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Inventory of Used Business Aircraft Continues To Shrink

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Preowned turbine business aircraft inventories tightened across the board in the first quarter, but business jets shined most brightly, according to the latest data from business aviation research firm JetNet. Across all segments, including helicopters, there were 5,675 aircraft for sale in the quarter, down 10.7 percent, or 680 units, from a year ago. That equates to just 5.4 percent of the in-service fleet on the market.

Notably, the business jet inventory showed the largest year-over-year decrease, shrinking by 350 units, to 2,020, or 9.3 percent of the in-service fleet. In terms of units, that marks the lowest inventory level for business jets at the end of the first quarter since 2008; by percentage, it is the lowest since at least 2005, the earliest year for which JetNet provided data.

Likewise, preowned turboprop inventory also showed a large decrease, falling 0.9 percentage points, to 6.9 percent, at the end of the quarter. That amounts to just 1,051 of the 15,337 in-service turboprops up for sale.

While business jet full-sale transactions fell 3.8 percent, they are taking 16 fewer days to sell versus last year, at 297 days. Business turboprop transactions slid 0.7 percent and are taking more time to sell at 303 days on the market, up 13 days year-over-year.

USED BIZJET SCARCITY POSITIVE FOR NEW AND USED:

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Used inventory 17% lower yoy in april, down to less than 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 5.5% of installed base (including 0-5 year aircraft at 4.0% and 6-10 year at 6.9%) with young inventories down 35% yoy. Young inventory is approximately 250 bps below long-term average levels and now roughly in line with pre-financial crisis levels.

By cabin size, 0-5 year used are at post financial crisis lows at 4% for all three cabin classes (small⁄midsize⁄large). For 6-10 year used, all three classes are about in line with post-crisis lows including small cabin at 6% and midsize⁄large at 7%.

North america only ,5% young used available. Among the manufacturers, inventory levels are lowest for embraer at 5% of fleet and gulfstream at 7%. Among young (0-10 year) aircraft, inventory is low at approximately 5% for all manufacturers other than dassault.

Used prices have held roughly flat ytd, although were 2% lower yoy in april (r3m). by cabin class, used pricing is improving slightly for small and large cabin (+1% yoy), while midsize pricing continues to decline (-10% yoy).

All the ingredients for bizjet turn look in place: 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 capx. In addition, our survey of industry professionals indicates rapidly improving market conditions, corroborated by recent positive commentary from oems and suppliers. Among our coverage, we see bbd/gd/txt (all rated overweight) as the primary beneficiaries of improving industry conditions.

U.S. Bizav Flying Rises as Part 91 Reawakens

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April activity for business aircraft in the U.S. and Canada climbed 2.6 percent year-over-year, thanks to “strong demand” in the Part 91 market, according to TraqPak data released today by Argus International. This was largely in line with the company’s estimate of 2.8 percent growth last month; this month, it is expecting a 2.3 percent increase. Over the past five Aprils traffic has increased by 11.7 percent, from 230,000 flights in April 2013 to about 257,000 last month.

Part 91 activity seems to have awoken from its slumber last month, rising 4.1 percent year-over-year, with gains across all aircraft categories. This category has been mostly anemic over the past year. The 1.3 percent rise logged by Part 135 operators was more muted than in months past, when the operations category has been leading the recovery in flight hours. Fractional flying eked out a 0.6 percent increase.

All aircraft categories saw increases last month, with large-cabin jets once again coming out ahead with a 4.7 percent year-over-year increase. This was followed by turboprops, which jumped 2.6 percent; midsize jets, up 2.2 percent; and light jets, up 1.8 percent.

The only double-digit gain in individual categories last month was in Part 135 large-cabin jet activity, which rose 11.8 percent from a year ago. Paradoxically, fractional large-cabin jet flying sunk by 19.9 percent year-over-year.

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