- 04 Jan 2022
- Matt Harris
- BizAv Market Insight
What do the latest trends and observations in the pre-owned aircraft sales industry indicate for buyers and sellers planning a move into the market this year? AvBuyer’s Matt Harris spoke to Hatt & Associates’ Tyler Bowron to seek insights…
Coming from an aviation background (his father was in military aviation in the 1950s before becoming a corporate airplane pilot) Brad Hatt, Founder of Hatt & Associates followed in his father’s footsteps when he embarked on his own aviation career, selling aeronautical radios for an OEM.
He soon found his feet in the industry, moving to Hawker Beechcraft in the 1990s where he spent 17 successful years. He became the OEM’s youngest-ever executive, and eventually was appointed President in 2005.
After five years at the helm, he left to start Hatt & Associates, his own independent global aircraft sales company. With a team experienced in the global jet marketplace, Hatt & Associates is experienced with OEMs, FBOs, fractional ownership companies, and aircraft suppliers. “We assist our clients along every step of the journey to aircraft ownership – from airframe selection, to financing, to take-off,” the company promises.
“While we specialize in the Beechcraft King Air and Hawker lines, ultimately our expertise is in all turbine lines,” Tyler Bowron (pictured left), a Partner at Hatt & Associates told AvBuyer.
“We have lots of involvement with Cessna Citations, Dassault Falcon models, and Gulfstreams in particular. “It’s really dependent on the needs of our clients, though,” he explains, adding that in a typical year the company can expect to complete between 25 and 30 transactions, worth over $100m.
Tyler, like Brad, caught the aviation bug at an early age, having a neighbour within cycling distance who had a grass strip and hangar. “That gave me the chance to fly in a Piper Cub, and an open-cockpit Wako,” he recalls.
Though he studied aviation and learned to fly, Tyler’s career began in the gas and oil sector, working for a company, owned by T Boone Pickens, which happened to operate multiple business jets. It was Pickens himself, who, discovering Tyler was a pilot, urged him to pursue a career in aviation.
“I began working in aviation in 2007, for Cerretani Aviation,” he says, “learning the ropes and building my own book of business contacts.” At the time Cerretani had an agreement with a leading Fractional Ownership company, selling its Citation jets once they’d been retired from the fleet.
Eventually, the Fractional Ownership company acquired Cerretani, and while Tyler continued to work on behalf of his own clients, he was also appointed to run the European sales office for whole aircraft. Just as he was preparing to relocate to London, Covid-19 put his plans on ice.
Seeking a new challenge, he found it with Hatt & Associates, who he joined in 2021 as a Partner alongside Jayson Hatt. Brad Hatt oversees the company as President (pictured left - Jayson, Brad and Tyler)
With a rich and extensive background in the business aircraft pre-owned sales market, AvBuyer caught up with Tyler to tap his and Hatt & Associates’ insights and expertise in the marketplace today.
AvBuyer: Tyler, tell us about the year you’ve just seen in the pre-owned aircraft sales industry. We’ve heard it described as being ‘unique’ by some, while others likened it to 2008 just before the Great Recession. How do you see it?
TB: Last year was certainly an exciting year. In terms of its uniqueness, and although the lead-up to the Great Recession in 2008 felt similar, 2021 was certainly different.
For example, the available inventory today is well below what we’ve ever seen before. In 2008, the popular markets had around 5% available inventory. Today, some of the popular pre-owned markets have zero available inventory.
That’s not to say that aircraft aren’t available to buy. They’re just selling before they reach the open market in most cases.
AvBuyer: What were the challenges, both to the aircraft broker community, and to buyers and sellers, in 2021?
TB: The lack of inventory made it difficult for buyers and brokers alike. We at Hatt & Associates found it important to be part of a network of brokers in the form of the International Aircraft Dealers Association (IADA). Together with other IADA members, and friends within the wider brokerage community, we were able to navigate the market with relatively little interruption.
The market conditions did demand much more work in locating aircraft for clients, though, as you can imagine. For sellers, this was, and continues to be a market presenting price challenges.
Prices have gone up drastically over a short period of time. Every time a new pricing precedent was set, prices seemed to go up with the next transaction.
Knowing how to maximize on the sale of the aircraft can be difficult in today’s market. That’s where working alongside an experienced broker makes a big difference.
AvBuyer: According to a couple of sources we’ve read, the scarcity of great quality inventory in the pre-owned market led some desperate buyers to forego important procedures like the pre-purchase inspection in order to quickly bag their preferred jet. How would you advise under-pressure buyers who are in a hurry to purchase an aircraft today?
TB: It’s unbelievable, but we saw it too: buyers forgoing a pre-purchase inspection, or having minimal inspections. Many of these were buyers with little or no representation on their side of the transaction.
You need representation in this (or any) market – and not just somebody who will represent your short-term acquisition needs, but somebody to protect your longer-term interests regarding the ownership experience and future re-sale of the aircraft.
Today, as always, it is critical to be patient when you’re buying a pre-owned aircraft. Sure, the market is frustrating, and there are a lot of buyers champing at the bit to jump in with a purchase, but it’s absolutely necessary to slow down and analyse exactly what you are buying.
Also, be prepared to pay more. Every jet aircraft went up by hundreds of thousands of dollars, and some went up by multiple millions.
AvBuyer: Most sellers will be hoping to achieve higher prices for their aircraft in today’s market. Who is really likely to benefit from price increases, and who – in reality – is ‘hoping against hope’ in this regard?
TB: This market really benefits aircraft owners who have held on to their older aircraft. There have been many aircraft transactions for those previously difficult-to-sell legacy aircraft, those that may have been all-but-forgotten in previous years but are now fetching multi-million dollar prices, owing to lack of newer inventory.
At the opposite end of the spectrum, the market is also benefiting sellers who bought newer aircraft, say, two or three years ago. If they purchased their aircraft for $7m, and sell it for $9m in today’s market, they effectively have had all their flying paid for, purely because of price appreciation in today’s heated marketplace.
On the other side of the fence, there were buyers hoping for an opportunity to buy low, due to the pandemic, who are having to adjust their price expectations. The anticipated flux of ‘distressed’ sellers as a result of Covid-19 never materialized. Prices didn’t come down – they went up.
That’s another major difference between now and in 2008. This market is not in a financial crisis.
AvBuyer: What are the markets that are catching your eye at the moment and why? Which do you expect to see stand out over the course of 2022?
TB: The Hawker 850 and Hawker 900 markets are notable, and are largely being driven by first-time buyers. Jets in the $2-5m range are popular today among that buyer demographic, and are likely to continue to see strong activity throughout 2022.
In contrast, there are signs in the larger jet legacy markets (such as the Gulfstream G550 market) that prices are starting to stabilize and possibly soften.
We’re expecting to see inventory creep up in this part of the pre-owned marketplace, which should result in a softening in this market over the course of 2022.
The pace we have seen in the market over the last year, though unprecedented, still allows for buyers to make a sound purchase, but it’s vital to have a full understanding of the equipment you’re buying.
Jayson Hatt (Partner), Brad Hatt (President) and Tyler Bowron (Partner), Hatt & Associates
AvBuyer: Looking at the market more widely over the coming year, what do you expect to see happen? Are we likely to be looking back on another record year for sales come New Year 2023?
TB: The sales numbers we’ve just seen in 2021 will be nearly impossible to duplicate, purely due to the lack of inventory that’s available.
Over the course of 2022, many first-time buyers of 2020 and 2021 will likely evaluate their choice to move into aircraft ownership along with the cost of ownership, and some – especially those flying less than 100 hours annually – will be looking to sell as a result.
The additional inventory this will make available will coincide with the OEMs ramping-up production, and as other buyers take ownership of their factory-new jets, they will also place their existing jets on the market for sale, further replenishing the pool of available inventory.
This should lead to some market stabilization, but it won’t be seen in earnest until 2023. Ultimately, 2022 will be another strong year, but not on the same scale as 2021.
AvBuyer: Finally, we’ve all heard about the many first-time users of business aircraft that emerged from the pandemic. Some will be looking for their first move into ownership this year, having experienced the benefits of Business Aviation through charter and fractional ownership. What’s your advice to them as they make their first steps into owning a jet?
TB: The advice remains the same, regardless of the market: Ensure the aircraft matches your mission; and understand the full cost of ownership – this is critical. The high demand for charter flights has brought an increase in the cost to hire a flight (in some cases, the cost to charter is outrageously high). But the current high charter rates are probably not sustainable.
If you find you have a need to fly 100 hours annually, it may make sense for you to consider ownership, but don’t rely on the high revenues from charter in this unique market to offset your cost of ownership.
And then there’s just common sense: As mentioned, be sure to have a reputable broker involved from the beginning of the process, to ensure both your short- and long-term interests are being protected.
Most first time buyers will find themselves looking for another aircraft within a few years, and when it comes time to sell your initial investment, a sound purchase now will make the transition to your next aircraft a much more enjoyable experience.
More information from www.hattaviation.com
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