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North America available young used only 3-4% of fleet.

We view the used business jet market as a key determinant of new business jet demand and monitor used inventories, retirements and pricing.

Used inventory 15% lower yoy in July, 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 5.1% of installed base (including 0-5 year aircraft at 3.9% and 6-10 year at 6.3%) with young inventories down 35% yoy. young inventory is 250-300 bps below long-term average levels and now roughly in line with pre-financial crisis levels.

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 4.2% of the installed base (including large cabin at 4.1%, small at 3.9%, midsize at 4.5%) has declined by nearly 300bps since early 2017. Inventories for all manufacturers are very low for both 0-5 year and 6-10 year, averaging ~3% and ~4% of the installed base (respectively).

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

Used prices were unchanged yoy in July (r3m), but 1% higher sequentially. Used prices were roughly unchanged yoy in July (r3m) with large cabin 4% lower, offset by small cabin 1% higher (midsize flat). However, on a sequential basis, used prices were 1% higher in July as midsize cabin recovered off the bottom (+3%) with small⁄large cabin flat.

Positive on Bizjet: after nearly a decade at trough levels, key young jet market indicators now all signal improvement, including much lower used inventory levels along with higher pricing, increasing flight activity and higher corporate capx. In addition, our survey of industry professionals indicates rapidly improving market conditions. We have overweight ratings on bbd, gd and txt.