Indicator at 42: Our Barclays Business Jet Indicator (BBJI) decreased 7% from January, lowest since July 2020, indicative of worsening market conditions. Our survey index has now dropped six consecutive times, declining ~50% from its late 2021 high. Our straight up measure of overall business conditions came in at 6.1 (0-10 scale), also 7% lower from January and down 23% from late 2021 peak, albeit indicative of a still strong market on an absolute basis.

 

View on market: We believe the decline in our survey index foreshadows a slowing in new order activity for the manufacturers, although we expect extended backlogs (two- to-three years) will allow for further delivery growth over the next few years. We forecast new industry deliveries increasing a further ~30% through 2025 to 10-15% above prepandemic levels. This level would still only equate to new deliveries equivalent to 3- 4% of the installed base.

 

Index components: The decline in our index reflects a 40% decrease in pricing and 4% decrease in customer interest, partially offset by a 15% increase in willingness to increase inventory and an 11% increase in 12-month outlook.

 

Stock market/higher interest rates: 89% of respondents now indicate a negative impact on business activity as a result of the lower stock market/higher interest rates, higher as compared to 72% in January. Meanwhile 94% expect a negative impact on business activity in the future as a result of the lower stock market/higher interest rates.

 

Production rates: When asked about the appropriate level of future annual production from the manufacturers, 56% of respondents indicate 600-700 aircraft per year, in a similar range to slightly higher than pre pandemic levels.

 

Respondent commentary (pgs 13-15): Survey participants highlighted slowing market activity amid increased uncertainty on higher interest rates, banking crisis and recession fears. Market characterized by increased buyer hesitancy, slowing charter activity, higher preowned inventory available for sale and lower pricing.