Aviation analyst sees sign of improving market for business jets
03/18/2014 11:26 AM
08/08/2014 10:22 AM
There are signs that an upturn in the demand for smaller business jets is nearing, an aviation analyst wrote Tuesday.
Improvements in the number of used business jets on the market and in business jet transactions support that theory, Cai von Rumohr, an aviation analyst with Cowen and Co., wrote in a report to investors.
Such an upturn would be good news for Cessna.
“We feel the data continue to suggest a pattern of firming demand,” von Rumohr wrote.
Among those data points, he said, was a decline in the number of used business jets on the market, including models that are out of production.
Less than 10 percent of the entire business jet fleet in operation was up for sale in February.
That’s the second straight month the number has been below 10 percent. That’s generally considered the level at which business jet pricing begins to firm, von Rumohr wrote. It’s also the fourth straight month that the percentage of light, super light and midsize business jets on the market has declined, he said.
The number of sales continued to rise both in absolute terms and as a percentage of the fleet, von Rumohr noted.
“This is the fourth straight month of solid uptrend and very well above the late-2009 low, an indicator that the inventory overhang is starting to clear,” he wrote.
A drop in the number of Cessna in-production models of business jets up for sale was led by the Citation Sovereign, he said. That bolsters the likelihood that Cessna will be able to sell the remaining 2014 delivery slots this year for new Sovereigns, von Rumohr said.
In addition, the number of recent production Hawker jets up for sale dropped from 105 in March 2013 to 66 today.
That suggests “the overhang of Hawker’s fire sale as it exited the business in early 2013 is starting to clear,” von Rumohr wrote. “This should help Cessna in its efforts to upgrade Hawker customers in its products once demand gains greater momentum.”
Cessna’s parent company, Textron, closed the deal to buy Beechcraft Corp. on Friday and is merging Cessna and Beechcraft into one company.
Beechcraft emerged from Chapter 11 bankruptcy in February 2013 and stopped building Hawker business jets in its restructuring.
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