Following his recent trip to network and visit clients in three countries, Jet Tolbert shares the trends and observations he uncovered in Europe’s jet sales market …
As we move further into 2016 with plenty of optimism for the US aircraft sales market, it is hard to ignore the glaring reality that the emerging markets, particularly the BRIC countries, will likely continue to face challenges throughout the year resulting in an increase in aircraft inventory for sale, and great opportunities for buyers to find value.
So how about the prospects for the European market at this time? A recent business trip to Vienna, Zurich and London gave me a great opportunity to ask some questions…
While the lifting of sanctions against Russia should create an opportunity for renewed investment in Business Aviation within Europe, there seems to also be an increase in European activity from owners seeking to upgrade to newer, faster and longer-range business jets...
Divestiture or Expansion?
Lukas Oppliger, CEO of Bern, Switzerland-based QCM CAMO+ told me that throughout 2014 and into the beginning of 2015 his client-base had been shrinking. He explained that part of this was due to aging aircraft owners handing over their businesses to a new generation that were more interested in divestiture than expansion.
Mr. Oppliger’s business manages 60 aircraft, and has since returned to growth. It remains to be seen what (if any) impact these young heirs will have on the long-term prospects for Business Aviation, he explains. Oppliger has observed an overall long-term trend for his business in which clients seek help to move through the upgrade path with continued airworthiness support and pre-buy inspections.
Eastern European Investment
Of particular interest is the quick withdrawal, and the slower re-emergence of Eastern European investment in aviation at this time. Following an outflow of aircraft from the region, recently there have been indicators of a move back in the right direction.
A partner in a Swiss multifamily office told me that the while the sanctions with Russia have definitely changed the landscape, the Eastern European investors are resilient.
Many individuals had diversified into Central Europe and are now (economically speaking) members of the EU, although they may have started in Russia.
Now these Eastern European nationals are investing back into aviation.
Although not at the greater numbers we were seeing in previous years, the trend has been significant. The representative explained that in his opinion, without a doubt the European sanctions are damaging to the EU itself, and that the lifting of sanctions would give rise to a new swell in the European economy and a positive impact on Business Aviation within Europe.
Another factor in the European market is the upcoming NCC (Non-Commercial Complex) Regulation that will come into effect in August 2016. While we cannot yet be certain exactly what this new regulation will look like, there’s speculation that it will contain similar requirements of BizAv as for commercial aircraft (including Ops Manuals, CAMO and Safety Management Systems).
It is certain that the NCC will apply to all aircraft with principal base in the EASA region; even those registered offshore.
Although the economic impact of these regulations has yet to be determined, according to Oppliger one thing's for sure: When compliance becomes mandatory in August 2016, it will increase the cost of ownership for all aircraft based in the EASA region. The question is, what will be the cost of compliance? The answer could potentially leave many owners considering where they want their principal base of business and where they want to register their aircraft.
In 2016 it looks like we will see a continuation of all that began in 2015 within Europe, at least until there is some resolution on sanctions.
With that being said, I have received a noticeable increase in European requests for aircraft, and have even noticed these buyers are considering aircraft in the US markets. On the surface this might lead us to believe the tide may be turning in Europe.
Once the bargains on the market today have disappeared, there may be fewer sellers willing to drop their price in the way that we have been seeing over the last 18 months. My advice? The time to score a great deal is now; get it while it’s hot!