Articles - Page 24 of 29 - Mesinger Jet Sales

The Flight Department Business Unit

Flight departments have historically reported to various business units in their companies, and are often bounced around from one unit to another because many companies have a hard time finding where they fit best.  The truth is flight departments often manage one of the biggest budgets (including facilities, payroll, aircraft and operations) and often with some of the most valuable individual assets the company owns.  Working within the business aviation industry requires a different set of operating procedures than most other standard business processes.  And the flight department supports some of the most important travel for the most senior executives in the organization.  Consequently, flight departments should be a separate business unit tasked with managing the aviation assets the company owns and supporting the overall growth plan of the organization.

We have long helped clients think about their aircraft as aviation assets and flight department leaders as aviation asset managers.  In 1997 my parents (we are a family business) created the Aviation Asset Manager Portfolio.  This was an aircraft valuation and planning tool helping owners better evaluate whether to transition aircraft or invest in their existing aircraft and how to maximize their return on investment and residual value.  Since then, we have helped several flight departments create long-term strategic growth plans and evaluate their current lift against the corporate business plans to see how the flight department can best support the companies’ needs.  Lately, I have heard a lot of aviation directors start to talk about needing to prepare these same kinds of plans and this is exciting personally.  I recently applied to become part of the NBAA’s Corporate Aviation Management Committee (CAMC) and was subsequently invited to join.  I now need to choose a sub-committee to participate in and the director asked me to think about what is exciting to me about management in our industry.  I immediately knew the answer and it is this very evolution of the flight department into a true distinct business unit that doesn’t just support an organization’s travel needs, but rather helps affect the organization’s bottom line and is accountable for doing so.

Because the flight department has long been looked at as a division of another business unit, they have not often had the same corporate visibility or top-down support to be integrated into the business development plans.  When, however, the flight departments are thought of as their own business units and create long-term strategic plans in conjunction with their company’s business plans something often unexpected and very exciting starts to occur.  This kind of planning and work to meet the goals established mean that the flights departments can better support their company’s long-term growth goals, maximize the residual values of their assets, minimize their costs and most positively impact their company’s bottom lines.  The good news is that more and more aviation directors are starting to recognize the enormous potential that this kind of long-term strategic planning can provide.  As they start to talk differently, internally, as true aviation asset managers, and demonstrate how this kind of thinking and work can really positively affect their companies, this will lead to a shift in the organizational structures of companies that have flight departments.  This paradigm shift will benefit the companies that utilize business aviation and in turn, strengthen our industry.

NBAA Business Aviation Taxes Seminar, May 4th, 2012

I recently attended the NBAA Business Aviation Taxes Seminar on May 4th in Denver, CO.  I wanted to briefly write about how good I thought the program was.  It was very well attended and had great topics and speakers.  These continuing education opportunities hosted by NBAA are great ways to earn CPE/CLE credits and freshen up on the issues surrounding taxes and regulations facing Business Aviation.  These are constantly evolving issues and it is important to stay informed.  Denver has a robust Business Aviation community and it was nice to have an event locally to attend.

Topics of discussion ranged from structuring aircraft operations to pre-purchase tax planning to personal use strategies to candidate and lobbying transportation.  In an election year, this last one provided very interesting information.  Due to the Jack Abromoff lobbying scandal several years ago rules have tightened dramatically and there is an almost complete ban on providing non-commercial aircraft as a gift to members of Congress or Presidential candidates.  Presidential and U.S. Senate candidates are now required to pay full charter rates for the use of non-commercial aircraft, as opposed to previous rules allowing a first-class ticket reimbursement rate.  This makes private aircraft very expensive for Senate candidates, but especially Presidential candidates who travel the entire country for months on end campaigning.  These trips are also subject to Federal Excise Taxes (FET).  This is just some of the information gleaned from this seminar.

Although we are not tax advisors for our clients, continuing to stay educated and informed on the constantly changing tax and regulatory issues facing Business Aviation is such an important element to providing the level of service we strive for with all of our clients.  If we know of an issue that is evolving in these regards we can certainly bring it to our client’s attention and advise them to seek further outside council.  Our firm is committed to attending these seminars and we thank NBAA for working so hard to provide them for us and the entire Business Aviation community.

Negotiating

Negotiating is both a skill and an art.  I am proud to have learned from two people that I consider some of the best: my father Jay Mesinger and our dear friend and colleague who recently passed away, Dean Welch.  Both have/had an incredible ability to turn square tables into round tables with everyone from both sides of a transaction focused on completing the common goal of a good, fair and successful transaction.

We just completed an acquisition of an aircraft last week with a unique set of circumstances.  To get it across the finish line we had to negotiate one final deal point.  We went back and forth several times with each side digging in to protect their priorities at which point we were close, but not done.  Everyone wanted to get the sale completed and there were a lot of external factors adding pressure to get these last issues resolved in a way that worked for everyone.  When the negotiations reached a challenging place where each party had given all they thought they could, instead of people getting mad or pulling away, we stepped back and reviewed the respective priorities.  We evaluated what each side had already negotiated and without either side giving anything up we found a way to shift value points in the deal that still gave adequate protections, but bridged the gaps that were open.

The solution to the problem was not obvious.  It was identified by listening closely, not getting upset and thinking outside of the box.  We also had good people on both sides of the negotiation who, because of careful management of the process throughout, were figuratively sitting around a round table instead of on opposite sides.  Most people approach negotiations from opposite sides of a table and of course each side always has competing priorities and that is the nature of negotiations.  At the same time, everyone usually also starts negotiations with the same end goal, the completion of the deal at hand.  So, what I have learned about negotiating over the twelve years I have been in this business is: to listen closely, understand each sides’ priorities and boundaries, keep the big picture in mind and don’t get so bogged down in the details that you lose focus on the end goal and work to create a group discussion that helps turn a square table into a round table.  Not all deals can be negotiated to a successful outcome, but by employing these skills you have a much greater opportunity for success.

Our Industry Got Smaller Today

I am tragically sad to announce the death of a wonderful friend and co-worker, Dean Welch.  Dean died after an accidental fall last night in Savannah, Ga.  Dean has worked with our company for almost 20 years. He has been a friend for over 30 years.  Anyone who ever had the privilege to sit alongside Dean during a transaction or even across from him came away from the experience feeling good about the manner and method in which he kept everyone engaged and their priorities first and foremost to accomplish the common end goal.  His integrity was overwhelming and his dedication to our company and our family was enormous.  Just writing this to everyone is the most difficult thing I have ever done.  Dean not only leaves my family and of course hundreds of industry friends, but also a loving wife, Tara and three wonderful children Bethany, Kimberly and Doug.

We already miss Dean so much.

Over the next several days as arrangements for Dean are formalized, we will continue to keep you updated.

Ongoing Investments In Your Aircraft

A few years ago I remodeled my house.  I had seen some TV shows about people who would spend a few thousand dollars in preparation for selling and completely changed the look of there homes.  I decided that if there were projects worth doing for someone else, it would be even better if I also enjoyed the investments that my house needed.  The same thing applies to airplanes.

Owners often ask if they should do cosmetic work before selling their airplanes to make them sell faster or for more money.  We regularly tell clients not to bother spending the money on refurbishment or upgrades right at the time of a sale.  At that point, it is best to figure out what their aircraft is worth as it is and price it accordingly because you will never get all of your investment back if you invest right before a sale.

At the same time, most buyers don’t want to buy project aircraft due to the down time and cost associated with them.  And, if the condition of the cosmetics are really poor it makes buyers concerned about what else might have been neglected about the aircraft deterring some buyers from focusing on an airplane at all.  Finally, small problems turn into bigger and more expensive problems if left without being addressed.  Consequently, I recommend regularly maintaining not just the mechanical condition of your aircraft, but the paint and interior too.  That doesn’t mean spending a lot on complete refurbishment projects, but when the paint starts to really fade and peel have it touched up and when necessary painted.  When the carpet is worn out or the side walls stained or frayed, have them replaced.  If you do these projects when needed and not just think about them when it is time to sell you can also benefit through your own use and better experience.  In the long run, these on-going smaller investments will also most likely save money in the long run because you will address smaller issues for less expense than if they were left unchecked to grow into bigger problems later.  When it is time to sell, you will then also benefit from a better sales price and faster sales cycle because worn out cosmetics won’t trigger other concerns about the rest of the mechanical condition of the aircraft or because of a fear of a long downtime and expensive complete refurbishment project.

Bring on 2012!

The last several years have proven to be a long hard road for our industry and it is not over yet.  I do, however, believe that we are on the right path and I am excited for 2012.

In 2011, we saw continued increasing activity in many segments of the market.  It was not consistent in all segments and the super mid-size corporate aircraft probably saw the least activity of all aircraft sizes.  As we faced continued global economic struggles and uncertainty buyers did continue to prevail by making extraordinary buys.  They often pushed for lower prices and got them, but not by dramatic drops of 10% or 20% like many thought they could.  Those big hits, and even bigger ones, were factored into our market earlier in the recession.  Instead, for the most part, the lower prices buyers were negotiating in 2011 were the last 1% or 2% or 3% from the already correctly market adjusted asking prices.

I think that even though the final sales prices were hard for many sellers to swallow, most buyers and sellers completed transactions walking away feeling like they made fair trades within the market conditions.  There were many buyers who missed out because they wanted more than sellers had to give, and there were some sellers who missed opportunities to sell because they weren’t willing to go far enough.  Some of the buyers who thought there should be even bigger price adjustments were misled by the media who reported regularly that prices were still falling.  Unfortunately, they only reported half of the story.  Most of the aircraft sellers who lowered their published asking prices by large percentages had aircraft which been on the market for long periods of time with asking prices which were long outdated.

The good news in 2011 was that there was a lot of activity and a lot of closed transactions.  I think that the same trend will continue through 2012.  At J. Mesinger Corporate Jet Sales, we are excited about the start of this new year and what lies ahead.  It won’t be easy, but nothing good ever really is.  We look forward to working with you this year.  Happy New Year.

NBAA 2011 Wrap-Up

From my perspective, this year’s NBAA Annual Convention was a huge success.  After the last few years of uncertainty and truthfully, some depression about the state of the global economy and our industry, people were enthusiastic and excited to be in Las Vegas and ready to get business done.  Pre-registration numbers exceeded the total registration for all of last year and registration by internationally based business aviation businesses and participants hit a record high.  The convention center halls seemed packed and bustling with activity and the static display appeared to have real buyers ready to talk about buying aircraft.

Our company had a GIV-SP, GV and a Challenger 604 available during the show for private showings at the McCarran Airport and we had several good showings.  We had scheduled meetings with several principles who attended the convention to talk about different sales and acquisition projects including some clients who came to the show from China.  My father and Jeff Lee, Aviation Director for American Express, hosted the Opportunities for Business Aviation in China/Asia panel discussion for the third year in a row.  The first year they had a 100 person room.  The second a 200 person room.  And, this year, they packed the house in a 300 person room for what was definitely one of the hottest and most discussed topics of the convention, the growth of business aviation in Asia.

I’ve been attending NBAA conventions for almost 15 years starting when I was in college thinking of entering our family business.  Every year I am reminded of the magnitude of our industry.  Business aviation is an important part of our U.S. economy providing more than 1,000,000 jobs and one of our most valuable exports, corporate aircraft.  It also supports our ever growing globally connected businesses and allows people and companies to do more than would ever be possible by using commercial airlines alone.  Many of the companies in our industry are small businesses providing individual components or services that collectively help us build these complex aircraft and support their operations.  Additionally, as was evident throughout the week starting with the opening general session and continuing through the NBAA Gala and Corporate Angel Network fundraiser on Tuesday night, the use of business aviation aircraft helps support philanthropic needs and saves lives.  I am proud to be part of such an amazing industry and I look forward to a long bright future for our company and our industry.

Disparity In The Markets & Great Opportunities

August is historically a slow month for corporate aircraft sales.  Buyers and sellers are often vacationing with their families and not focused on aircraft transactions.  The truth is we did not see our normal patterns of activity, or lack thereof this past August.  Large-body, long-range, like-new aircraft markets have seen continued strong demand and low supply.  I have watched a lot of that activity come from the biggest companies around the world who have had pent up demand for aircraft to travel to clients and operations in the farthest corners of the globe.  We have even seen some good activity on some older aircraft models.  Other markets, however, have been slow although there are great values with motivated sellers waiting for activity to pick up.  There is an interesting disparity of sales activity in our markets leaving a lot of great opportunities for five to fifteen year old excellent aircraft (which you can absolutely get financing on) to help companies and individuals fulfill their mission requirements.

Today another broker called to see if we had any activity on a few super mid-size aircraft that we are representing.  He was representing the same aircraft type and both of us lamented that we had had very little activity on these listings over the last few months.  Neither of us could put our finger on a definitive explanation and both of our clients had recently lowered their asking prices and sales expectations.  As our global economy continues to try to find its footing and companies around the world work to grow their business in light of our economic challenges, I have to believe that they will get back to the basics of getting out in front of their clients and in their operations.  To do this effectively many of these companies will need to utilize corporate aircraft and the good news is that there are great aircraft available at the right values to help them do this.  I am excited that Labor Day and summer are behind us (although I will miss the warm weather) which historically means that it is time for most of the world to get back to business.  Call us today to learn what aircraft we are representing that can help you meet your mission.

Fleet Management And Transition Planning

It has been a while, but several clients are starting to not only talk about one off sales and acquisitions, but about long-term fleet management and transition plans.  It is exciting to hear companies thinking in these terms again and these are projects that we are excited to be a part of.  Transition plans are not easy or quick.  They involve long-term commitments and in depth analysis of mission profiles, corporate development plans, budgets, market evaluations and the review of future products and other outside influences.   Over the years we have developed a lot of resources and proprietary tools that we use when developing these kinds of plans for our clients including detailed interactive budgeting models.   We use many of the same resources when working with first time buyers.

This kind of forward long-term thinking about transition plans, and not just transactions, allows for the development of programs that allow companies to strategically plan and budget to effectively meet corporate needs.  From a flight department perspective, this type of planning provides positive exposure at the executive level as aviation growth becomes one of the key vehicles the company uses to facilitate corporate growth.  From the executive level, the commitment to this kind of planning means that a company can better plan for major capital expenditures and most effectively meet their travel needs.  Longer term strategic transition planning also helps facilitate operational planning like commonality of cockpits, training programs, facilities needs and more.  Over the years we have worked with many large companies to develop these kinds of forward thinking strategic plans and then represented our clients in the execution of them.  While much of this kind of planning was put on the back burner over the last few years, it is good news for our whole industry that many large companies are ready to start discussing this kind of planning again.

EBACE: Another Industry Success

The European Business Aviation Convention and Exhibition held its annual event in Geneva, Switzerland May 17th through the 19th. EBACE, jointly hosted each year by the European Business Aviation Association (EBAA), the leading association for business aviation in Europe, and the National Business Aviation Association (NBAA), the leading voice for the business aviation industry in the United States, takes shape as a three-day event and features exhibits, an incredible static display of aircraft, education sessions and maintenance & operations sessions (M&Os). It is all held at the magnificent Geneva Palexpo and Geneva International Airport.

This year I was privileged to have been asked for the second year to participate in one of the educational forums. On May 16th, along with many of my fellow aviation professionals from around the world, we presented at the “EBACE International Aircraft Transactions” conference. Like last year the attendance was great as well as the material presented. I leave each year knowing that international transactions are far more complicated than we are used to in our domestic work. In fact, no two transactions are the same as we blend different countries, different cultures and different time zones into the mix.

So now back at my desk in Boulder I can reflect on my successes at this year’s EBACE. I came away feeling terrific on many levels. I saw old and made new friends with international legal and maintenance professionals. I was able to see and be seen, thereby extending our corporate brand beyond our domestic boarders. I was able to attend several informational sessions, broadening my knowledge base about current International business issues to further support our ability to complete these complex transactions for our clients.

EBAA and NBAA are not just associations whose goal is to put on trade shows, but rather to shape business aviation in their markets for each of us who go to work in this industry every day. Regardless of whether you are operating business aircraft or building and supplying goods or services to this industry, we need associations like these to promote the positive value of business aviation in each and every city, state and municipality within their respective boarders. I urge each of you to learn more about these associations and support them with your membership. Once a member, be involved, stay active and when one of these associations asks for its members to reach out to the local and federal politicians and regulators about relevant issues that impact our operational flexibilities, do it. It is vital!

Visit the NBAA website here
Visit the EBAA website here

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