Aerospace and Defense:Business Jet Monthly -November 2016

类型：投资策略机构：摩根大通证券(亚太)有限公司研究员：摩根大通(亚太)研究所日期：2016-11-21

Help on the way? Thus far, the market’s takeaway from the election is that itwill drive tax cuts and infrastructure spending and that this expansionary fiscalpolicy, combined with reduced regulation, will mean faster US growth. Thisproposition is untested but if it plays out, business jet demand should rise. Wesee Cessna as the leading beneficiary, as its customer base of mid-sizebusinesspeople have been on a buyers’ strike since the financial crisis. This factis not lost on the market, with TXT up 10% since the election vs 2% for theS&P 500. Gulfstream could benefit too, though its customer base ofmultinational corporations and ultra high net worth individuals has fared betterthrough the recovery, even in the US. Stronger business jet demand will taketime to show up—should it occur at all—but we will watch for early signals inthe coming months, both from OEMs and in the used market.

    Meanwhile, demand remains under pressure. As expected, the themes ofoversupply and price pressure were present at the NBAA show earlier thismonth, with Honeywell lowering its 10-year outlook by 7% to ~ 8,500 planes,the second consecutive downward revision. (See Figure 3.) We sensed thatOEMs view US corporates as the best opportunity in a tough market but evenamong these customers, new aircraft face competition from inexpensive usedmodels. Earnings disclosures have been mixed, with Gulfstream orders hangingin and management focused on cost cutting to support EBIT through theG500/600 transition. Bombardier’s book-to-bill was only 0.6x but managementremains confident in keeping 2017 Global and Challenger deliveries near 2016levels. Supplier commentary, including from Honeywell and Rockwell Collins,has been more cautious on 2017.

    Used inventory increased 10 bps m/m to 9.7% in Oct. In-production modelsfor sale have stabilized at 9.6-9.7% of the fleet since May-16, though this is stillup 75 bps YTD. Inventory increased 10 bps each for Heavy jets and Light jetswhile remaining flat for Medium jets. 0-5 year old inventory decreased 10 bps toan estimated 6.3%, broadly in line witht he long term average. Specifically, thenumber of young Falcon 7Xs for sale ticked down in Oct.

    Used pricing was flattish in Oct at $11.2 mn. Avg asking price was down0.2% in Oct, a smaller decline than recent months but pricing has been downm/m in 9 of 10 months this year and the drop since since Dec-15 is 12%. Avgasking price decreased 3.2% for Medium jets to $6.4 mn and 1.1% for Light jetsto $4.3 mn. Heavy jets ticked up 0.7% to $21.1 mn.

    US flight ops grew 3.1% in Sept. This was the second best print this year afterFeb which benefitted from the leap year and YTD growth is now 1.4%. Withinthe US, domestic numbers (+1.6% for 9M16) are faring better than interational(+0.2%). European flight ops declined 1.7% in Oct for a 1% contraction YTD.