Dave Higdon writes about aviation from his base in Wichita Kansas. During three decades in... Read More
Businessman Gulfstream Jet
As we approach the start of March, many people involved in used aircraft transactions exude a sense of optimism, reports Dave Higdon. That optimism started growing in the latter half of 2016...
Brokers, dealers and sellers all note that their phones ring more often, bringing more inquiries and raising their expectations for increased market activity in 2017.
“We experienced something similar in early 2009,” noted one southwest broker. “But it was short-lived.
“First came the three automobile-company executives, each flying a different business jet between the same airports to testify before the same House of Representatives committee. Then came the president's ill-advised remarks following those same executive’s ill-advised trip-planning and terrible performance.
“Things then went really cold in the aircraft sales market as it followed the rest of the economy in a downward spiral.”
It's the Economy...
So what’s different today? “The economy was tanking back then,” the southwest broker continued. “Today, we're much better off and we have been getting better for several years.”
David Lipski, President, Eagle Aviation in Columbia, South Carolina, noted the phones started ringing more frequently late last year. He also said 2016 sales grew stronger in the second half of the year.
Ditto for Rene Banglesdorf, owner of CharlieBravo Aviation in Georgetown, Texas: “Last year, people we talked to had a mixed year – a weak first half and a stronger second half. This year, we're getting a lot more interest across the board.”
Her upbeat attitude is shared by others. “Market wise, I'm optimistic,” Banglesdorf adds. “My phone has been ringing since the first of the year.”
The Financial Times this week reported that four major US benchmark stock indices closed at record highs for four straight days in Valentine's week. Adding to the momentum, according to the Financial Times, were positive corporate earnings and robust investor confidence, which together offset fiscal and political uncertainty to push US stock markets to those record levels.
With 82% of companies in the Standard & Poor's 500 Index reporting, corporate earnings are up 4.6% for Q4 2016, and the Investors Intelligence Advisors Sentiment survey showed bullishness at a 12-year high last week, according to CNBC.com.
“I view the next few years very positively,” Lipski said. “The economy has improved. We've moved in the right direction in the past couple of years and there are greater things on the horizon.”
And unlike several years ago, financing a business aircraft is less of a challenge today. “Securing financing is not an issue if you're a qualified buyer; unless you can't afford an airplane, you can get a loan – 20% down,” Banglesdorf added.
Other Influential Elements...
Banglesdorf and others also mentioned the impact of new business aircraft users joining the community through new options. “There are a lot of companies making a lot of noise that are offering a new way to enter Business Aviation,” she said. “Wheels Up and Jet Smarter are two examples.
“They make it a little more accessible to enter at a lower level – and a broader market would help all of us.”
Not all parts of the world are hot spots for business aircraft sales, however. The market with the highest potential remains the US – at least in the eyes of David Lipski, Rene Banglesdorf and others.
The only potential fly in the ointment is the looming debate over privatizing ATC in the US.
“That change (and the user fees its supporters propose) represents a financial unknown,” observes an East Coast dealer who asked not to be identified.
“Some prospects will sit out making a buying decision until they can factor user fees into their operating budgets. Everyone knows – or at least expects – those fees to run substantially higher than the fuel taxes we pay now, so until we see some numbers, it could be a sales-killer.
“And sales killers are job killers. There’s another valid point against privatization.”