One of my very favorite holidays and thus personal annual
milestones is Thanksgiving. Not a religious experience just a major family
experience. As we sit around our Thanksgiving table as a ritual, we will go
around to all of the guests to hear what they are thankful for. For me personally it marks a chance to reflect
on another year that hopefully personally is still going strong, which I’m
happy to say this year it is. Now let’s look at it, as I also do, as a milestone
for the current year’s business.
This year has been strange and filled with nuances that made
everyone in our industry stop and try to put words to them. Remember when 2019
started we were in the midst of a government shutdown. We were having very
serious trade talks with China that has resulted in a year of exchanging tariffs.
All of us were trying to wade through January hoping that when the shutdown
dust settled and the trade talks and tariffs eased a bit, we would find the
foundation we all enjoyed through the preceding November. Would we have a
market that continued a robust transactional trajectory?
So, once the normal January lull that typically lasts the
first few weeks of the month were over, with an added extra week for the
government to reopen, what did we find? Well, I think we collectively found a
market that seemed to be missing the zest and zeal of 2018. We found a bit less
frenzy. What would come next with a market missing the frenzy? The good news
was and has been, a market that still maintained its balanced supply ratio as
well as a market that seemed to be maintaining its balanced residual loss rate.
Balance can still be used to describe our market.
The results in 2019 do not seem to have driven anyone back
to the fence to sit and watch. We have not had any buyer call and put a project
on hold. We have not had sellers rethink transitions. That is all great news.
The weird part of the market this year is the loss of the frenzy. The result of
a frenzy from last year’s market being missing is what we as a group have been
trying to put into words. The number of days on the market for many planes has
been stretched out. Yet still within a reasonable range. Prices in many categories
have been adjusting slightly downward and a few market segments and price
points have slowed to a trickle in activity. A bit less demand and a bit more
Many of the older, lower-end planes that were being sought
after by either turboprop step-ups or first-time buyers have not enjoyed the
robust activity that they did in 2018. Several newer, higher-end planes have
slowed based on aggressive competition from the OEM’s. In fact, I have never
seen the OEM’s being as aggressive to not miss a deal. Typically, there seemed
to be enough activity for the pre-owned segment as well as the new. The
segments seldom collided like they have this year. That collision course has
caused corrections in the like-new pricing to create the needed differentiation
between the two segments.
So, with all the thankfulness still being a relevant sentiment,
what could be ahead? Guess what, November 21st could see another
government shutdown if budget negotiations are not completed and agreed to.
2020 is an election year. This phenomenon always puts a bit of pause into the
works. Continued impeachment talks could cause hesitation and consternation to
buyers and sellers. We as industry professionals need to be very careful to
focus ourselves and our clients on the positive. The high value of business
aircraft. The fact that the safety record is so high in our mode of
transportation and that new clean sheet entrants being offered by the OEM’s will
no doubt bring about larger inventories of young really nice aircraft. I feel
like we will all be touting the many things to be thankful for this time next
year. By the way, having recently returned home from this year’s NBAA-BACE in
Las Vegas and talking to so many of my clients and industry friends, I can definitely
say that spirits were high and moods were good. Those that I interacted with
are feeling very optimistic and thankful for another year of successes.
I hope everyone will enjoy a family dinner and celebration
and continue the tradition of honoring each other, our families, and our
friends. The only problem for me is it seems Thanksgiving comes around quicker
each year. Happy Thanksgiving!