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Young used inventory at decades low of 5% of fleet.

Used inventory 14% lower yoy in June, down to ,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 5.2% of installed base (including 0-5 year aircraft at 4.1% and 6-10 year at 6.2%). With young inventories down 34% yoyi. young inventory is 250-300 bps below long-term average levels and now roughly in line with pre-financial crisis levels.

Inventory for each cabin class is at⁄near post financial crisis lows.

For 0-5 year, used inventories are lowest for midsize cabin at 3%, followed by small cabin at 4% and large cabin at 5%. For 6-10 year, used inventories are lowest for small⁄midsize cabin at 6%, followed by large cabin at 7%.

The decline in young used inventories has been largely driven by north america,

The largest region with ~50% of young used inventory. North american young used inventory at 4.3% of the installed base (including large cabin at 4.0%, small at 4.2%, midsize at 4.5%) has declined by nearly 300bps since early 2017. By manufacturer, Bombardier⁄Cessna⁄Embraer⁄Gulfstream very young (0-5 year) inventories all look low at less than 5%, while Dassault is slightly higher at ~6%.

Used prices were 2% lower yoy in June (r3m), but 1% higher sequentially.

By cabin class, used pricing continues to decline for midsize (-6% yoy), while small⁄large cabin prices were 1% lower. The sequential increase in pricing was driven by large cabin (+3%) and small cabin (+1%) with midsize cabin flat.

Scraps running low, poised to increase.

We estimate business jet scraps are currently running at less than 1% of the fleet, down from ~1.5% of fleet in 2014. We would expect retirements to pick-up going forward given the average age of the fleet has increased from ~14 years to ~17 years since the financial crisis, which presents a large replacement opportunity. The FFA’s mandate for all aircraft that fly in U.S. airspace to be equipped with ads-b out transmitters by Jan 1, 2020 could also stimulate replacement demand, as older aircraft may be scrapped to avoid the relatively expensive upgrade.

Positive on Bizjet:

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. Among our coverage, we see bbd/gd/txt (all rated overweight) as the primary beneficiaries of improving industry conditions.