Jay Mesinger is the CEO and Founder of Mesinger Jet Sales. With over 40 years’ experience in the... Read More
Opportunity May Be Knocking
Comparing classic market indicators today with the metrics of the past five-or-so years suggests that now may be the time to replace the ‘No’ word with ‘Yes’- observes Jay Mesinger.
Without sounding too lofty- or ignoring what might be considered by many as sound business principles- I want to add to the data points that guide good governance regarding aircraft acquisition- retention or divestiture. I have seen several prognosticators claim that 2014 will be the turnaround year. Using general domestic and global economic conditions as a backdrop- they point to the fewer number of some models for sale as well as the reduced number of days on the market in general for pre-owned aircraft as data supporting their optimism. Provided they are part of an ongoing trend rather than an anomaly- some of these data points correctly denote recovery.
Differentiating between a blip and a meaningful change in direction- however- is never easy when you are attempting to stay ahead of the market. The challenge is deciding when to buy jets and when to be cautious and prudent - even if the market is still trending down. Building on last month’s article- which focused on the value of strategic planning in the process of buying jets this month we look at the mind-set of buying jets when the market is still in some flux and pricing continues its downward trend (albeit at a slower pace). As you can imagine- I spend my days talking to industry leaders - not just dealers and brokers but also aviation attorneys and tax specialists- lenders and consultants.
They all feel that the business jet market will recover- but not just yet.
They are also of the mind-set that jet buying opportunities have never been better. No one knows with certainty when prices will stop going down- or when the time will be ideal for buying jets. The key message of this article is that NOW is a “safe” time—perhaps even a “smart” time – to buy.
When asked if now is a good time to purchase a business aircraft- my response is “Yes- buy now if the company is best served by having a jet aircraft to grow the business”. The enhanced value to the bottom line and shareholder equity resulting from greater productivity derived from Business Aviation will more than compensate for a few percentage points in pricing.
If the “buy now” question were asked three years ago when our market was in free fall- my answer would have been completely different. Then- industry leaders were taking collective gasps as daily we saw dramatic drops in value. Lenders were making cash calls to borrowers. Aircraft were being put up for sale as good companies struggled. Today there is a very different attitude among lenders- sellers and buyers.
A company is wise to aggressively address transportation tools that can grow the company- introduce new products to larger markets- and offer better customer service. Establish a buying budget and estimate next year’s residual value loss at a slightly higher percentage to account for pricing uncertainty. But expect the overall five-year view to easily justify this year’s decision to buy and not put off an acquisition. My good friend Zig Ziglar often said- “If you waited for all the lights to turn green before you left your house and headed toward town- you would never leave your house”.
The same philosophy applies here. Waiting to buy jets until you are absolutely sure the market is at the bottom will leave you with fewer choices and potentially a poor purchase. Given what has been a fifty to seventy percent drop in prices since 2008—truly unprecedented in the history of our community — now is the time to buy.
When the market has clearly turned and recovery is obvious- the best equipped aircraft with the lowest time and best cosmetics quickly sell. Once those gems have been sold- you might still pay a lower price but you will not have access to the best equipment. Consequently- you will really be paying more for less- which is not a great place to be. That is why I say “Yes is the new No”. It is time to say “Yes”- and set about the buying process.