The Mesinger Blog

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 The days of clear, transparent listing and smart marketing have been replaced by constant racing in the process.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.

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 13^th 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

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.

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.