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.

The preowned business jet market tightened throughout the first half of the year and by June had dipped to the lowest percentage of aircraft for sale, 9.1 percent, since the beginning of the “Great Recession,” according to JetNet’s most recent market update covering the first half of the year.

In June, 1,966 preowned business jets were for sale globally, compared with 2,301 a year earlier. This marked a 1.7 percentage drop in the number of preowned aircraft available for sale, which was at 10.8 percent by the midpoint of 2017.

Available preowned turboprops are even more scarce, with 6.6 percent of the in-service fleet available for sale in June. This compares with 7.6 percent a year earlier. Helicopters showed similar trends: 5.8 percent of in-service turbine helicopters were available in June, compared with 6.7 percent a year earlier; and 5.4 percent of piston helicopters were on the market in June versus 5.6 percent a year earlier.

During the first six months, 1,344 business jets exchanged hands, a 0.2 percent increase from the same period in 2017. Average days on market dropped by 26 to 297 for business jets. Turboprop sales, however, took 13 days longer on average, at 307. In all, 651 business turboprops were sold in the first half of the year, relatively flat with the year before.

Average quarterly flight utilization for business aircraft has exceeded the 30-hour mark for the first time in a decade, according to the latest business aviation index from aircraft maintenance plan provider JSSI. During the second quarter, average per-aircraft utilization reached 30.35 hours; year-to-date average flight hours are up 4.6 percent, it said.

“As we entered the summer season, one of the strongest periods of the year for flight activity, we fully expected to see an increase in aircraft utilization,” noted JSSI president and CEO Neil Book. “However, the continued growth this year has been exceptional. It’s also encouraging to report that average flight hours for the quarter exceeded 30 hours for the first time since 2008.”

Of the nine industries using business aircraft analyzed by JSSI, seven reported an increase in quarter-over-quarter flight activity. The growth was primarily driven by the business services sector, which saw a 15.8 percent quarter-over-quarter increase. This was followed by the aviation sector, up 11.3 percent, and consumer goods, up 7.7 percent. Real estate and construction business aircraft users saw flight activity decreases of 7.4 percent and 1.6 percent, respectively.

All seven world regions reported increases in year-over-year flight activity, according to JSSI. Europe topped that growth, climbing 13.3 percent year-over-year, while Asia-Pacific was not far behind with a 12.6 percent rise. North American flight hours increased 2.4 percent year-over-year.