Given today’s ever changing economic news- there are many factors circling around the heads of Board Members. One day home prices are firming and the next they have never been so weak. One day Greece has adopted an austerity plan and the next the Prime Minister is resigning. It is dizzying for all of those people who are responsible for corporate decision making.
I get calls all of the time from Board Members who are trying to weigh the impact of so many external factors. Often times Directors are concerned about making decisions based on what seems like a high supply of aircraft for sale or the content of articles they read about falling asking prices. They query us as to whether prices will continue to fall thereby making waiting the right decision.
Sometimes the focus of the discussion is whether the market will kick back up and a buying opportunity be missed. This dilemma causes them to discuss buying sooner rather than later.
Long lead times of the manufacturers will usually drive the discussion toward placing orders now so there is certainty of new aircraft ownership in the future. But what if there is a serious change in the economy or the company’s fortunes during this long lead-time? What is the penalty to unwind the order? These discussions are economics and market-driven. They are important data-points to add into the discussion. The most important conversation to be had- however- concerns the value of the business aircraft to the company.
BUSINESS AIRCRAFT VALUE
Analysis of a business aircraft’s value to the company should be considered in great depth. The idea of using Business Aviation to get out ahead of the competition- get in front of the customer- and provide a level of service that is clearly better than the competitive company- is far more important than what might be small variations in asking prices or supply numbers.
It is true that the aircraft markets may still be soft in areas- but I assure you the freefall we experienced in 2008 will not occur in the next five or so years- if ever again. There simply is not another 50-70% decline left in these prices. There may be five to ten percent remaining- but when a real buyer who can demonstrate a certainty to the seller enters the market- that remaining discount can probably be attained in a final purchase price!
In no way do I want to minimize the seriousness of the current global and domestic economic conditions- and I would never whisk away the concerns of a Board while they are trying to balance good governance with the company’s desire- or need to grow and capture new markets. But I will say with great conviction that the best way to determine when the time is right to buy a business aircraft is when the business plan developed by the Board clearly shows the advantages of owning or operating the appropriate business aircraft to achieve the company’s goals.
The enlightened Board applies the tools we have discussed in past articles. Through comprehensive evaluation of need- the target is well defined and the Board can take action.
Involve all of the stakeholders- and build the plan. This action includes identifying the mission profile- determining which aircraft or alternative Business Aviation solution is best- developing budgets that project the cost of these solutions- and making sure the reality of your plan is in sync with realistic expectations. Then the outcome will be an idea whose time is right.
Consider the strengths and weaknesses of activity versus inactivity. Even in less-than-certain economic environments- the idea of acting on plans that can increase market share- increase customer service and thus increase business- outweighs the external forces of the economy. Thus the real question is- “why wait?” All of the reasoning that brought the Board to the discussion of Business Aviation in the first place will keep the Board on track for a perfectly-timed decision.
Do you have any questions or opinions on the above topic? Get it answered/published in World Aircraft Sales Magazine. Email feedback to: Jack@avbuyer.com
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