J.P. Morgan Securities has issued a report, dated July 31, which asserts that the business jet market is continuing to deteriorate. According to analyst Joseph Nadol, the downturn will not be short-lived...

“The after-market pricing environment for business jets continues to weaken with all size aircraft affected, particularly large aircraft.

“Pricing is now down eight per cent year-on-year. We believe the pricing weakness will continue to force business jet OEMs to sacrifice margins in exchange for volume, and could eventually make pricing for new aircraft uneconomic relative to used aircraft.

“After-market transaction volume, which was one of the few bright spots in the business jet market earlier this year, appears to have slowed, particularly in the midsize and large aircraft sectors.

“On a trailing three month basis, volume growth declined to seven per cent in June from thirty per

cent two months earlier, and the midsize and large segments are in the red.

“Growth of new aircraft deliveries continues to decline, reflecting the after-market environment. On a trailing three-month basis, new deliveries are now about flat with last year, but strength in the small aircraft (+29 per cent) segment is covering severe weakness in the midsize (-34 per cent) and large (-7 per cent) segments.

“We reiterate our belief that the business jet industry is currently at the beginning of what could be a multi-year cyclical downturn.

“We believe that the major drivers of this downturn are an uncertain outlook for corporate profits, a slowing fractional market and perhaps most importantly, increased scrutiny of corporate management.

“The after-market pricing environment for business jets continues to weaken. Pricing experienced a brief uptick in June, but then proceeded to resume its steady sequential decline to a current low as of our most

recent update.

“The asking price for in-production business jet models is down an average of about eight

per cent year-on-year.

“Price deterioration is evident in all three market segments (large, midsize and small aircraft), but large aircraft have been hit the hardest over the past couple of months; the asking price for large aircraft is now down an average of about 10 per cent year-on-year.”