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Psst: How’s Business?

Aircraft Dealers & Brokers confide there are challenges to dealing with clients and inventories.

As the line from the song goes- ‘you don’t need a weatherman to know which way the wind blows’. This old Bob Dylan line seems particularly apropos working near the production lines for four major business aircraft factories. The daily hum of production flight tests alone provides visible affirmation of the strength of today’s new-aircraft for sale market.

According to all reports and indicators- the market for pre-owned aircraft is also particularly robust- driven in part by the new plane sales to move-up customers- partly by strong profit and personal wealth growth and access to favorable finance terms. That said- however- serving as a dealer or broker in the used aircraft for sale market does have its challenges – challenges a little different from those faced by the factory marketing staffs- some welcome- and some unavoidable- including finding inventory; finding buyers; matching up an eager customer with a “good” example of the “right” plane… at the right price… And doing the job before a competitor does it first – taking with them the fees and profits from the transaction as well as getting an edge on any potential future deals.

For each market- the challenges may vary- but the goal remains the same – find the deal- satisfy the client- bring home the bacon. We sampled a cross section of companies engaged in the movement of pre-owned aircraft from its current owner to a new one. These aviation professionals declined to be identified for their observations. “No point in educating the competition or tipping off clients to the details of what we do-” said one broker representative who declined further comment- except: “I’d rather not talk further.”

Others were slightly more forthcoming – offering up varied observations on the condition that they were not identified with their comments. “It’s competitive enough as it is-” said a dealer rep who wasn’t anxious to be identified. “Not sure I want my clients to see what we go through- either.”

This point- alone- offered a clue to one aspect of today’s market for pre-owned business aircraft. As the market goes for new aircraft- so goes the market for pre-owned planes for sale. And sales and order backlogs for new business turbine aircraft are at historical highs – with historically long lead times for many of the most-popular jets. Several factors- actually- help influence the high level of activity in the pre-owned market: those big backlogs; higher demand in overseas markets; and the growth in the number of companies and high-net-worth individuals using – or wanting – a business jet for sale.

For the dealer/broker business- competition is keener than ever- thanks to these factors- as noted by Susan Sheets- president of the National Aircraft Resale Association (NARA) in a previous ‘Ten Questions Interview’ for this publication. Another factor adding pressure to the cooker is the growth in the number of dealers and brokers in the field- spawned by the heat of the market. So what are concerns and factors these resellers deal with? Read on for some representative views.

WAS: Broad brush- how are inventories running now versus last year and five years ago?

A representative of one regional reseller offered- “Inventories seem to be waning- at least for the mid- and large-cabin jets our clients want most… but not because people are holding on to them longer- it seems- but because they aren’t staying on the market long – if they become publicly available- at all.

“For some of the older- smaller jets- well- they don’t seem to command the demand they used to- except among new operators looking for a lower-cost way into business jet ownership.”

Another broker lamented- “Too often some of the best choices don’t seem to come in play – they’re committed before the former owner takes delivery of the replacement plane. That’s where we try to work harder – mining data to find those customers awaiting new planes and signing them to handle the current plane when it’s time for it to go. Puts pressure on available inventories – despite how strong the transaction reports make (sales) look.

“Thankfully- new-plane deliveries are headed to more than 1-000 a year for the first time – this year or next – and that bodes well for future inventories.” A western-U.S. dealer/broker offered a third perspective: “Anyone who’s adept at working their networks should have no trouble finding what their clients want. The real trick is in getting a deal the client can live with when demand for jets under 10 years old is so high. And for some later-model types- you pretty much have to know before it becomes available if you want a crack at landing it.” Many of those in-demand planes are either getting sold months before they’ll be available or they’re going for premium prices – and then it depends on how much of a premium the client is willing to pay to play- this particular executive explained. “In these circumstances- patience can pay off – or it may just mean making a new decision.”

WAS: Again- in general- are pre-owned airplanes moving faster or slower than last year and five years back?

An eastern US brokerage offered this observation: “As good or better. The premium pre-owned jets- the ones most in demand – newer mid- and large-cabin- ultra-long-range and ultra-large – don’t stay on the market long if they are in premium shape. If they do hang around- there’s usually a reason- one of two: a seller with an inflated sense of the plane’s value to others- or a plane in need of a little TLC to improve its ‘ramp appeal’ to potential buyers.

“A lot of planes in both categories aren’t really in play for us – the owners are trying to sell the plane themselves and save on the transaction costs of using a broker- or to get a higher price than they’ll get letting it go to a dealer.

“Funny thing – we get a trickle of those would-be owner/sellers who run out of patience or need to move the asset. With a little work- we can improve the chances they’ll come straight to us the next time they want to upgrade or expand their fleet. “They learn to appreciate the value a good broker can represent – such as overseeing the brush-up needed to get a higher price- which offsets some of our costs. It’s a win-win.”

A southeast dealer echoed many of those sentiments. “Older jets – particularly those more than 15 years old – and smaller jets can be a drag on inventory. Unless- that is- you can get the plane at a price point that makes it worthwhile to perform the upgrades the prior owner would have done – or should have done.

“Thank GAMA for the backlog on smaller new jets – those waits are the saving grace of what would be a slower market for the older light jets. And thank goodness for some of the upcoming modernization programs for older Cessnas and Lears – those programs that convert the planes to Williams engines- in general. Those programs make buying an older Citation or Learjet more economically viable- particularly given the performance gains and operating- and maintenance-cost reductions – and shorter lead times.

“With the available cockpit upgrades- RVSM- better performance and payload and range – it helps us move some older planes their owners once worried about getting out of.”

WAS: Which task presents the greatest challenge: Finding an airplane to match with a ready buyer? Or finding a ready buyer for an airplane you’re handling? Or is there much difference?

Again- our southeast dealer went straight to the point – with a classic- ‘On the one hand/on the other hand’ explanation: “Well- if you’re dealing with a client looking to meet defined needs of performance and costs- it can be – can be – relatively quick and easy if they don’t have any brand-specific requirements or unusual mission needs- like hauling full cabins over extended ranges.

“Then it can be difficult to explain to some that what they need probably doesn’t exist in the cost range – or that their cost range won’t support a plane that fits their needs. In other words- it depends.”

Our Western region broker countered this way: “Matching can be easy if you’re dealing in a range that offers a lot of options and/or the client can be reasonably flexible in what they are willing to spend – and that’s more often the rub. “Case-in-point: A potential client contacted me about finding an ultra-large airliner-based business jet. After some research into the purchase and finishing costs of a factory-new version- applying some depreciation figures and tax considerations- this prospect gave me a price range his company thought they’d have to spend.

Unfortunately for them- pre-owned examples of this airplane are selling at or above their original price – if they even become publicly for sale… and too often they don’t. And then we’re back to the first problem: demand is high enough that pre-owned units command above-market prices. Needless to say- I didn’t sign that guy.”

WAS: Is much of your business centered on finding interim lift for a client waiting for delivery of a new airplane on order?

Our Western region dealer/broker noted this: “We do get inquiries- often from the OEM folks interested in placing a customer in an airplane similar to what they have on order- but it’s not an everyday occurrence.

“Very often- the OEM staff can help move an airplane from a customer about to take delivery to another customer with a longer wait ahead of them. Some of the time- though- we’re able to match up a client with a managed aircraft to fill the void until the new plane comes out of the factory.”

And a representative of a multi-region brokerage noted- “It happens- but not a lot – but we’re glad to help every time it happens. Sometimes- it doesn’t mean selling an airplane but it does mean establishing a relationship with an operator who will- a few years down the road- have an airplane to sell. If we can place them in interim lift – bought- leased- chartered- whatever – and maintain that relationship- we’ll have an edge when that time comes. We’ll be ahead of the pack – like banking customers.”

WAS: Within the segments of light- medium- large and ultra-large/ultra-long-range jets- which seems the most active these days?

Noted the same multi-region brokerage representative- “Are you asking about demand or what we sell the most of? If it’s the latter- it’s light jets by virtue of their sheer numbers. There are more models and more units produced- and a lot of the new-plane sales – whether to move-up customers or new operators – involves replacing older light jets. In terms of demand- though- the mid-size jets seem to bring the highest relative values- particularly for those younger than 10 years old.

“But relative to the available inventory – that is- the total size of the fleet built and flying – the ultras seem to be off the scale in interest. It’s harder to sign them- easier to sell them- and easier to get a right price for them.”

Our southeast region dealer sounded a similar note: “Overall- we can turn around a mid-size jet quicker and easier than almost any other. But from smaller and newer operators- the demand for light jets is also quite strong – partly because the advances in upgraded new models have encouraged turnover and partly because there are so many planes and so many people interested in getting in.

“The hardest thing for me to find available is a reasonable deal on an ultra-large or ultra-long-range jet. They are in demand – many times by operators who don’t need the extra range or space – because they offer capacity and amenities unlike any others. And for those with the pockets- well- why not? What’s $40 million for something smaller when $50 million not only gets you larger – but also the ability to fly multiple stops without refueling on the road. These folks like the security and luxury and convenience – and more and more of them can afford what they want. “As long as those traits work in harmony- people in our business are going to have a lot of business – and a lot of competition to land that business.”


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