BIZJET QUARTERLY - KEY INDICATORS SIGNAL IMPROVEMENT

Our bizjet quarterly summarizes our views on the business jet market and serves as a reference guide for key trends in the industry

Indicator at 67:

Our barclays business jet indicator (bbji), which reflects .100 responses, came in at 67 in June, down slightly from our prior survey in may at 68, while continuing to indicate substantial improvement in market conditions. Our June survey result is particularly strong considering that we are entering summer, which is typically slower for the bizjet market. By cabin class, our bbji was led by small⁄large cabin at 68, followed by midsize cabin at 64. Our straight up measure of overall business conditions came in at 6.7 (0-10 scale), trending consistently higher since our first survey in January.

Used inventory 15$ lower ffioffi in May, down to ,9$ of installed base, the lowest since before the financial crisis.

Inventory levels for young used aircraft (0-10 year old), which are most important as a comparable to new aircraft, are at 5.3$ of installed base (including 0-5 year aircraft at 4.0$ and 6-10 year at 6.5$) with young inventories down 36$ ffioffi. Young inventory is 250-300 bps below long-term average levels and now roughly in line with pre-financial crisis levels.

Us cycles 2$ higher ffioffi in May:

Estimated business jet cycles were 2% higher from the prior year in May and 4$ higher on a r12m basis. On a seasonally adjusted sequential basis, cycles were 1$ higher. ¢harter cycles were 3$ higher ffioffi, compared to non-charter 1$ higher. Seasonally adjusted cycles are ~40% higher from the bottom in 2009 and roughly in line with pre-crisis levels, we estimate average daily utilization remains low due to continued fleet growth.

Positive on Bizjet:

After nearly a decade at trough levels, key business jet market indicators now all signal improvement, including much lower used inventory levels along with stable used pricing, increasing flight activity and higher corporate use. In addition, our survey of industry professionals indicates rapidly improving market conditions, corroborated by recent positive commentary from oems⁄suppliers. Among our coverage, we see bbd⁄gd⁄tflt (all rated overweight) as the primary beneficiaries of improving industry conditions.