CIBC: Biz Jet Market Remains Stable -From Transportation and Aerospace weekly
Key Points
Global Jet Capital released its Q2/23 business jet market update, and we continue to see trends soften versus last year but tracking above pre-COVID levels. Nonetheless, the market is stable and well positioned to weather a potential downturn in the economy as backlogs remain elevated and inventory levels are low. We continue to see healthy business aviation fundamentals which is a constructive macro backdrop for BBD. Key takeaways from the Global Jet Capital report are:
Global Business Jet Flight Operations Down 7.5% Y/Y In Q2/23 But Up 12.1% Vs. Q2/19: In Q2/23, flight operations declined 7.5% Y/Y but were up 6.1% Q/Q. The Y/Y declines were led by the U.S. and Europe. Demand remains above pre-COVID levels, though, with second-quarter departures up 12.1% versus Q2/19. In H1/23, departures were 13.1% higher than in H1/19. We continue to see flight activity stabilize at a higher level than prepandemic, supporting the view that there has been a step-function increase in demand for business aviation.
Backlogs Remain Elevated: OEM backlogs increased 8.6% Y/Y in Q2/23 to US$50.4B and the industrywide book-to-bill ratio was 1.2:1. The current backlog levels are also higher quality (i.e., fewer speculative orders) which positions the industry relatively well in the event of an economic downturn compared to other cycles.
Transaction Activity Down In H1/23: Transaction activity slowed in H1/23, with both the new and pre-owned markets declining compared to year-ago levels, reflecting tough comps (2022 was exceptionally strong) and supply chain constraints. Business jet transactions totaled US$12.2B (1,165 units) consisting of US$6.5B of pre-owned sales (907 units) and US$5.7B of new aircraft transactions (258 units). For context, total transactions in H1/22 were valued at US$17.0B and in H1/21 it came in at $12.9B.
Inventory Levels Increasing But Still A Seller's Market: Aircraft listings increased in H1/23, continuing a trend that started in the latter half of 2022. By the end of Q2/23, inventory stood at 6.1% of the total fleet which remains low by historical standards despite rising from a record low of 3.1% in Q1/22. Historical average levels have been in the 10%-11% range over the last decade. The inventory of aircraft younger than 13 years old was 4.4% of the global fleet while those older stood at 7%. While we are seeing a normalizing in the inventory levels, it remains on balance a seller's market.
Residual Values Holding In: Global Jet Capital noted that the average business jet bluebook values rose 11.5% Y/Y in Q2/23. Bluebook values for older aircraft were 21.4% higher in Q2/23, while newer aircraft increased 8.1% in value. While residual values are still rising, the 11.5% increase does highlight a slowdown in the pace of growth as we see a stabilization in the overall business jet market.
NOTE from Tempo 1 : I stop to publish the weekly flyng hours. There's no real change in the market for the last 3 months. I will looking at regularly and I will publish them if there any change.