|If you are reading this article you have either bought or sold a plane in the past, planning to buy or sell or are currently buying or selling. You might also be an aircraft sales professional who has been engaged to buy or sell on behalf of a client. If any of these are the case, this article is written for you.
A lack of stability in markets always brings out the most interesting approaches and opportunistic challenges in the valuation process. In the last few weeks I have had several instances that have reminded me of these challenges from my experiences in previous unstable markets. Let’s take the title in the order it was written.
This is when a seller decides to put their aircraft on the market and is not willing to embrace a market reasonable asking price or a market reasonable final sale price and simply expect too much. Often a misconception occurs when a seller believes the value of their plane has some connection to what was paid, what was invested or what their friend sold theirs for. Or even worse the seller believes they will find the one buyer who will be willing to overpay regardless of market metrics. What is actually most important is what was the very last one that sold in that category and how much did it sell for, adjusted to match the criteria of your aircraft by equalizing the year model, difference in airframe time and equipment. In our current supply side environment if you are looking at comps from 90 days ago you probably are not using the best intel. Markets are changing quickly as sellers become more and more anxious about not missing the next sale. So if you price too high and ask too much real buyers may mistake you as something other than a real seller. They may feel you are not advised well or do not understand the current market. This could cost you a sale and by the time you wait for the next buyer to come along it will cost you even more due to what will assuredly be a lower price at a later date. I have written often about what is a new normal for residual loss rates which are between 7-10% annually barring any unforeseen global political or economic shifts. In today’s world those shifts seem to come daily! So don’t be one of the sellers that have to realize they asked too much, missed sales and found out you were too late to recapture yesterday’s market value.
This is the exact opposite but is also an occurrence in a supply rich volatile market environment. You prepare to make an offer on a plane and take the approach that whatever the seller is asking or the market is representing itself to be you are going to just offer significantly less because it is continuing to go down. Typically, you or your trusted aircraft sales professional has done the market research and have focused in on a very short list. This short list is comprised of the aircraft that stand above the complete list of available inventory and would be options you would be happy to end up with. Then you look at the research, shake your head and say offer this. This is a number that has no association to anything other than an opportunistic attempt to pay significantly less than the real market will bear. I always say when helping buyers we don’t want to buy a cheap plane cheap, we want to buy the best plane at the best price. There is a difference. So if you have taken the time to work through the available aircraft and really identified the best plane for you, why act like you don’t care if you buy it or not and later have to settle for far less plane? Sure you might pay less later since you know they are going down but why pay less for less of a plane. That is another big difference. I always find the slicing and dicing of the available inventory in every segment a very interesting exercise. With the amount of available inventory on the market here in North America it is possible to eliminate the planes based and operated in far off parts of the world or those that have a history of major damage. Next eliminate those planes that are not configured like you want, with a final elimination for those that are obviously overpriced, and you end up with a pretty short list of aircraft. With the amount of aircraft available today you can often get many features and upgrades installed, for much less than one hundred cent dollars, paid for by the seller with their hundred cent dollars during the course of their ownership.
Don’t miss the value of the first plane on your list. If you offer too little you are very apt to be perceived as not being a real buyer which is just as bad as being perceived as not a real seller on the flip side. And it will be too late. You will almost find yourself feeling as if you are bidding against yourself if a seller just rejects your offer out of hand and you want to come back with a new offer without the benefit of a counter to help shape the discussion going forward. Don’t lose track of why you entered the market to buy. You wanted this important business or personal tool for a reason!
Just in Time
Bottom line, trust your partners who you engage to consult and execute on the transactions, trust the numbers. Don’t expect too much when you try to sell based on all the input. Don’t try to pay too little and miss the best plane and most importantly as a buyer or a seller don’t be too late, the moment is now. The parade is moving and it will pass you by. Be just in time!
Have you ever felt like that is the slogan for some service providers in the world? Do you feel like some work and work at making you unhappy rather than happy? As if they come to their job every day just to make their customers mad! Believe it or not I wonder if some owners and sellers of business aircraft think those of us who price aircraft for sale subscribe to this belief.
In today’s world of high supply and shrinking demand, in great part due to the emerging markets languishing, the price instability might seem like a conspiracy theory to push prices down. I have always said if I could really control prices I would make them go up not down. I promise the market is not in a free fall, but rather in a very predictable decline of what appears to be 8-10% per year residual loss. By the way this begins from year one as you fly the new one off of the lot.
If you watch the daily on-line updates or print publications that come out weekly or monthly one could quickly begin to feel we are in a doom and gloom scenario. In the last month all of the manufacturers published their first quarter reports, with most reporting sales down year over year with go forward predictions of continued declines. It is true sales of new aircraft are down. Remember, the OEM’s had planned to produce and sell aircraft to what appeared an insatiable appetite around the world. Many of these countries had relatively small numbers of turbine aircraft operating for personal use and the need to satisfy this demand sent all the OEM’s scrambling a few years ago to keep up. It takes years to build up that infrastructure and supply and it will take years to scale back. This scaling in both directions sent shock waves through our industry.
In 2003 when the markets began a never seen before growth spurt, the idea of the then limited supply of new or like new planes created significant premiums on their backs. This lasted until the global collapse of this growth in these emerging markets starting in 2014. It was the end of 2014 that the price of oil began to drop. In 2015 the drop rate was increased and most oil producing countries as well as oil producing companies and many companies that provided goods and services to these countries and companies pulled back capital dollars. That meant the almost immediate halt to purchasing new aircraft.
This reduction or elimination of capital expenditures continues today. If you compound the price of oil and the collateral damage done with the austerity and anti-corruption legislation in China and the economic sanctions placed on Russia, you quickly see that North America is the bright spot for aircraft transactions. The problem is North America is not a large enough market on its own to support the entire world supply of aircraft.
That information hopefully helps to shape the reason for the high supply of aircraft available and the diminished demand. The good news is that even though the OEM’s sales are down with a predicted continued decline in sales for the next few years, the selling of pre-owned business aircraft is still a viable market, albeit mostly in North America. This is much more positive an outcome than the 2009 standstill globally for sales.
It does however keep the residual loss rate increasing by 8 to 10% annually. In fact, I do not see that trend ever stopping. Today, given the aging fleet, increased inventory due to an emerging market paralysis and other global uncertainties, as bad as it might seem, at least it is predictable.
So back to the title, “We are not happy unless you are not happy.” Nonsense. We are never pleased with a service offering that cuts against our clients. Our industry is filled with wonderful professionals who care greatly about their clients being happy. Listen carefully to your trusted sales professional and trust the numbers.
Everyone likes to have a hand in influencing the purchase price of an aircraft. The Sellers always want to point to a rebounding market. They are focused on their particular aircraft’s pedigree and mechanical integrity and always see the glass as half full. The Buyers are always focused on the high supply and lower demand, and are quick to point out that given the high supply, pedigree and mechanical integrity are abundant and might not add as much value as a seller would hope. I believe both can be correct and that is why typically a meeting of the minds on middle pricing ground is what usually occurs.
I am writing today about the myths and truths regarding pricing, first from the buyer’s perspective. After all, as it is said with the Golden Rule: The one with the “Gold” rules. That may be one of the myths. Just because you can afford to buy a plane, you do not get to set unrealistic pricing models. And, if you can afford to buy you should be sure that you don’t just buy a cheap plane cheap. You are not rewarded for buying the least expensive plane but from buying the best plane at the smartest price.
The buyer cannot just put on a blind fold and throw a dart at the wall and declare that where it sticks is the right price for the plane. They must endeavor to determine the right price using a combination of research, interpretation and common sense. We work daily in our office to look closely at market segments. We do not do this work in a vacuum but rather envelop market intel on the collateral markets to the target plane as well. This gives us the overall market view. We then need to adjust this view by weighting the financial benefit of a specific aircraft within the chosen segment. Pedigree, hours, programs, mechanical history.
Next comes the interpreting. Since there is no real recordation body to capture actual sales prices, it is the constant calling into the market, talking to brokers and sellers that fills in the gaps for sales prices on recent sales. By the way, any prices gathered that are over ninety days old are probably not relevant today. Things are moving quickly in some markets. The interpreting comes when you find that buyers say they paid less and sellers say they got more. Seeking out the reality is where the relationships and skill as a researcher come in. Common sense is being able to sniff out the complete pricing picture such as maintenance handled as part of a pre-purchase inspection and who was responsible, buyer or seller, or possible premiums paid by a buyer for a unique financing structure. Put all this intel together and one begins to see how the buyer should work to correctly influence the market with good solid offers. These offers will no doubt be less than a seller would hope for, yet in a range that between a willing seller and a willing buyer gets a deal done.
A quick visit back to the Sellers logic. The thought of a rebounding market where prices will start to go up rather than down reminds me of an article I wrote a couple of years ago about flat being the new up. In that article I said that if we could just have several quarters of flat pricing rather than downward trends we could claim that as a recovery. Let me amend that discussion to say that if we could just have several quarters of predictable residual loss, we could call that a recovery. The sellers need to remember that before there would ever be a rebound in prices the market would have to stop going down. My question back to sellers and owners when asked to speculate on when the market will go up is, go up form where? The predictable part of the residual loss rate would mean that the only downward trend in pricing would be the agreed upon seven to ten percent annually that the industry embraces
Our market today is active yet limited to basically North America. The paralysis of the emerging markets has put this recovery once again on the backs of a smaller than global buying market. Over the last many years the OEM’s have produced planes to fulfill the appetite of a much larger market. The is no reason to believe that this globalization in our industry will not come back, just not in the next few years. So when buying today it has never been more important to understand all of the offerings available in a saturated market and how the pricing is affected by pedigree, mechanical history, cosmetic condition, avionic upgrades, not to mention aircraft to the left and right of your target. Go in with eyes open to the true annual residual loss and buy when the time is right for your needs.
Jay Mesinger CEO/President
Mesinger Jet Sales
“Writing my articles for the last 18 years has provided me an opportunity to give back to an industry that has given so much to myself and my family.” -Jay Mesinger, President/CEO, Mesinger Jet Sales
Boulder, Colorado- “MESINGER PULSE”, A monthly newsletter to be published by Jay Mesinger, Mesinger Jet Sales.
After writing monthly for aviation publications for many years, Mesinger has decided to broaden its readership and self-publish this new monthly article. The article will draw from Mesinger’s 42 years of experience as a leading aircraft broker and industry participant. The article will provide “Mesinger’s industry perspective”.
During his writing career, Mesinger has been unbiased, balanced and focused on providing a unique and enjoyable style of writing looking into the current and future industry trends and business aviation growth process. Yearly, Mesinger attends the global business aviation conferences, speaks regularly at business aviation gatherings and has been a member of the NBAA Board of Directors as well as served as Chairman of the NBAA Associate Member Advisory Committee. Mesinger is currently on the Jet Aviation Advisory Board.
The article will be distributed via email to industry participants on the second Monday of every month. It will also be available on the Mesinger Jet Sales website at www.jetsales.com/blog and their corporate LinkedIn page. Visit www.jetsales.com/contact to sign up to assure receipt of the articles.
You can’t turn back hours on an aircraft just like you can’t turn back miles on a car. You can, however, help overcome higher total time with price and pedigree.
We are proud to exclusively represent for immediate sale two great Falcon 2000s, Serial Numbers 19 & 31. Both aircraft have been owned since new by one U.S. Fortune 25 company with an established first-class Part 91 flight department. They are used to support domestic corporate travel needs where dispatch reliability and safety are mission critical. And, there is a no-expense spared approach to maintenance.
The operator of these aircraft has an incredibly capable and sophisticated in-house maintenance team and larger inspections are primarily performed at either Dassault Aviation or Duncan Aviation. In 2014 and 2015 respectively for S/N’s 19 & 31, Duncan Aviation complied with the 3C inspection packages, landing gear detailed inspections, wing tank modification “dry bay mod” and new paint. As always, when we listed these aircraft for sale, our technical director spent several days in our client’s hangar reading all of the logbooks from day one to present and looking at each aircraft. The logs are in great condition. All 8130s, tags and associated documentation are kept with their applicable logbook entry, all historical work order detail is available and everything is in good order. There is no finer pedigree in the world than what you get with these two Falcon 2000s.
Our client is selling these aircraft as part of a fleet transition and the replacement aircraft have already been acquired. They understand the competitive market and are ready to be competitive within it as our asking price demonstrates. These are great aircraft and they will represent a great value for a buyer. As my father always says, “don’t just buy a cheap airplane because it is cheap, buy a great airplane and make a great buy.”
Read Jay Mesinger’s article from AvBuyer Magazine’s March 2016 issue from the Business Aviation and the Boardroom section. Also read at: AvBuyer.com
Read Jay Mesinger’s article from AvBuyer Magazine’s March 2016 issue from the Aviation Leadership Roundtable section. Also read at: AvBuyer.com
We are proud to exclusively represent for immediate sale a 2013 model Bombardier Challenger 300, Serial Number 20415, Registration Number N85BE. This is a one U.S. owner, highly equipped beautiful airplane with the desirable double club interior configuration. This aircraft was delivered new from the factory with the Collins Proline 21 Advanced Avionics package which is the same avionics package included in the current production Challenger 350. And, additional options include the installation of Link 2000+ (ATN B1 CPDLC), ADS-B Out, TCAS 7.1, WAAS, ATG-5000 GoGo Biz High Speed Internet with Wi-Fi and the Text and Talk feature and more. The engines and APU are also enrolled on the Honeywell MSP program and the airframe is enrolled on the Bombardier SMART PARTS program. The owner of the Challenger 300 S/N 20415 is based in Columbus, OH and it has been professionally managed by a Part 91 flight department since it was new.
Bombardier started developing the Challenger 300 in 1999 as a “clean-sheet design” and they delivered the first customer aircraft in 2003. The Challenger 300 has been a very successful product for Bombardier and today there are over 450 Challenger 300s flying around the world. In June 2014 Bombardier received full type certification for the next generation of the Challenger 300, the Challenger 350. One of the big improvements in the Challenger 350 is the Advanced Proline 21 Avionics package which, as mentioned above, is incorporated into S/N 20415 that we are currently representing for sale.
Our client understands the competitive market and they are ready to be competitive sellers within it. View detailed specifications, photographs and a video on our website at http://jetsales.com/jets/2013-challenger-300/ and call us today to learn more. We look forward to speaking with you.
Mesinger Jet Sales proudly presents for sale this one US owner, well equipped Gulfstream G150. With a range of close to 3000 nautical miles and relatively low operating costs, this is a great option for anyone considering a mid-size aircraft while looking for comfort and efficiency. It is based in Houston, TX, operated by a professional Part 91 flight department and it may be viewed by appointment.
The interior of this aircraft is designed to comfortably accommodate 8 passengers with a forward two-place divan opposite a single club chair, four single club chairs in the aft with stowing executive tables and a belted lav seat certified for taxi, takeoff and landing. This G150 features a forward galley with a TIA high temperature oven and dual hot liquid containers with a liquid drain, as well as an aft externally serviced lavatory.
Passenger amenities include a RosenView passenger information and map system, a dual-DVD player, XM radio, a cabin audio system, a 15 inch LCD monitor that flips into the aisle for viewing, and an ICG-200 Iridium SATCOM flight phone system. The interior is appointed in warm and rich colors providing a very comfortable environment.
This Gulfstream G150 is loaded with upgraded avionics including a dual FMS-6100 FMS System with WAAS/LPV, Dual Collins GPS-4000S GPS Units, a 3rd VHF COMM with Data Link capabilities, Collins IFIS with Dual File Server Units allowing for a Paperless Cockpit, Laseref V, TCAS II with change 7.0, Dual TDR-94D Mode S EHS Transponders with Flight ID, a cockpit voice recorder, 406 ELT and more.
The engines and APU are enrolled on the MSP Gold program. The airframe is enrolled on the Gulfstream Plane Parts program. And, the aircraft will be delivered with a fresh 8C inspection complied with by the Gulfstream Service Center in Dallas, Texas.
With the combination of these traveling refinements, good cosmetics, equipment and pedigree, this is truly a great G150. Compared to other mid-size aircraft, a Gulfstream G150 is a smart, comfortable and efficient choice to fulfill many mission profiles. Call Mesinger Jet Sales at 303-444-6766 or email firstname.lastname@example.org to get complete specifications, maintenance information and pricing details.
We are proud to be representing an outstanding Global 5000, Serial Number 9158 for immediate sale. It has excellent pedigree; low total time; a high hour to cycle ratio; the high max take-off weight service bulletin has been complied with increasing its range to approximately 5,200 nautical miles; it is equipped with triple FMS, HUD, EVS, Swift 64 Data and Satellite TV among other options and the paint and interior are in very good condition. Additionally, this Global 5000 has been upgraded with both Build 6 and Batch 3 with WAAS/LPV and FANS 1/A+/CPDLC. And, most importantly, the seller understands the competitive market and is prepared to sell at a price that will represent a great value relative to the competition.
The Global 5000 was first announced in 2001 and the first flight was in 2003. It can fly approximately 5000 nautical miles with a full passenger load far exceeding any of the other directly competitive aircraft in the market today. It also has the widest fuselage cross-section of any of the direct competitors making it one of the most comfortable corporate aircraft in its category.
Bombardier stepped into the ultra-long-range corporate aircraft market when it first launched the Global Express development program in 1993. The first flight for a Global Express was in 1996 and the first customer deliveries were in 2000 and 2001. Since then, Bombardier has delivered well over 450 Global Express and subsequent derivative aircraft including the Global XRS, Global 5000 and Global 6000. The program has been very successful for Bombardier. Current production Global aircraft include the 5000 and 6000 and the 7000 is in development and it will push the boundaries of corporate aircraft and global travel to new heights. NETJETS, the world’s largest fractional ownership program, has also moved to a fleet of Global aircraft from Bombardier for their large cabin aircraft further endorsing the large body, ultra-long-range aircraft product line. Additionally, Bombardier continues to demonstrate its dedication to worldwide service and support.
View detailed specifications, lots of photographs and a video about this Global 5000 S/N 9158 here: http://jetsales.com/jets/2007-global-5000-3/.
Call us today to learn more about this excellent aircraft. We look forward to speaking with you soon.