2010, and prices remain 32 per cent off the Feb-08 peak of $16.3 mln. 10 of 24 tracked models saw prices rise, 11 saw decreases, and 3 had flat prices.
Inventories have hovered between 11.3 per cent -11.9 per cent for the last nine months, and within categories, Light and Medium jets have been moving within a range as well. Inventories remain elevated in historical terms and we believe further declines are necessary to create the conditions for new jet demand to set out upon a sustainable upward path.
Fractional fleet continues to decline
The total fractional fleet decreased by another four aircraft to 871 in December, contracting by 26 aircraft in 2010. The fractional fleet is down by 89 aircraft from the peak of 960 in January 2009, a ~9 per cent decline. Initial January numbers point to a steep decline in the fractional fleet.
The three-month rolling average of gross fleet additions increased to 2.7 in December, from 1.0 last month. The average of new jet additions increased to 1.3 from 0.3, and the average of used jet additions increased to 1.3, from 0.7 last month