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.

Our bizjet quarterly summarizes our views on the business jet market and serves as a reference guide for key trends in the industry

Indicator at 67:

Our barclays business jet indicator (bbji), which reflects .100 responses, came in at 67 in June, down slightly from our prior survey in may at 68, while continuing to indicate substantial improvement in market conditions. Our June survey result is particularly strong considering that we are entering summer, which is typically slower for the bizjet market. By cabin class, our bbji was led by small⁄large cabin at 68, followed by midsize cabin at 64. Our straight up measure of overall business conditions came in at 6.7 (0-10 scale), trending consistently higher since our first survey in January.

Used inventory 15$ lower ffioffi in May, 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 5.3$ of installed base (including 0-5 year aircraft at 4.0$ and 6-10 year at 6.5$) with young inventories down 36$ ffioffi. Young inventory is 250-300 bps below long-term average levels and now roughly in line with pre-financial crisis levels.

Us cycles 2$ higher ffioffi in May:

Estimated business jet cycles were 2% higher from the prior year in May and 4$ higher on a r12m basis. On a seasonally adjusted sequential basis, cycles were 1$ higher. ¢harter cycles were 3$ higher ffioffi, compared to non-charter 1$ higher. Seasonally adjusted cycles are ~40% higher from the bottom in 2009 and roughly in line with pre-crisis levels, we estimate average daily utilization remains low due to continued fleet growth.

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 use. In addition, our survey of industry professionals indicates rapidly improving market conditions, corroborated by recent positive commentary from oems⁄suppliers. Among our coverage, we see bbd⁄gd⁄tflt (all rated overweight) as the primary beneficiaries of improving industry conditions.

Business aviation activity in the U.S., Canada, and the Caribbean increased 2.2 percent in May, continuing the general upward trend in 2018, according to the latest TraqPak report from aviation researcher Argus. The 2.2 percent increase follows a 2.6 percent overall year-over-year increase recorded in the past couple of months.

In May, Part 135 showed the strongest increase, up 2.8 percent from the same month in 2017. Part 91 activity also increased in May, up 2.1 percent. Fractional activity, meanwhile, inched up 0.7 percent. This improvement came in spite of a precipitous drop in large-cabin fractional flights, which were down 21.9 percent in the month, Argus reported.

All categories of aircraft in North American/Caribbean regions flew more in May, led by a 2.9 percent gain in light-jet flights. Midsize jets nearly matched that improvement with a 2.8 percent increase year over year. Large jet flight activity, meanwhile, was up 1.2 percent and turboprops 1.5 percent, Argus reported.

In the U.S., the Southeast region by far was home to the largest number of departures in May (60,958). The Western region, including California, Nevada, and Arizona, accounted for the next highest departure tally at 34,676.

Argus believes the general improvements in flying will continue, projecting a 1.9 percent increase in overall flight activity this month.