JP Morgan Bearish On New Business Jet Sales Recovery

In a report a week ago JP Morgan North American Equity Research analyst Joseph Nadol III indicated that there is a “significant overhang” of pre-owned jets available at attractive prices.  This makes for bad news for new jet sales which he described as “anemic”.  He indicated that new aircraft sales were continuing to decline and stated:

“We see potential for further rate cuts if orders do not pick up. However, there are reasons for optimism. Global corporate profits were up an estimated 46 percent in 2010, and they have historically been correlated with bizjet deliveries, though there is a one- to two-year lag.”

The report revealed that used business jets have trended down since the middle of 2009 and are now 3 points off of the peak sales. The trend included a .4% drop from 11.7% to 11.3% last month. Nadol stated, “The bad news is that even after this decline, inventories remain at a level identical to the 2001 peak.” This does not bode well for new business jet sales but if the trend continues it could mean a turnaround. The growth for 2012 is forecast at 20% and JPMorgan opines that if the demand picks up, that the industry could meet that figure. If orders do not continue to increase or do not pick up, the forecast of recovery may be longer than the next two years and will be longer. The report said, “If orders do not start coming in, the recovery will get pushed out.”

For those of us selling pre-owned business aircraft this report was not necessarily bad news but for the manufacturers looking for new jet sales, they are probably “cautiously optimistic”, but yet only if the amount of pre-owned jets drop.

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