Articles - Mesinger Jet Sales

Mesinger Pulse: A Day in the Life of a First-Time Buyer

Originally published as a blog for AINsight for Aviation International News on 9/2/22

We are approaching the end of the second year of record purchases by first-time buyers. Some entered this orbit being frustrated or even scared by commercial airlines and public airports because of Covid, some entered being lured by the ability of capturing 100% bonus depreciation on not only new but also pre-owned aircraft. Regardless of the reason for entering they all came with certain expectations of what private aircraft ownership would mean to them and what steps had to be taken to achieve their goal.

Over these 24 months, we have had our fair share of first-time buyers also come to us to achieve the dream. I took some time this week to circle back with a few of our clients to see how ownership was meeting their needs and/or their expectations. I also wanted to ask about the steps that had to be taken to prepare for ownership, and if the process was what they had expected. Just because we are ending the second year, we are by no means at the end of the line of people who are still considering or actually entering, this world.

One of the interesting byproducts of this massive market shift has been the effect of the demand on our market. We actually went through four or five months at the end of 2021 and into 2022 of prices going up as much as 10 percent a month. So, the barrier to entry based on price alone has changed the dynamics of the decision. Lenders have been scratching their heads about how to value planes based on their lending criteria and the quickly escalating values year over year. As a result of such high demand and transactions, our industry has been affected in many areas such as hangar space and pilot shortages caused by the increased utilization. New owners are finding in many cases a need for not just one, but sometimes two full-time crews to meet both their personal flying as well as high charter demand and the opportunity for increased revenue to offset their costs. However, there is a line between a healthy charter demand and the off-the-charts charter demand of the last two years, which can lead to increased maintenance events, crew exhaustion, and faster wear and tear on the aircraft. The increased costs may outweigh the increased revenue at the end of the day.

All this contributes to a more challenging entry into service for all these new entrants into aviation. In asking a couple of my first-time buyers how it is going for them they have first and foremost related how much they love this kind of freedom in their world, but also how complex the process was. They relate it to starting up a business and dealing with supply chain issues. They talk about if they are micro managers by nature how stressful this can all be and how they solved this stress by finding the right partners on the operational side to trust. This included the right skilled broker, experienced management companies, good crews, and smart legal and tax partners. Creating a great environment is critical for the new owners to attract and retain crews and other operational partners.

One of the areas of frustration for many is the long lead time for FAA and other 135 conformity. This is new based on the high transactional demand on our system. Maintenance shop delays are also troublesome and create longer than expected return to service timelines.

Most new entrants are joyous to be able to travel with their families and pets and make lasting memories. They are learning what we have known all along. Once bitten by this bug it is hard to shake the habit. We are a proud industry and operate with a high degree of professionalism and safety. Welcome to all the newcomers and our hope for you all is a long enjoyable experience.

Asset Insight Podcast: The Business Aircraft Market, As Fourth Quarter Approaches

Halfway through the third quarter of 2022, we asked Jay Mesinger, CEO of Mesinger Jet Sales, for his views on how the year is progressing relative to pre-owned aircraft sales and the business aviation market in general. Some of the topics covered include:

Is this the right time for an aircraft sale or purchase? Leading indicators are likely to shape the market in the months to come. The slow, yet steady, rise in aircraft inventory – will it continue? Are values beginning to stabilize? Is bonus depreciation truly affecting purchasing decisions this year? And more. Recorded 8/30/22

Read the “Insider Daily – Veteran Analysts See Change, But Continuing Strength in Marketplace

Article from the August 10th NBAA News Hour.

Four of the industry’s top analysts discussed the factors driving the still-robust market for business aircraft, while also pointing to trends emerging on the horizon that could impact sales and flight activity.

Speakers include: Jay Mesinger, Mesinger Jet Sales; Alasdair Whyte, Corporate Jet Investor; Rolland Vincent, Rolland Vincent Associates, LLC & Anthony (“Tony”) Kioussis, Asset Insight, LLC

Copy and paste this link into your browser – https://bit.ly/3C1mnio

Mesinger Pulse: Forecasting the Weather is More Accurate Than Forecasting Our Aircraft Market Conditions

Originally published as a blog for AINsight for Aviation International News on 8/5/22

Remember when you woke up in the morning and before getting dressed you watched your local weather person forecasting the days’ weather? Watching for the temperature and any rain, or snow. Then discounting the forecast slightly to choose your day’s attire. There can always be that slight variance between what is predicted and what really are the day’s conditions.

I must say that even with that slight variance, the weather person was more accurate than any of our prognostications about our aircraft industry. I watch every indicator that should be guiding the economics of our industry, such as recession fears, higher interest rates, higher gas prices and geopolitical unrest. If we were betting people, any one of those would cause a market correction. Any one of those alone should bring an arresting halt to the demand we are seeing. Imagine all together they are not stopping the demand. Don’t forget we are getting ready to get back into what could be a year-end buying frenzy to take advantage of the last published year of 100% bonus depreciation.

 I, like all of you that are reading this, have the privilege to work with very smart and very successful people. Very few of those I work with, albeit knowing the wealth that is out there, believe that this demand can continue. None of them really think that the value of aircraft will just drop and fall precipitously. They mostly believe that the demand may peel away, days on the market may be longer, the bidding wars will end, and we will begin to look like the normal days of pre-pandemic. No crashes but no rises.

This balancing effect will be a welcome change for what has been a gangbuster for two years in unprecedented demand and rising aircraft prices. Some peel away of demand will automatically bring back a welcomed better process. With a bit more supply and a bit less demand, sellers may be forced to be more normal in their acceptance of the transaction terms that have kept our industry safe, free of mechanical surprises, as well as maintaining a solid foundation of value to the assets that are being purchased. Bottom line, back to the days of the correct pre-purchase protocol that is right for a purchase of a complex piece of equipment that does not have the purchaser taking on pre-existing conditions of the aircraft they are buying.

I had a good friend of mine, Steve Varsano of the Jet Business in London, say on a recent webinar that if you believe that this unruly demand and slight supply number can last, you must have drunk the Kool-Aid. He, like most, believes this cannot last in its current state. The question for all of us is how will the landing be? Betting minds are pulling for the soft, balanced landing. This will leave us all taking deep breaths of relief as opposed to gasping for air. After all, no one really wins when one side or the other claims a victory because the pendulum lands squarely pegged on their side.

Mesinger Pulse: Are There 5 Buyers Instead of 10 Buyers?

Originally published as a blog for AINsight for Aviation International News on 7/1/22

If inventory remains in short supply, the market will feel the same regardless of if there are 5 buyers rather than 10. Said differently, we as an industry could be being fooled about demand. It could be shrinking, and we may not notice until it is too late, because the supply side of the equation may mask the reality. Only if supply increases will the real demand come to light, of course. In real estate, demand is reported to be shrinking, due to higher interest rates. Inventory is rising in some markets and home prices are being reduced to compete. It seems that aircraft prices are not yet affected by the factors that may be affecting home prices.

Our industry may be a little more insulated from rising interest rates and the talk of a recession because of the economic level of our clientele. Aircraft transactions have always been a lagging rather than leading indicator of economic health, which may be a curse rather than a blessing. We have found ourselves having harder landings than many due to the feeling of good health until it is upon us all at once. I can remember in the years leading up to 2008 brokers saying to each other, “this cannot last!” Yet we went on day to day acting as if it could. Smart minds should dust off our memories and think back to those days of old.

I am not suggesting that we predict doom and gloom. I am just saying that paying good attention to the number of calls we are each getting daily on the inventory we have for sale would be smart. Are there a few less calls each day? Does it seem like real buyers may be a bit fewer and farther between? Might it be a bit harder to get those full price offers, much less exceed the full asking price?

None of these contemplations are doom and gloom. They might just be indicators that there could only be 5 buyers rather than 10. By the way, we can all live with a few less buyers. In fact, our industry on way too many levels has had to live with what may have been too many buyers. We have endured pilot shortages, hangar shortages, maintenance slot shortages and other supply chain impacts. We have felt the frustration caused by bidding wars and ruffled feathers. We have experienced unpleasantness that leaves us all feeling exhausted by the process.

We actually have another period coming up that will be very interesting and give us all some additional vision of our future market. Year-end bonus depreciation. Starting in August, we should start hearing from prospects that they want a year-end deal so they can qualify for 100% bonus depreciation. We will likely still be suffering from short supply, so if the demand kicks up like the last two years, we may be in for another round of frenzied activity. On the other hand, if we experience a lighter amount of prospect calls and fewer people calling to capture a year-end deal, we will have another bit of demand input and perhaps see more signs that there are 5 buyers out there rather than 10 for each plane. I am so hopeful that we as an industry can come in for a soft and gentle landing. We shall watch and see!

Mesinger Pulse: Good Advice Keeps Good Buyers From Buying

Originally published as a blog for AINsight for Aviation International News on 6/3/22

I was talking to an aviation attorney recently and we were lamenting about the difficulty of buying a preowned business aircraft in today’s environment. Forget the pricing that has continually been creeping up, because that is truly a manifestation of high demand and low supply. The real problems are the processes of the transaction.

Even at these unprecedented price levels, sellers are now also demanding a greatly shortened closing time, mostly created by the inability to perform a comprehensive pre-buy inspection or no inspection at all. 

So if a buyer hires an aircraft broker and/or attorney as guides and they steer them away from these processes and even steer them to sit on the sidelines for a few months watching what I think is inevitable—a market shift based on so many headwind factors—that will be good for the buyers.

I must say that when we, as brokers, are hired by sellers in today’s market, we get assurances from them that they will allow what is a more usual and customary process, including a full pre-buy inspection. After all, if the buyers are willing to pay the price, which is also a factor in today’s market, there is no reason for a seller not to allow a full pre-buy in conjunction with the higher prices.

If enough buyers start to sit on the fence, the sellers will not have any benefit from today’s pricing. Buyers will just wait until both eventualities occur—lower prices and usual and customary processes. In that case, no one is winning.

Good buyers are not buying, which is what they really want to do, and sellers are not selling, which of course is their goal. You may think that is not the case, but more and more airplanes are coming to market and the days on market for many are increasing.

Creating a standstill is bad for business. Creating unbalanced transactions is also not only bad for the short term but also for the long-term viability of our wonderful industry.

We as stewards of our industry should take the lead in guiding for success. After all, who but us are better at providing this guidance? Those people who are still adding to the demand will not all go away even in a market that may be weakened by outside factors such as fuel prices, interest rates, the threat of recession, and geopolitical events. Many of the first-time buyers, as well as corporate operators, will still be anxious to buy or modernize their existing fleets. 

I am excited to see corporate operators come back into the mix. They have been sitting out this process during what has been a long stretch created by the pandemic. They are starting to fly again, and they will certainly be coming back in.

This will bring added inventory to the mix, which will help ease the high demand and low supply calculus. This is another reason more sellers need to heed the future and begin on their own to create healthy pathways to a successful transaction. 

My writing and pontificating is honestly meant to soften the landing of what I know to be a shift in our market. The pendulum always swings back. As trusted advisors, we need to do our part in guiding clients into this posture. It is good for us all, as well as the entire buying and selling community. 

Well, here we are at another summertime. I hope we all start to poke our heads out a bit more and travel a bit more and enjoy a safer environment inside and outside of our industry. 

Mesinger Pulse: From Where I Sit

Originally published as a blog for AINsight for Aviation International News on 5/6/22

Do any of us ever have a chance to make a bold statement that NO one can argue with? Well, here is mine. These are such interesting times. Go ahead, just try to argue with that. Every day I come to my office thinking today will be the day that change occurs. So far that has not happened. From where I sit, I still see demand at all-time highs, I still see supply trickle in and prices remain at all-time highs. Yes, in certain areas of the market a few more planes are coming to market, however, this is not causing pressure on pricing.

All the reasons that should be in place for a change are in place including geopolitical events, interest rate hikes and on and on, but none of these market-changing events are changing the market. I am still seeing sellers limit drastically the allowed inspection protocols. I am still seeing sellers say well that was easy, maybe I should ask even more and give even less. I am still seeing buyers being willing to accept these prices and terms.

What may my new mantra be? I will just come to work each day and it will be what it will be. How can we possibly see interest rates go up more than has happened for a hike in the past 22 years and the stock market goes up 900 points? How do we possibly model that?

BTW, I am not really going to come to work each day and think well today it will just be what it will be. I am going to continue to advise my clients, both sellers and buyers, to act prudently. Act deliberately and keep putting themselves in the other’s shoes. Balance is what we must strive for, or I believe we will be setting ourselves up for a harder fall. I am not suggesting that a buyer should not pay a reasonably higher price and I am not suggesting that sellers should not price their plane commensurate with the current selling prices of like planes. I am suggesting that everyone should be very careful to not drive the other side to sit on the fence. We should keep the playing field safe and inviting for all to join in.

I still feel that though the prices are higher than in the past, the terms of a sale should be reasonable and allow for the due diligence that we all have enjoyed in transactions since the beginning of our industry.

I would also hope that the process of inviting offers could go back to an enjoyable time. It always amazes me when we make an offer on day one and it is for the asking price then the seller says well that was just day one, I think I will leave it out there. What is that message, don’t rush to put your best foot forward because that may seem too easy or quick, or risk waiting and missing the plane? Somehow the buyer gets penalized for being a good listener.

Balance is critical for a continued sustainable process. Balance cannot occur if both sides are not participating. Keeping balance will keep our market going forever, lack of balance will throw us all off. So, from where I sit, I see an opportunity for both sides to work to create and sustain the industry we all have enjoyed.

Mesinger Pulse: Just Say No

Originally published as a blog for AINsight for Aviation International News on 4/1/22

Wednesday of this week, I had the privilege of hosting a Webinar whose title was, “Hard Landing, Soft Landing. If not now when?” We had a distinguished panel that included an all-star aviation banker, a top-notch aircraft appraiser, and my sons Josh and Adam. We discussed the current market, and its imbalance with respect to many industry segments including pilot shortages, hangar shortages, maintenance slot shortages and aircraft inventory shortages. Then we went into the quickly rising purchase prices of the aircraft. It was agreed that prices have been rising every bit of 10% a month for the last 4 months. Not to mention the preceding 12 months not having had any of the usual annual depreciation to the equipment which is typically around 10% per year.

The next topic shifted to the process that has been changing along the back of these escalating prices. Sellers not being willing to allow any pre-buy inspection, or very limited if allowed at all. We all agreed that our industry is dynamic and not static, so a shift always comes. But when the pendulum begins to swing in the other direction will it be a soft or hard landing? I have always felt that a hard landing would occur if we went into a global or even domestic recession, however, some on the panel believed that a domestic recession and some inflationary pressure may be baked in for some or many of the new entrants to the market and would not result in such a dramatic shift.  It would most likely come from a geopolitical event causing major implications to world order, and I am sure everyone’s eyes are open enough to see that is happening as we speak. As one panelist stated, one misguided missile strike into a neighboring country could change immediately the dynamic of what is already a catastrophic set of events. We are all hopeful for de-escalation and a negotiated settlement to the current crisis.

The soft landing, or as we discussed it yesterday and renamed it a resilient landing, will occur if the demand remains high and the economy remains good, but due to a slow and steady increase in supply, we will likely see and feel an easing on pricing and not have huge drops in value. The pendulum would shift back to a more balanced market. That set of events and outcomes would be sustainable and allow for a measured growth rather than a complete drop off of values and business activity for our industry.

But what can we do while we are all in this market frenzy to start to control our current destiny and preserve the fabulous industry? Perhaps we could collectively begin to “Just Say No.” No to process that we know is not smart, no to demands placed on buyers by bad actors that are driving bad decisions to be made in the buying process, and no to rapidly increasing outlandish pricing.

I know I am talking about a long shot approach. But I wonder if we could get to a critical mass of us that just say no, we can smartly, properly, and correctly make some groundswell changes right now to our industry. If enough of us began to say no to no pre-buys and no to the price being demanded, could we in fact move the needle? The alternative to a continued set of these circumstances, is we are going as an industry to drive buyers to sit on the fence and wait. That will drive our industry to a standstill, and nothing gets done and nothing sells.

I know many of you have enjoyed our industry like I have for decades. We all owe it to our industry to protect it from ourselves. It may just be the time to say no!

Mesinger Pulse: Is There a “Glass Ceiling” Up There?

Originally published as a blog for AINsight for Aviation International News on 3/4/22

I would like to discuss the “glass ceiling” regarding the price of aircraft and other areas of the business aviation industry. Let’s start with the ever-escalating price of preowned aircraft and the biggest question: will we start to see these bump into a glass ceiling and begin to be held at a plateau or even pushed back down? And when this occurs, will we have a gentle landing or an abrupt change?

Remember 2008, when preowned inventory went from about 7 percent of the available fleet for sale to 18 percent practically overnight. The difference in the gentle landing or not will largely be because of such a drastic change in inventory very quickly.

Currently, my sense is that demand will not subside. In fact, I am already watching demand outlive the pandemic.

My sincere hope is that we solve the escalating pricing with more supply gradually. This will result in stabilization of pricing without steep drop-offs in values and keep pricing levels from driving up one sale to the next. Then we can begin the traditional annual depreciation of 7 to 10 percent that we are all accustomed to for equipment in a more balanced market.

One can always say that other traditional causes for abrupt changes in values result from major geopolitical events or global meltdowns. I hate to remind you that we could be in that geopolitical period as I write this.

The next big pricing conversation should be around the phenomenon of personnel shortages and added costs to recruit and retain. This is for not just pilots but also all other flight department personnel such as maintenance technicians, schedulers, and dispatchers.

In fact, I hosted a webinar last week and had the CEO of one of the leading recruitment companies on, and the discussion circled around a central theme: when is enough, enough? When will salaries and benefits settle down?

The answer to that is of course driven by both the airlines’ constant recruiting and a large swath of the aging personnel retiring, leaving the available pool ever smaller. As an industry, we cannot just flip a switch and have replenished personnel standing by. It takes years to build this bench.

Jet fuel is another segment experiencing cost escalations. This one really rides on the back of many global supply and geopolitical concerns.

The industry seems not to be noticing this increase as closely as the price of aircraft or crew, but there will be a price that will come about, and then the same question may be asked: when is enough, enough?

What price per gallon will finally get the attention of the operators, leading flying to trend downwards? Fuel is often the most expensive variable cost for an operator and many of the first-time buyers entering the market may be in for sticker shock on this line item.

Another impacted area is the modernization and maintenance side of our industry. This area is most impacted by supply chain interruptions. This adds inflationary pressure, causing costs to rise and I assure you will lead to operators demanding that enough is indeed enough. Enough in delays, as well as costs associated with the events.

Are we as an industry trapped in this situation? To some degree yes, and yet hopefully the resiliency of our industry will allow us to manage the challenges and associated costs. Attempting to control what we can might help us steer this ship to a more sustainable reality.

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