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!