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Mesinger Pulse: Market-maker vs. Marketplace

Originally published as a blog for AINsight for Aviation International News on 8/7/20

As we are all lamenting as we write and speak and have client conversations that we are in a very strange time. Some might even say they are flying blind with respect to values and activity today and in the future. Actually, I am not willing to go there. I absolutely do not believe we are flying blind. I firmly believe that values and activity can be pegged.

There is no doubt that we as a country and world at large do no fully comprehend where the right-hand bracket on COVID is yet, however I refuse to close my eyes and allow myself to just bump into unidentified circumstances while flying blind.

At our company we are working hard each day along with many of my fellow aircraft professionals to have our eyes wide open and shape the future rather than being shaped by this phenomenon. I do not mean even for a moment to suggest that this is not a terrible pandemic that we are all working to survive. I do mean that there is something very powerful that we can all be doing. It has never been more important to speak factually, do not perpetuate rumors, and be leaders.

For us this translates into not focusing on being Market Makers, but instead putting all of our energy into building a vibrant and robust Marketplace. The difference is huge. The Market Maker is often discussed when talking about stocks and other commodities that are purchased for resale and profit. I am much more excited to be a part of creating a marketplace. That is the environment that promotes, markets and builds solid markets for the aircraft we all have for sale. This marketplace fosters right pricing, right representation and right dialog around the offerings.

I believe the key to keeping values up and reducing large residual loss rates is embedded in the ability to compare and value different pieces of the aircraft. Setting the correct value adds for pedigree, operational history, location of the aircraft, as well as number of owners. Promoting the quality of the records and the maintenance performed on the aircraft.

We must not be dragged down into a discussion about how bad the virus is and therefore how low prices must go. We must certainly allow for that honest discussion but we must be stewards of our marketplace and keep the high value of safe efficient travel first and foremost. It might be that the mix of use may change during this pandemic, possibly less international travel and a higher component of domestic flying, but flying is flying and whatever keeps these planes in the air is positive and strengthens our marketplace. So while the idea of being a market maker may seem more difficult today, the idea of working together as an industry to build and support and strengthen our marketplace should be enough to have us all open our eyes and abandon the idea that any of us have to fly blindly through this period.

Jay Mesinger at CJI Global 2020 Conference

The CJI Global 2020 Conference was a paid event covering multiple topics over many different session. Above is the session that included Jay Mesinger and was titled: Reborn in the USA – Selling Aircraft in 2020 and 2021. The video is available to view now at no charge, however your name and email address are required and the information will go to CJI (Corporate Jet Investor). Enjoy!

Mesinger Pulse: The Sign Says We Are Open For Business, But Are We?

Every week I join two or three web events. I now know what everyone’s home office, kitchen and living rooms look like. I know what everyone’s favorite casual or Tommy Bahama shirts look like. I know what we each look like with beards, mustaches and longer hair. I think we are all itching to get back to work.

The topics of the events are all pretty much the same. What is happening in our respective businesses and how do we feel about our current and near-term future? We are all reporting on increased call activity. Some are looking for the best “Off-Market” planes, whatever that means! Some are struggling to find the plane that will capture the imagination of a prospect through pricing. Others are trying to create the best set of facts to motivate a prospect off of the fence.

So, are we open for business or is our imagination playing tricks on us? I think we are involved in an amazing scientific experiment and are possibly only a handful of weeks away from knowing the real meaning of opening back up. The experiment is about us as a world grappling with the reality of social distancing, masks and the right mix of hygiene in conjunction with the need and desire to open up economies. As we see states and cities and restaurants and bars and bowling alleys open and create the right mix of clientele, we will know far more answers and be able to really shout, “We are open for business!”

Until this experiment has a few more weeks of results we can only dream and imagine what we will look like for the Summer and the Fall into Winter. If we can adjust responsibly, more and more normalcy may return. The idea of travel may begin to embrace the confidence of the public. I know that confidence will come back and all the increased calls we are starting to have will translate into offers and sales.

As I am sure you are all experiencing, COVID-19 is adding new challenges as well as new creative actions. Visiting aircraft being considered for purchase and moving the aircraft to locations away from their home base for pre-buys, all require new solutions to what are necessary actions for a sale. We will get these new protocols in place and they will be easier every time we try them.

So, no gloom here just the reality for us to be open for business and encourage our clients to get back out into the skies will depend on a semblance of normality returning. The normalcy will return if we all use the facts and follow the leads. We all have a responsibility of turning the open for business sign around in our windows. We all can claim to be a part of the successful opening. Please join in this effort to turn the sign around and get our transactions back up, keep the values of our aircraft as intact as we can, and get back to enjoying the success we have all had a taste of.

Soon we can shave, grab that coat and tie and turn the baseball caps forward. It will be great to meet my peers in person rather than on Zoom.

Mesinger Pulse: Heightened Level of Sensitivity

There are so many articles that I am receiving about the impact of COVID-19 on every facet of our daily lives. I do not want to distract or add to those very important bits of input. I do want to create a dialog that takes all of these impacts and relates it to us and our industry. This set of events is monumental. There is a word for this type of event that catches us all off guard. It is called an exogenous change. In an economic model, an exogenous change is one that comes from outside the model and is unexplained by the model. None of us were prepared for COVID-19.

Hurricane Katrina, although huge and life changing, was always expected over time. In 2008 the economy we were living in, with cheap money and lower barriers to entry for borrowers, although maybe not foreseen at that moment, was what we should have all expected based on the real fundamentals at that time. The effect of what happened in 2015 when oil went from $150.00 per barrel to $25.00 per barrel was not foreseen but the impact of that should have never been a surprise.

One of my very best friends is an economist in Denver. His firm Harvey Economics published their spring newsletter. It was so impactful that I have plagiarized parts of it below. You will note his words because I have put them in quotes. As aircraft professionals we serve our industry in the capacity of consulting as well as brokering. That can put us on either side of a transaction.

Today I want to speak about being on the buying side. This is what will be an especially complicated side during this Pandemic and the future months to come. Buyers, like sellers, will need to adjust to a set of market conditions that are not yet set in stone. They will be evolving. Usual and customary practices are very likely to change. Like so many areas of our society, new norms will abound. Not just the price we pay or the price we accept for the aircraft. Viewings of the planes must contemplate social distancing practices, aircraft movements to inspections must consider possible quarantine periods for the crews, and the length of time for scheduling of inspections or modernizations post-closing may be extended. On and On. Changes may come up to processes we are not even considering yet.

We must all act with a heightened level of sensitivity. I wrote last week about “reactive” pricing versus “responsible” pricing. That was the beginning of this continued discussion. If we are to, as buyers, get a deal done we must act with sensitivity and responsibleness in every piece of the process beginning with responsible offers. If you are afraid of markets tumbling then do not go in and just throw a dart at the wall. Sit on the fence. If you have confidence in your aircraft professional who is guiding you then build your metrics, consider all factors of the aircraft including future investment, pedigree, and mechanical condition and set your price and go after the plane. I assure you there are not that many buyers so if you set yourself up correctly and you are willing to act accordingly in this environment then go for it. Go into the market with confidence and sensitivity towards the seller. If you come into this market as a bully prepare to lose the plane you want. Be sensitive to the fact that sellers will respond best to buyers who do not talk about making multiple offers, or who come to the table with just an LOI or “would you take”, In today’s environment consider including a full contract to contemplate with the offer and already have the deposit in place at a title company. Be real, be thorough with your process. Show compassion and sensitivity and you will be more successful than not.

Now to quote my good friend: “The foundation of our economies, local to worldwide, are composed of simple transactions of one party selling or trading something of value to another party. The number, speed, and nature of those transactions determine the size and health of an economy. When these transactions recently slowed to a crawl, it was as if blood had stopped flowing in our economic body. Having spent much of our adult lives on the topic of impacts, you may ask what will be the socioeconomic impact of all this? Again, we have no models or past experience to accurately estimate this unknown future.”

The Mesinger Jet Sales team is charging forward on all cylinders. We are here for you now and throughout this pandemic, as we all adjust to this new world. We wish all of you a smooth transition and good health.

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