Mesinger Pulse: Huge Optimism. How Does This Translate?
In preparation for an industry influencers panel in the next few weeks I was on a conference call with some top industry sales professionals to build the agenda. One strong participant said he is watching the greatest optimism in our market since pre-2008. No mystery there. It is thick in the air. More calls and more reasons to feel good about the direction of our market.
But the discussion progressed and the conversation quickly turned to the fact that the market for real transactions was flat. Almost seems like an oxymoron. Optimistically flat!
So why is this the feeling among some? I think it is because of the very low inventory levels. No matter how excited we are to be out of a ten-year lull with tumbling residual values the days of trying to find a great plane in the same day as you start to look are gone. This creates several other anomalies.
It is very important today to not let our clients get discouraged with the longer wait time for a great plane. You must help set the expectation of patience. I know that when a buyer decides to pull the trigger long wait times for satisfaction can be problematic and can actually cause a buyer to go back to the fence and wait this pendulum swing out. When prices were dropping the sense among buyers was to wait, prices will just get lower. When markets correct and get better buyers say maybe it would be better to wait, prices will go down again or at least stop rising.
The reality of market corrections is when it is right for a buyer to buy based on their individual or company needs help them assess the market, find the sweet spot for them, and buy. Sellers can have the same paranoia and think they will sit on the fence and wait for the market to stop dropping. Take heart, we are in a very balanced market. Yes, perhaps pricing is more aggressive then it has been but residual loss rates have all but stopped if not at least slowed dramatically.
Now let’s switch gears. One of the by-products of what seems like a demand rich market is the fact that some sellers think it is as easy to sell planes without the help of a broker by just returning a call of an unsolicited email offer on their plane. It reminds me of the fax machine days. Owners and Sellers would just watch their fax machines and as those unsolicited offers came across, take the offer and proceed down the path of the sale.
That all seems easy. But as I always say, “if it were easy, everyone would be doing it.” Airplane transactions are honestly one of the most complicated transactional feats known to man. First, how does one even know what to say yes to, not just with respect to price, but even more importantly usual and customary terms. I think there are probably a thousand ways in a transaction for the sale of a plane to come apart. I have clients that ask, “how do you do this job?” So, with the good of a balanced market comes the complications that can plague a sale regardless of the market conditions.
I have talked recently in these articles about the need to really understand what one is selling and what one is buying. The accuracy of the specification and the history of the aircraft being sold is so important. No one wants to invest in travel, contract work and inspecting to find surprises that could have been avoided in the right preparation for a sale. So, when just shooting unsolicited offers across to owners who have not engaged a sales professional and taken the time after the engagement to build a marketing package that includes specifications and a good description of history, buyer beware for a surprise. I am not saying the surprises will be malicious, it’s just what happens when an owner tries to respond to a sale inquiry without good professional representation.
These are not new occurrences, they are just the way of the world in a demand rich, supply poor environment. These could be labeled great times for us who make our living everyday in aviation. Regardless of the segment we work in, business is healthy. Yes, if one were counting the transactions they may seem flat or at least farther in between as we struggle to find that needle in the haystack of our discriminating clients, but patience is the virtue to be awarded today. Sit back and trust your aviation professional and you can rest assured you will be happy with the results. Be optimistic!