One of my very favorite holidays and thus personal annual milestones is Thanksgiving. Not a religious experience just a major family experience. As we sit around our Thanksgiving table as a ritual, we will go around to all of the guests to hear what they are thankful for. For me personally it marks a chance to reflect on another year that hopefully personally is still going strong, which I’m happy to say this year it is. Now let’s look at it, as I also do, as a milestone for the current year’s business.
This year has been strange and filled with nuances that made everyone in our industry stop and try to put words to them. Remember when 2019 started we were in the midst of a government shutdown. We were having very serious trade talks with China that has resulted in a year of exchanging tariffs. All of us were trying to wade through January hoping that when the shutdown dust settled and the trade talks and tariffs eased a bit, we would find the foundation we all enjoyed through the preceding November. Would we have a market that continued a robust transactional trajectory?
So, once the normal January lull that typically lasts the first few weeks of the month were over, with an added extra week for the government to reopen, what did we find? Well, I think we collectively found a market that seemed to be missing the zest and zeal of 2018. We found a bit less frenzy. What would come next with a market missing the frenzy? The good news was and has been, a market that still maintained its balanced supply ratio as well as a market that seemed to be maintaining its balanced residual loss rate. Balance can still be used to describe our market.
The results in 2019 do not seem to have driven anyone back to the fence to sit and watch. We have not had any buyer call and put a project on hold. We have not had sellers rethink transitions. That is all great news. The weird part of the market this year is the loss of the frenzy. The result of a frenzy from last year’s market being missing is what we as a group have been trying to put into words. The number of days on the market for many planes has been stretched out. Yet still within a reasonable range. Prices in many categories have been adjusting slightly downward and a few market segments and price points have slowed to a trickle in activity. A bit less demand and a bit more supply.
Many of the older, lower-end planes that were being sought after by either turboprop step-ups or first-time buyers have not enjoyed the robust activity that they did in 2018. Several newer, higher-end planes have slowed based on aggressive competition from the OEM’s. In fact, I have never seen the OEM’s being as aggressive to not miss a deal. Typically, there seemed to be enough activity for the pre-owned segment as well as the new. The segments seldom collided like they have this year. That collision course has caused corrections in the like-new pricing to create the needed differentiation between the two segments.
So, with all the thankfulness still being a relevant sentiment, what could be ahead? Guess what, November 21st could see another government shutdown if budget negotiations are not completed and agreed to. 2020 is an election year. This phenomenon always puts a bit of pause into the works. Continued impeachment talks could cause hesitation and consternation to buyers and sellers. We as industry professionals need to be very careful to focus ourselves and our clients on the positive. The high value of business aircraft. The fact that the safety record is so high in our mode of transportation and that new clean sheet entrants being offered by the OEM’s will no doubt bring about larger inventories of young really nice aircraft. I feel like we will all be touting the many things to be thankful for this time next year. By the way, having recently returned home from this year’s NBAA-BACE in Las Vegas and talking to so many of my clients and industry friends, I can definitely say that spirits were high and moods were good. Those that I interacted with are feeling very optimistic and thankful for another year of successes.
I hope everyone will enjoy a family dinner and celebration and continue the tradition of honoring each other, our families, and our friends. The only problem for me is it seems Thanksgiving comes around quicker each year. Happy Thanksgiving!