Mesinger Pulse: A Ten-Year Anomaly: Buying

I have reported over the last ten years that first-time buyers were trickling back into the market and how critically important that was to the implied confidence in our industry. After all, if you are not an owner why in the world would you get in to ownership in periods of value free falls? This also applied to transitions in fleet makeup by people or companies that already owned aircraft but were reluctant to sell due to low prices being paid, as well as being reluctant to re-invest due to a continued downward spiral in values. Why the new market anomaly? Now there is a new-found confidence in the market.

I reported last month that inventory levels of aircraft in most segments were way down. This drastic reduction in global inventory is changing quickly the dynamic of buying. No matter how low levels go, there will of course still be aircraft that do not have great pedigree, do not have good mechanical history or for one reason or another would not check the boxes for most buyers even at reduced prices. The low inventory levels are reshaping transactional processes for us all.

We are starting to see a dramatic shift in where our business is taking us this year compared to last year in terms of increased acquisition projects. At Mesinger Jet Sales we have the most powerful valuation and marketing tools in the industry that are continually adapted to an ever-changing market. For the last ten years, with inventory at record high levels, there were multiple options when working on an acquisition. Today, with aircraft all over the world, fewer for sale and more buyers, it takes a level of sophistication and advanced modeling to make a great buy for your client and find the needle in the haystack.

So, it’s time to take out the old play book and dust it off. In many ways we were spoiled and did not have to import planes for our North American buyers, we could find plenty right here at home. We are now in a position of having to find ways to locate planes that can be imported from at least countries that more closely align with our FAA registry requirements and that have a similar culture with respect to hangaring planes, managing planes and maintaining planes. If you have gotten into this business in the last 10 years you may be finding that without that old play book to refer back to you are not going to be able to get up to speed on this skill set as quickly as your competition.

You must have the knowledge and experience today to ask the correct lines of questions to be able to qualify a foreign aircraft before investing to go look at it. After all, traveling across the country is nowhere near as expensive as traveling half way around the world to see one.

The next fact to have to assimilate is that you are not the only one in all likelihood that is after that needle in the haystack. How do you create a space for your client first to know about and then quickly jump into the buying mode for that plane when you find it? Certainty for the seller is key. This may seem easy as everyone says they have a real cash buyer and they can move quickly. These are nice words but think about them all for a moment. To say your buyer will pay cash could mean they do not need financing, but since financing is not an allowable contingency in an LOI or contract, that is a sort of hollow statement. My client wants to move fast! Again, what buyer that is real doesn’t want to get in their new plane and start enjoying the life that business aviation brings to you? That the buyer is real is nice to hear too, but based on what criteria? Certainty, and then the ability to capture the seller’s attention comes from years of doing this and creating a credibility in the market. A seller will know that when you call with a buyer, you have checked all of the qualifying boxes and the seller’s broker knows as they present two offers to the seller which one, based on reputation of the buyer’s broker, will close.

So, it is a new world based now more on identifying a great plane, understanding how much to pay so that you do not miss the value yet you don’t overpay, and providing certainty to the seller so you can have their full attention. This very rapid shift in market dynamics also means that we must help our respective buyers feel a new confidence in market pricing for the perfect plane. With limited availability of the great plane and more than one person vying for that opportunity, being willing to pay a more aggressive purchase price is new and understandably might be hard to grasp for the buyer. There is always a time gap in shifting markets for buyers and sellers depending on the direction of the shift. We just keep helping our clients focus on the idea that missing the right plane now could mean paying more for the next great one, with uncertain time between the next great opportunity. See you all out there.