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.