I have been writing lately about what feels like an overnight surreal change in the overall market condition, from high inventory levels with long sale cycles and multiple price reductions to low inventory, short sale cycles and more aggressive pricing. With global markets all beginning to breathe life at the same time it may not just be North America going forward that will dominate the transaction activity. With the awakening of markets around the world all that supply in many categories that is currently out of North America may stay out of the country and sell to foreign buyers, resulting in even less inventory in North America and even less to import for a local client. For the first time in about 10 years we are seeing firmer pricing and much more difficulty finding the plane that really checks all of the boxes for our buyers including great pedigree, great records, great maintenance, great cosmetics and compliancy with respect to modifications and NextGen mandates.
It is now time to acknowledge that the “Buyer’s Market” has faded away and I am excited to declare a healthy balanced market. This is so important since the markets of recent past did not allow for stability. Yes, perhaps you will pay a bit more for your perfect plane today, but the good news is you should be able to count on a significantly lower and more predictable residual loss rate. In fact, in several categories you may even see a flat line for several quarters.
I have spoken for the last several years about the importance of the buyer being able to be credible and bring confidence and certainty to the seller and the overall transaction. It is time now to remind the selling side they have an equally critical role in this process. I have come across two sellers in just the last week that have promoted themselves as real sellers, ready to sell and promising a traditional and customary transaction. I of course had real buyers who in the offer process were already demonstrating real ability and willingness for a great show of certainty. After protracted discussions between sides, and by the way a willingness to meet the stated price of both sellers, the sellers said “oh, we decided not to sell!”
If in today’s market one comes just testing the water by dipping their toe in or crying wolf, they will be hurting their ultimate position as a seller. The broker community as well as the buying community will begin to know their patter and not be willing to risk approaching the aircraft with their real buyers.
This is not to say that when a real buyer meets a real seller that there will not be a competitive tension. That always occurs when a great plane pops up and you have several prospects all at once. If the plane is priced correctly for the new supply/demand equation there can be a frenzy created. So, if you are a buyer and you find that needle in the haystack, jump and don’t sit back. I am not suggesting you forgo all of the prudent due diligence, it just means get your offer in and start acting like a real buyer and not a tire kicker.
What is there today may not be there tomorrow. Therein lies the competitive tension. Remember a little tension is not a bad thing as long as you don’t get paralyzed by it. Stay focused on the end game and trust your aviation professional. I think it is also important to get your buying ducks in a row. Have your aviation attorney hired. In fact, I would suggest you allow the attorney to build an LOI template in advance so all you need to do is add the price and the specific aircraft info. If financing will be a factor, start early to chose that partner and have them teed up. If management is needed, start that process early as well. In other words, be ready to jump and jump with a team. This team will help guide you on markets, legal, tax, financing and operational needs.
In summation, here would be the takeaways from this article. The market has changed and changed quickly. Aggressive prices are being asked and received by sellers. This is OK as long as within reason. That decision can be made with the collaborative effort between yourself and your aircraft professional. As a seller, be credible. Do not toy with the market. Markets and its players have long memories. Be ready. Build your team early. Enjoy the balance because I think it is sustainable.