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Mesinger Pulse: A Stickler For Details

Originally published as a blog for AINsight for Aviation International News on 12/4/20

Everyone reading this article today has some touchpoint to aviation. And we all know the sophistication and complexity of this field, as well as the expensive factors involved. The cost to buy, the cost to operate, the cost to charter, the overall cost to utilize these amazing pieces of equipment. There is one more cost that could be the biggest. The cost of missing critical steps in the buying, inspecting or operating processes. The details.

I have had a few brokers on the other side of a transaction from us lately say, “Wow, I wish we had found a buyer that was not as focused on the details as you all have been.” I can only scratch my head at that comment and wonder what that must look like for everyone involved. Yes, it is true, we always have the most expansive pre-buy we can choose. Yes, we drive down into smart delivery conditions. None of these factors create transactions that are awkward or overly one-sided. They just create a demand for certainty. After all, that is what our clients pay us for.

I might add this demand for certainty should be a part of both sides of the transaction. The only difference is when the details become important. As sellers, we create accurate specifications that are signed off by the seller, before the marketing begins. As buyers, we have the specifications verified during the pre-buy. As a seller, we pay close attention to the requests made by the buyer when outlining the pre-buy workscope. For us as buyers, it is never just taking a facilities standard pre-buy as sufficient. We are always looking at proximity to near-term future maintenance and being sure we are checking the optional boxes for inspecting those areas that could be near-term expensive findings. Getting this done during the pre-buy continues to give us and our clients certainty they are buying the right plane. There is nothing worse than a buyer missing the details as to what to inspect then having to come back to the table post completed contract and asking the seller to allow for an expansion of the inspection. Again, details and when it is critical for each side to focus on them.

Paying very close attention to the operational protocol of the proposed aircraft will give the buying side more to consider when looking at the best plane to buy. Not realizing that for a 135 operation there needs to be an FDR at all or a modified one capturing the correct number of parameters is one key factor a buyer must consider the details of to avoid costly surprises. Knowing if the plane will be flown Internationally or over water will also drive certain equipment criteria for those specialized operations. Not understanding those details could create post-closing expenses that should be considered in the original criteria for selection of the target aircraft.

All of this is so logical for many to consider, but believe it or not, completely ignored by some. These omissions could drive a terrible and costly outcome. After all, the Devil is in the details, so are the Diamonds!

Mesinger Pulse: Counting the Days

Originally published as a blog for AINsight for Aviation International News on 11/6/20

It seems like all we have done lately is count! Now it is time to take out a calendar and count the days. We are still getting calls every day from prospects asking if it is possible to get a plane bought and put into service by the end of the year. Given the complexity of the entire process that task is getting more and more difficult by the day.

The first thing that must happen, and happen in just days, is to find the plane to buy. Believe me if you are contemplating this exercise, know you are not at the head of the line. Many of the best choices are already in play and the remaining planes may not either be the best pedigree, the best equipped, the most solid choices overall. That is not to say that you couldn’t wake up in the morning and find that perfect plane coming to market. It is just this end of the year rush that may have taken many choices off the table.

Let’s say you can find that perfect choice. Next you or your representative or flight department personnel will want to go see it, and review at least initially the logs and records. That may take as long as a week to set a visit and accomplish the cursory review. Many of the people calling us are first time buyers. Therefore, on a parallel course there will need to be a search for either pilots, or better yet, a management company. These searches do not just fall off a tree. This is a carefully executed search that has many critical facets. The management company will among many other operational pieces, have to locate hangar space in the appropriate city and find contract pilots ready to take the important flights to qualify for the bonus depreciation by year end.

Once you have the plane identified then the all-important contract phase begins. This could take up to 10 days to accomplish. Given the rush to get planes purchased and in service, the maintenance facilities are slammed with pre-buys. Getting a slot and having the confidence to pay the inspection cost up front usually does not occur until you have the certainty of a contract signed by buyer and seller.

These are all precious days. Another tricky part can occur if during the inspection items are discovered that parts or engineering requirements start to hold up RTS of the aircraft. COVID-19 has presented several supply chain complications.

Can it all be done if one starts the process on November 6th? Some would say yes if you for instance found a plane new at one of the factories. Getting that into service would be a much easier path. No pre-buy, easier contracting process and fewer into service risks. I have seen buyers wave a pre-buy at year end. That is risky and a path we would not recommend.

The list of critical path players needed to accomplish a transaction will include an aviation attorney, tax strategist, management company, maintenance company, and a broker.

I do not want to take any wind out of anyone’s sails but just approach these year-end-starting-today transactions that have a must close mandate with eyes wide open.

Mesinger Pulse: Everyone Raise Your Hands If…

Originally published as a blog for AINsight for Aviation International News on 10/2/20

No this isn’t an interactive Zoom article. I really won’t be able to count the raised hands as you read this, however if you keep a little score card of how many  times you raise your hand as you read I think it will give you a new perspective of what we are all going through during these strange COVID times. So here we go:

EVERYONE RAISE YOUR HAND IF you believe that your opportunity to talk to people about business aviation is increasing over the last couple of months. This is not about strictly being in the brokerage side of our industry. This means simply, in the course of your daily conversations. You can be on the management side, the insurance side, the maintenance side or even if you are an operator of a business aircraft and are talking to your associates.

EVERYONE RAISE YOUR HAND IF you believe that demand is increasing for people really wanting to buy an aircraft for the first time. After all, the first-time buyer is and always has been the growth opportunity for our industry. I have always said when an aircraft is sold to a first-time buyer, pilots get hired, insurance is sold, hangars get rented, maintenance gets performed and a whole cycle of business aviation activity gets started.

EVERYONE RAISE YOUR HAND IF you believe that rising demand will affect the price of aircraft upwards. This is an interesting one. Except during the rise of the emerging markets when the BRIC countries, the Middle East, and Russia were coming into the market and the exploding demand caused premiums to be paid on new and like new aircraft, previous recoveries merely slowed the residual loss rate of the economic event. They did not create enough demand to send prices back up to the pre-event time period. And as we currently see the surge in activity from first-time buyers, we also see a retreat in acquisitions from corporate flight departments, thus maintaining a balance in supply and demand which will keep prices from rising

EVERYONE RAISE YOUR HAND IF you believe that once we start to really gain traction in reopening the economy, as well as confidence returning to the consumer to revert back to commercial flying, the phenomenon of the first-time buyer coming into our market, with such rarely before seen vigor, will settle back to a more normal ratio. Over the years when the economy was not struggling with pandemic like events, we at Mesinger Jet Sales probably had a percentage of our overall acquisition business of about 25% from first-time buyers.  Today, during this pandemic event, we are dealing almost exclusively with first-time buyers. Truly an exciting time for our entire industry!

EVERYONE RAISE YOUR HAND IF you would like to have an indoor dinner party, get on a plane and go to some exotic trip with your best traveling friends or family; Go to your favorite restaurant for an evening of joy and laughter and great dining; Hug your children and grandchildren! Now add up your score and analyze the answers. I look forward to your comments from this article. Write me at jay@jetsales.com. I will report to the readership everyone’s scores next month.

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