BY MOLLY MCMILLIN
Wichita business jetmakers say they’re encouraged about continuing signs of stabilization in the corporate jet market.
The number of used aircraft up for sale fell for the fourth straight month in November, according to a business jet update by UBS Securities released on Monday.
Jets available for sale, however, remain 4 percent higher from a year ago and represent 16 percent of all business jets in service.
The used market is a key indicator of new business jet sales. As the number of used jets on the market falls and prices increase, demand for new jets typically rises.
The UBS report warns of a continued risk of an extended downturn in the business jet market.
There is still a significant oversupply of jets, the fractional ownership business is weak, and financing is tight, although a weak U.S. dollar should help international sales, it said.
But planemakers say they’re enthused about signs of stabilization.
“We’re excited to see it, and we’re experiencing it,” said Cessna Aircraft spokesman Doug Oliver. Used aircraft sales at Cessna will finish the year higher than expected.
Still, it doesn’t change a long-term outlook that recovery in the business jet market will be long and slow.
“We have to keep in mind that it’s (in the) early stages and that… our business lags the general economy,” Oliver said.
Wichita’s three general aviation manufacturers have cut more than 12,000 jobs in the past year as customers canceled or deferred orders.
The used aircraft inventory decline is both encouraging and expected, said Hawker Beechcraft executive vice president of marketing and sales Shawn Vick. “It’s expected as we see economies recover around the world, and we see our own economy, improve.”
Hawker Beechcraft is closely watching for improvements in pricing in the used market, Vick said.
Average asking prices for newer business jet models have fallen about 30 percent from their peak levels, UBS said. And prices declined another 1 percent to 2 percent in November.
For example, a newer Cessna Citation Sovereign, which sold for an average high of $16.6 million within the past four years, sold for $15.8 million in November 2008. The model sells for $14.2 million today, according to UBS.
A newer model Learjet 45 and 45XR, which sold for as high as $7.8 million in the past four years, averaged $6.3 million in November 2008. The aircraft sells for an average of $4.7 million today, UBS said.
And a newer Hawker 400XP sold for an average high of $5.5 million in the past four years, sells for an average of $4.8 million today.
As used inventories decline, prices rise.
“It means buy now, because those prices won’t be around for very long as our economies and our business improves,” Vick said.
Declining inventories and rising prices increase demand for new business jets.
In addition, there are some other signs of stabilization in the business jet market, said Bombardier Aerospace spokeswoman Danielle Boudreau.
Business jet utilization and the CEO confidence index is improving, she said.
“A lot of indicators are starting to show good things within the business jet market,” Boudreau said. “However, conditions are still challenging.”
http://www.kansas.com/business/story/1088264.html
Source: WICHITA EAGLE
Date: 2009-12-08