In the midst of the global COVID-19 pandemic, and with various global political factors ahead in 2020, it’s a difficult time to read the Business Aviation marketplace without expertise. So Rebecca Applegarth asks Janine Iannarelli for her perspectives…
Janine Iannarelli has been in the aviation industry for 37 years, and specifically business/private aircraft sales for 35 of those. As president and founder of Par Avion Ltd., Ms. Iannarelli has represented a number of private individuals and corporations internationally in the purchasing and sales of business aircraft.
Having established Par Avion Ltd. in January 1997, she’s seen lots of ups and downs in the marketplace, including some truly unique challenges. Iannarelli is therefore well qualified to discuss the uncharted territory of today’s COVID-19 pandemic and its potential impact on aircraft sales.
AvBuyer: You put out a strong, re-assuring statement regarding coronavirus on your website recently. Having seen, and navigated market downturns in the past, how do you see the coronavirus pandemic impacting the market and how are you preparing?
Iannarelli: The viewpoint of the trade seems to be split into two different groups of people: Those who hold a more negative outlook, and those who say we have to wait it out a bit and see what unfolds – a more optimistic outlook that I associate with.
Par Avion Ltd is prepared for the onslaught that we feel will come on the back-side of this pandemic. By preparing, we are investing heavily in our information gathering and emphasizing a refinement of our ‘primary research’ of the market. I have instructed each of the people working together at Par Avion to make sure our market reports and analyses are perfect – not just good, but perfect.
Janine Iannarelli, President & Founder of Par Avion Ltd.
Additionally, we are further developing our consulting services, including a service that we offer to aircraft owners that provides them with the opportunity to stay abreast of changes in the market for their specific make/model of aircraft. Regular reporting on the market helps to keep them apprised of the value of their airplane asset.
This is a product that has always been available, but until now was not a mainstay of the business. With the recent addition of David Wyndham to the team it is logical that we encourage this service and deploy his expertise in operational and performance analysis.
We are constantly combing through data, be it first-hand information we gather, or via secondary information sources which we make extensive use of. We’re in constant communication with others in the trade, too, and remain so with our clients.
This is a moment we can all take to tidy up any loose ends in our work.
AvBuyer: Tell us about the markets you're focused on at Par Avion Ltd. What were they looking like before the pandemic, and what are they looking like now?
Iannarelli: Even before COVID-19, our expectation was that 2020 would not be as robust a year as the previous few in light of the fact it is a Presidential election year in America, which typically makes for cautious business activity in general.
People are hesitant to make huge investments without knowing what the future might hold. Continuity in a government is good because at least you know what you have to work with, whether good or bad.
Over the past two years discussions of ‘us’ being due for a recession have been ongoing and the only question was, would it be mild or severe? Prices had started a downward trend in 2019, though not dramatically. Some markets were simply exhibiting what would be regarded as a normal depreciation schedule, as was seen prior to 2008; a 3-4% per annum reduction off of the declining balance.
COVID-19, while a serious threat to our global economy (and certainly the aircraft marketplace is vulnerable), for me is a little different than the downturn we faced after the economic meltdown of 2008 – and there are several reasons, liquidity being one of them.
In 2008 the banks themselves were at great risk and had no money to lend. Today there are funds available, though admittedly the financial institutions are reluctant to lend at the moment, and the US Government is taking a huge step in helping all through this crisis by injecting a trillion dollars into businesses.
That is a huge difference as compared to 12 years ago.
In addition, the buyers who existed pre-COVID-19 have not necessarily gone away. They have ‘paused’ their investing, but are fully expected to resume once we ‘open up’ a little bit. (By ‘open up’, I mean that at least the US restrictions on internal travel need to be relaxed and allow unfettered movement between States.)
We also expect an uptick in interest in travel by private aircraft for reasons such as dimished airline routes and flight availability, and a desire to reduce contact vis-à-vis large terminals and the cabins of commercial airliners.
On the market front, there are far fewer late production, pre-owned airplanes available [for sale] today, as compared to ten years ago. The supply of new or nearly-new has in fact been declining due to the OEMs having cut production since the last downturn.
There are more buyers than were perhaps realized who view ten years of age as ‘old’ in our sector of the aviation marketplace. Since 2008 financial institutions have preferred younger aircraft at the end-of-term, further limiting a supply of what a percentage of the market consider suitable.
One final thing I think many people haven’t considered is that for all the OEMs; the supply chains have been disrupted.
To what extent will be unknown until they start talking about it, but I can almost unequivocally say that there will not be as many [new jet] deliveries this year as were originally planned for.
The OEMs will have to defer deliveries of new aircraft, at least to the equivenlant time they and their global partners were shut down. Essentially, this means if you are ordering a new aircraft today, you’re looking further down the order book than you would have been without the COVID-19 pandemic.
Certainly, there are going to be some delivery positions that become suddenly available, caused by the crisis, but once the manufactuers work their way through this inventory there will be delays.
So it was extremely important for the US to invest in small business, and historically it’s the first time they’ve ever done it. Many of the those suppliers to the manufacturers today are domestic US small businesses, and if they were to collapse it would cause a significant ripple effect.
From a buyer’s perspective, however, if you’re looking to buy a fairly new aircraft, particularly in the Large Cabin Jet category, and there’s nothing to be ordered from the manufacturer that you can have in the relative near-term, you’re probably going to look at the pre-owned market as well. This might help tighten the supply [of used jets] even more.
AvBuyer: With the whole world impacted by the coronavirus pandemic, where do you see the market returning first?
Iannarelli: As mentioned there was a set number of buyers prior to COVID-19, and they won’t have gone away. At least, not in the domestic US.
I feel strongly they’re going to come right back to the marketplace as soon as travel restrictions are lifted and they have a destination to go to. Business travelers will lead the way, hopefully soon followed by leisure.
Having looked at enquiries pre-COVID-19, I would generally say 85% originated inside the US and the other 15% from the rest of the world. Recently (post-COVID-19), I have heard it said that 95% of enquiries are coming from the US. While I can’t take credit for that observation, I would second it.
With 95% of enquiries coming from the US, the international markets are going to be very challenging for the coming year. The vast majority of aircraft sales business is going to be transacted here in the US.
I recommended to my clients to reposition their ‘for sale’ aircraft over to America prior to the lock down. One of my clients kept their airplane in the States instead of flying it back to Europe and it was subsequently sold and delivered in April.
The client made it easy for a prospective buyer to see it, and with service centers operational here in the States, it was relatively easy to conduct their due diligence inspection. Those were key components of this COVID-19 success story.
AvBuyer: We've seen a range of theories on the market recovery post-coronavirus, from relatively quick to long-term. Where do you stand on how the recovery will play out, and why?
Iannarelli: Well it will certainly be a ripple effect. Service industries will be among the first to return to full capacity post COVID-19. If you sell, consult or advise, you’ll get back on the road almost instantly to visit clients or take care of other business.
The same could be said for any kind of manufacturing firm that usually would send out team members to visit their manufacturing sites. Those people will be back flying quickly. Leisure travel will be the last to return to normal, whatever the new normal will be.
Again, I anticipate there will be more of a flourishing in the United States before we see it anywhere else. One reason is because of the distances we need to travel in the States.
But for the industry as a whole to restart, in some respects it could be pretty quick and in others, it’s going to depend on demand and access. Even if you don’t have a requirement for long-haul international travel, there still remains quite a bit of terriotory to travel in the United States.
AvBuyer: Finally, a word on David Wyndham. You've appointed him as executive sales director and acquisition specialist. How will he fit in with Par Avion Ltd.’s vision for the present and future?
Iannarelli: I think there’s a great compliment of skill sets and, in fact, David adds a new dimension. Conklin & de Decker is a resource that I have made use of for years, and what a great addition to my team to have one of its original team members.
It’s not that Par Avion Ltd. wasn’t already providing some analysis of which airplane works best for a flight department, but David takes it to the ‘nth’ degree. David has the ability to strategically assess one’s existing operation or need, rapidly compute the numbers, and off the top of his head give you an analysis of the operation and make further recommendation.
David’s appointment increases our ability to provide an ongoing market analysis, as opposed to periodic, evaluations of the aircraft asset.
David is an information source who I think will prove really valuable to people contemplating a first-time purchase or a major change to their uplift.
His unique skillset, combined with all the expertise and resources Par Avion Ltd. brings to the table, will provide the assurance sought in these unsettling times for those wishing to engage in an aircraft sales transaction.
More information from www.paravionltd.com