Business Jet Market Showing Signs of Stabilization

The number of business jets available for sale on the market appears to have stabilized over the past two months, albeit at record high levels, according to David Strauss, UBS analyst.

He estimates 3,057 business jets were available for sale at the end of May – 2,878 used and 179 new aircraft - roughly in line with the previous month.

But those levels are still 55% higher than last year, he noted, and as a result, prices are down 30% to 40% on young aircraft and a further 3% to 4% in the previous month.

He said:

We believe the used business jet market serves as a leading indicator of the new business jet market. We think the slower growth rate over the past few months indicates that inventories are beginning to stabilize.

Of the five major manufacturers, Bombardier (BDRAF.PK) had the highest percentage of its respective fleet available for sale at 19%, followed by Cessna at 18%, and Dassault, Gulfstream and Hawker Beechcraft all at 16%., he noted.

“Overall, we think the current business jet market is characterized by significant oversupply, weak pricing and tight financing,” Mr. Strauss said.

While our key indicators and contacts indicate a bottom is near, we think the potential for further production cuts along with the risk of an extended downturn limits upside for most of the stocks.