Originally published as a blog for AINsight for Aviation International News on 8/6/21
Hard to believe it is August 2021. Maybe the title of the article should have been, “Can You Be Flying by December 31st?” The answer is maybe, maybe not. Last year about this time people started to get very serious about wanting to buy a plane. They also wanted it in service by December 31st to take advantage of Bonus Depreciation. The world was in the middle of wave one of the pandemic; World travel was virtually shut down; Domestic travel although also restricted was all the rage; People were buying second and third homes in the US, and the next hurdle was getting to them. First-time buyers who had been threatening to buy planes were storming in to act on the threats.
As a country, we were beginning to experience what continues today, which are major supply chain issues. Long delays were occurring in our industry on the maintenance side of things. Engines and APUs were having constant delays and setbacks in delivery due to parts not being manufactured and shipped on a pace we as a world had been used to. Other production and replacement parts were also seriously impacted. These delays alone were causing me to advise every single new client that hired us to purchase a plane, and have it in service by a guaranteed December 31, 2020 date, to not even start the process if that mandated a contingency to walk away at the end of December on a transaction that could not complete. I knew I would not have any luck writing that into a contract with a seller. In 100% of the cases, my buyers all said, no problem, we understand and it would just be nice, but not a necessity. That was smart buying! BTW these supply chain delays are still happening.
Last year at this time there was not the low supply of aircraft that developed by the end of the year. In fact, today we are at a very low point of inventory to choose from. If there is anything that might impact the final sales numbers of 2021 it will not be demand, it will be the ability to fulfill the demand. Let’s take a look at the factors that are creating this phenomenon.
First, our world is still basically shut down. Yes, it is opening up slowly but cross border work must be checked almost daily. This keeps us in the US from being able to readily import aircraft and therefore our inventory universe reliant on US aircraft. Next, the corporate side of our industry is just, and I mean just, starting to wake up. Soon I am confident this portion of our industry will start to transact and that will provide additional supply of inventory to choose from. Next, and one of the most impactful reasons that our inventory supply has gone down, is the fact that we had a record number of first-time buyers in the 4th quarter of 2020 and still today. This group of buyers only depleted our available inventory rather than contributing to the supply with a relinquished airplane. Let me explain. It is like going to a party and not taking any hors d’oeuvre or wine. You just eat the food and drink the party host’s wine. First-time buyers did not have anything to contribute back to our supply. All of these things have contributed to the short supply of aircraft.
These contributing factors will ebb and flow. They always do. Those of you who have been in our industry for years know it is not static, it is very dynamic. Demand and supply move like a pendulum. The real question is should you get into our industry now or wait? My sense is if an aircraft fits your needs now, don’t wait. That of course means you should not overpay; you should not lower your expectations for quality. It just may mean that the key word should be patience. It also means that although it could take 60 to 90 days to find the perfect plane, you should be ready on day 2! Have your legal, management and consultant team in place on day one.
Success is not an option. Just understand the factors that create success. If you want a chance at a December 31st in-service transaction, then get started as soon as you finish reading this article.