Jay Mesinger is the CEO and Founder of Mesinger Jet Sales. With over 40 years’ experience in the... Read More
Prices haven’t bottomed yet as many buyers fence-sit.
Jay Mesinger offers his thoughts on which factors influence today’s market for pre-owned aircraft- and which are merely distractions.
Depending on your equity holdings- watching changes in the Dow Jones averages can be fun or frustrating. Stocks indexes may be down 30 points in early trading and be up 60 by midday. Such movement- however- does not tell us much about the market for business aircraft. If it did- aircraft values would be at all-time highs instead of being at all-time lows.
Clearly there are influencers on the Dow that are not at play on aircraft sales. In this article I look at which influencers truly affect market activity and which are distractions- or simply market myths.
Buyer behavior is a key indication of the health of the market for business aircraft. When real buyers are ready to buy- they just analyze and buy. They do not sit on the sideline and find reasons not to buy. At times like these- I wish I was in the business of selling fence railing. That way I could at least offer a product to those people who tell me they are not going to buy a business aircraft now as they sit on the fence and watch what is happening. Here are the factors that I think are at play with respect to the pre-owned market.
FACTORS VS. DISTRACTIONS
In every category of business aircraft there is just too much inventory. Some might argue that in several categories- such as high-end- relatively new aircraft- there are only a few listings. When you look at those few offerings and see that many have been on the market in excess of 100 days- you realize that a year’s worth of inventory is available for sale. That is too much supply! Excess supply exists because there are too few sales- and the real effect of fewer sales is lower pricing. Another factor influencing the market is a lack of non-relationship financing.
Good lending options not only create more sales- they begin to affect positively the supply-to-demand ratio and provide confidence in buyers and sellers that residual values will be stable. Financing has been a game changer for our industry’s health.
Before the recent presidential election everyone was sitting on the fence waiting to see which political party would come to office. Some observers were sure that a change in party would cause the industry and the economy to soar. Such thinking- I believe- was more of a distraction than a game changer.
The economic instability in Europe- on the other hand- could truly be considered a game changer. It is still unfolding and has absolutely put the brakes on buying in much of Europe. Our “kick-the-can” methodology with respect to U.S. deficits and our nation’s economic housekeeping is a game changer- not a myth or a distraction.
Let’s identify what should bring buyers to the playing field. High prices are not holding them back. They have never been lower. Yes- prices may not have bottomed yet- but I believe they are close. Uncertainty in pegging the bottom- however- should not be a reason to wait.
The value of Business Aviation is the underlying reason to bring buyers back into our market. There is no substitute to using a business aircraft to grow your company and provide exceptional service to your customers. Identifying areas where this tool is needed and then acting on that need is what will overcome so many of the factors keeping the market sluggish. More awareness of Business Aviation’s value will create more sales – and more sales will pare down inventory levels- which will stabilize and elevate prices.
Business activity creates business- which is the way exciting markets start. People come off the fence out of fear of what might be increasing prices. Then in fact prices do start to edge up. Who knows- maybe even lenders will feel the frenzy and work to get back in the game. Our industry might even be the catalyst for broader economic growth in other industry segments. But let me caution you against one thing: It is not yet over. There are still signs that prices will continue to edge down. There are still enough unsettled game changers to keep opportunities in abundance for buyers.
Do you have any questions or opinions on the above topic? Get them answered/published in World Aircraft Sales Magazine. Email feedback to: Jack@avbuyer.com