Articles - Mesinger Jet Sales

Mesinger Pulse: Is There Something in the Air?

Originally published as a blog for AINsight for Aviation International News on 12/2/22

It is not a change in the season I am contemplating, though it may seem a bit cooler. Rather, a change in the market environment of late. I am not here to declare a large swing in our market, but I am going to lay out the areas of change that I see and feel. I am always careful about shouting that change is here until it is.

The obvious and often discussed headwinds of recession, interest rate hikes and geopolitical challenges are all reasons that many of the prognosticators are guessing about our future. I want to talk about the effects of these indicators.

I looked at AMSTAT for 11 months of retail-to-retail jet sales for the period between January 2020 and November 2020. There were 1,795 units sold. In fact, that was up from the same period one year earlier. As we all remember this was the beginning of the Covid pandemic and none of us as industry professionals or our clients knew what the effect of this would be on our industry. But 2020 turned out to be one of the very best transaction years in our history. There was no issue yet with supply and since there was no supply issue prices had not started to increase yet. Those that bought in 2020 had great choice and good pricing. Next came the same January through November of 2021. That 11-month period netted 2,580 retail-to-retail jet transactions. What a jump! Most buyers in 2021 were first-time buyers. The result of their appetite for private aircraft was a dramatic depletion of available inventory. They started to pay more, have far less choice, and lose control in the process as sellers dictated the terms.

Now let’s look at the same period for 2022, January through November. This year we are down by 17% with total retail-to-retail jet sales of 2,132 units. Some would absolutely argue this was a result of far less supply; some might argue it is a result of some less demand; most could agree it is probably a sampling of both phenomena that created this number of unit sales to last year.

I was just speaking this month at CJI Miami. One of the questions posed to our panel was, “are we at the peak?” I asked the questioner what peak he was asking about, the peak in pricing or demand? I answered the question from both perspectives. I felt we had crossed the pricing peak in August or September of this year. I am not suggesting prices are falling, only that they have stopped rising. I went on to suggest that I believed in 2023 we would start to see what we as an industry have always experienced which is an annual residual loss rate of between 5-10% annually. That difference between rates is typically brought about by the age and type of aircraft. I have seen several price adjustments since August or September usually representing what may have been too aggressive and opportunistic pricing to start with. Many sellers this year have been drawn to this market to capture an upside to their aviation investment that has never been seen before, and now realizing that they may have stepped too far, are pulling back a bit.

One thing that I mentioned when discussing the idea that we may have also reached the peak in demand was a look at days on the market. This is increasing and allowing for a less frenzied approach on the part of buyers who no longer feel the aircraft that comes to market this morning would necessarily be gone by sunset the same day. I see in most categories of aircraft that more inventory is coming on for sale by the day. This is due in part to new aircraft deliveries, the rethinking of the size of a flight department, and owners feeling that capturing the profit that has been made on the value of the aircraft is opportune. I think many owners who have been lured to ownership feeling like charter revenue could really backfill the investment are now feeling that selling is where the real upside could be.

So, what is in the air? I think we will start to enjoy the continued increase in inventory. More choice is always a good thing. Slightly more favorable pricing and best of all less frenzy. This combination of outcomes will keep everyone’s investments sound. Bottom line, this change in the air is a mild shift. Probably just really good kite weather. Enjoy!

Asset Insight Podcast: Business Aviation’s Fourth Quarter Aircraft Sales Frenzy

In the midst of business aviation’s traditional fourth quarter aircraft transaction frenzy, we review where things stand with Jay Mesinger, CEO of Mesinger Jet Sales. Topics covered include:

Demand – are we seeing changes relative to the types of buyers?
Supply – is inventory likely to continue increasing?
Pricing – rationalizing ongoing Ask Price increases with increased pre-owned listings.
Rising maintenance costs and 2023 Hourly Cost Maintenance Program rate increases.
Charter activity – has the charter user evolved and are charter rates holding steady?
Fuel pricing going into 2023 – might rising fuel prices positively affect the use of SAF?
Aircraft pre-purchase inspections, facility access, and supply chain issues.
Key takeaways from this year’s NBAA and CJI Miami. Recorded 11/29/22

Mesinger Pulse: NBAA-BACE Takeaways

Originally published as a blog for AINsight for Aviation International News on 11/4/22

Well, it is over. The event is behind us, but the memories and feelings continue. I spoke to several attendees and asked them for their takeaways, as I was unable to attend this year. What was it like to attend this event in person? It was as if all the people I asked had spoken as a group before we talked as the answers were so similar.

I think that since the comments were all so positive then I have to say it was a winning event. Bravo to NBAA and the staff for being able to put together an event that not only brings the industry together but also speaks volumes to the pent-up desire to be together in person.

All those I spoke with started off talking about the customer experience. Starting with their own and then speaking about those customers whom they were able to see during the event. Being able to finally get the Zoom call out from between themselves and their customers was even more impactful than anyone imagined. The hugs and the handshakes brought back a closeness between those attending that had slipped away a bit. Josh, Adam, and Andy reported great interactions with our customers and industry colleagues as well.

Of course, beyond the personal affinity of being together again came the reality of our industry today. The discussion of supply and demand was a very important topic. It became clear that those of us directly involved with our industry in the capacity of buying and selling aircraft were exhausted by the lack of supply. It has actually changed the methodology of how we all do this business. The word tricky came up often in my questioning. It is tricky to source, then value, and finally transact an aircraft. So often aircraft come to market today for the sole reason of a seller feeling like there is an opportunistic profit to be made by selling their aircraft in today’s demand rich market.

The words chaos and disarray were used by several of the people I spoke with. The days of clear, transparent listing and smart marketing have been replaced by constant racing in the process. Racing to get it to market as a seller, racing to get an offer in as a buyer, and racing to get to an inspection to finally get to a closing. Dizzying was another word used to describe the process today. No one I spoke to felt that there was any magical answer to the supply problem. No one I spoke to felt that the demand was going away, even with the headwinds of interest rate increases, talk of recession and the geopolitical unrest around the world. Everyone I spoke to felt that 100% bonus depreciation, or not, the demand would continue, albeit with a desire from many buyers to enter a market with a normal level of residual loss year over year.

The most interesting side of the equation will be supply. An increase in supply will no doubt move the pendulum more towards the center and a more balanced market, away from a strictly sellers’ market. This would be a good thing and should not necessarily disrupt pricing with any significance, but likely to a more traditional residual loss rate. So, the opportunity to be together in person allowed for so many constructive conversations to occur among the industry professionals. Without the NBAA BACE forum to have these very personal conversations we as a group would still be bumping along skirting so many real issues.

The last takeaway from most was that events big or small are what we must strive to continue to support. Be it BACE like events or smaller regional shows, we as an industry must do our part to attend and talk up among our peers. We must keep the events relevant and important. We as an industry must remain positive and shout the value for all of us.

I look forward to seeing you all in person soon.

Webinar: Wolfe Research – Walton’s Weekly Flyby

On Friday, 10/14, we hosted a top bizjet broker ahead of next week’s NBAA tradeshow. Boeing & Airbus reported Sept orders/deliveries capping 3Q as the strongest Q for total orders since 4Q19. Boeing reported 44 net orders in Sept with 227 in 3Q and 432 YTD with Airbus reporting 11, 388, and 647, respectively. Deliveries in Sept/3Q were mixed with BA posting 51 for the month and 112 for the Q with the month tying June but the Q 9 deliveries below 2Q (still up from 1Q’s 95). Airbus delivered 55 in June and 140 for the Q with the month trailing March and June and the Q trailing 1Q and 2Q. See detailed tables inside.

Click here to watch: https://players.brightcove.net/6285638718001/CsxhGkzZ9_default/index.html?videoId=6313958097112

Mesinger Pulse: Life Milestones

Originally published as a blog for AINsight for Aviation International News on 10/7/22

I would imagine all of you reading this have your own set of milestones that help you set your personal clocks. Mine are very specific and get me through the year. As you read this, I will be celebrating a big one in Europe.  Birthdays are a time to recount one’s health and well-being. Look around yourself and count your blessings. This birthday for me has me thinking of my career and how I have fared. I started thinking back to 1974 when I started a Piper Dealership in Houston, Texas. My partners and I took over a defunct dealership at Hobby Airport. Within the first year, we had turned the business around to be the largest by sales volume of the Piper network in North America. Then the next year to be the largest by volume in the world. That’s lots of Piper aircraft sold.

I can remember a sales lesson I learned and one that strikes me to this day, when customers would come into my office and say, “Give me your best price.” I was so young and naive that I thought that was what they meant. So, of course, I would give them my best price. Little did I know that was not what they would then pay me, it was just a new starting place for the customer to begin negotiating from. From there I learned so much about how to conduct myself and set up the culture for my business and that of the people who supported me.

In 1986, when Piper like most other general aviation manufacturers either stopped building planes or what few they built started distributing directly, I took the Piper Shingle down and put up the J. Mesinger and Associates sign. This allowed me to take the customers I had introduced to aviation and grow with their aviation needs. I have several customers today who started with me way back then.

Other very meaningful milestones in my business world were having my wife, Sandy, who is a CPA by trade join me in the business to become not just my wife but my partner. That was 30 years ago.  Sandy has added unmeasurable depth and growth to the company. That was the start of being able to boast that we are a family business. Next came Josh who, believe it or not, has been with the company for 22 years, and then our other son Adam, who is celebrating his 13th year with us. Both sons bring great skill sets and integrity to the business and are becoming industry leaders.

Over these many years, we have tried to always grow our market share with innovative and creative marketing campaigns. Once, we had 100 cell phones branded and exquisitely packaged to send to prospects. They were activated and only could dial 4 numbers, Myself, Josh, Adam and the office. The  tagline was that once you have these numbers you need no others. We all anxiously awaited a call!

I have added a link that I hope you will follow to watch one of my early video attempts. Another example of trying to be ahead of the pack. Who knows how any of these actually worked, but something must have as we are still here today 48 years later.

So, I hope this article has the intended outcome, and each of you will think about those important, meaningful life milestones and create your own memories. Thanks for being a part of mine. It will be fun in the next two weeks to see so many of you that we have not seen in person in Orlando at NBAA-BACE. Taking the Zoom screen from between us will be wonderful and allow us to share our life milestones in person. One of my first marketing videos: View the video here

NBAA News Hour: Taking a Look Into the Industry’s Near-Term Future

The business aviation community should expect another end-of-year rush to buy aircraft during the upcoming fourth quarter, which will keep prices high and restrict inventory, although a transformation may occur in the new year.

Experts considered the permanency of business jet buying trends from 2020 and 2021 that were once seen as an anomaly, as well as the continued absence of aircraft from corporate fleets on the supply side and how that is impacting the size and quality of used inventory.
The latest Thought Leadership NBAA News Hour: “Turning Into the 4th Quarter; A Look into the Near-Term Future,” was moderated by Jay Mesinger, president and CEO of Mesinger Jet Sales, which sponsored the session.

For Joan Roberts, vice president and escrow agent at Oklahoma City, OK-based Insured Aircraft Title Service, current indicators show that the massive spike in aircraft transactions recorded in the past two fourth quarters is likely to happen again this year, despite a dip in sales during the summer months.

“[Last year] was just a crazy year; the numbers were off the charts,” she said. “This continued up to May this year until we saw dips in June, July and August, but even these months saw levels that would have been seen as average for the years prior to the pandemic.”

“However, September has started with a boom, and if these numbers continue, we’re going to be right back to 2021 numbers for the end of this year,” she added.

There are some minor shifts in behavior, Roberts continued, with deals taking slightly longer to close than during the height of the pandemic and more sales unraveling, but she still expects high activity from buyers in the last three months of the year.

Jeffrey A. Carrithers, president and CEO of GlobalAir.com, said he saw similar trends through his online service BrokerNet.

“Our client base is from the aircraft broker world and aircraft buyers, and it’s still a very active market out there, if a little bit slower than at this time last year,” Carrithers explained. “September looks like ‘Here we go again,’ and while we’re seeing more aircraft inventory in the marketplace, I would say it’s still a tight market.”

This continued demand for business jets, despite the lack of availability and the reduced quality of used inventory, tells Alex Mesinger, director of business development at Mesinger Jet Sales, that there is a permanent shift in the industry.

“COVID was a shock to the system that changed how the wealthy view their privacy. There is a lot of wealth in the system, and demand for yachts, private jets and ranches has exploded contrary to economic indicators. There are 23,000 private jets in the world, and there are a lot of people in the world who can afford that choice,” Mesinger noted. “I don’t see the demand slowing any time soon.”

This systemic shift in demand, compounded by global supply chain issues, is keeping used aircraft prices artificially high, Mesinger added, and that will continue until business flight departments release their aircraft into the used market. Carrithers expects that to happen in 2023, as older fleets are replaced by new aircraft from the OEMs. “For anybody looking for a price adjustment, I really think it’s going to be later in Q1 of 2023,” he noted.

Stability is needed after two years of manic demand, said Jay Mesinger.

“It would be nice if we could get back to a place where we have normal depreciation of 5-7% a year with used equipment prices going down instead of up. Then we could get rid of some of the sellers who come to the market strictly from the opportunistic standpoint,” he said. “We also need more good quality aircraft to come to market.”

This article can be found on NBBA.org

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.

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