02:21 PM EDT, 07/17/2024 (MT Newswires) -- RBC's analysis of the business jet market increases its conviction in the long-term demand trends and upside avenues in aftermarket services for leading OEMs.

The business jet fleet is the oldest in over two decades, supporting demand for new jets and planned production rate increases. "With used inventory levels remaining significantly below the typical range before the pandemic, we expect robust forward demand and pricing support for bizjets, especially for large jets, which remain at the lowest inventory levels among the three major jet categories," RBC said.

Supply chain challenges, including the availability of technicians, remain a key risk with regard to build rates, though RBC believes improvements are likely to take hold by next year.

Services also also likely a source of upside for leading OEMs, RBC said. OEMs are developing their in-house services divisions. This trend is influenced by the more stringent and costly certification requirements, leading jets to remain in operation for extended periods, and bolstering the demand for maintenance services. RBC notes that aircraft retirements are at low levels, suggesting that aircraft are being utilized for longer durations before decommissioning. This extended use necessitates increased maintenance and servicing. Consequently, aftermarket services and parts sales not only are essential for maintaining older aircraft but also tend to offer higher margins, improving overall profitability. Amplified usage rates from both commercial fleet operators and defense customers have resulted in a higher frequency of maintenance and need for parts replacements, RBC notes.

"The favorable age profile of the existing fleet and the sustained high levels of usage, coupled with the significant opportunities for growth in the services sector, are key factors that support our favorable view on Bombardier's stock."

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