Timing is everything, so say the pundits. David Wyndham examines the applicability of this often quoted adage to selling a corporate aircraft in Part Two of his Three-part series on today’s market dynamics.
The top 10 business jets in terms of units delivered since 2007 have lost about 68% of their inflation-adjusted value. After such a decrease, have values stabilized? Is now a good time to buy, or should you ‘cut your losses’?
Before putting the ‘For Sale’ sign on your business aircraft, be clear on two things:
In selling your current aircraft, are you trying to achieve a specific selling price or just liquidate at fair market value? Or is your current business aircraft unable to meet your travel needs and you want to be positioned to make a change?
Aircraft brokers and forecasting experts do not see any near-term changes in the declining values of aircraft. Thus postponing a decision to sell is not likely to increase your aircraft's market value. Unless you make major investments in upgrading your aircraft, your current aircraft is probably worth more today than it will ever be worth in the future. Even if values were to recover in two years, your current aircraft would be two years older and have lost more value due to age than any gain a market recovery could promise.
AMSTAT currently lists 2,344 business jets ‘For Sale’. The median number of days listed is 263 days, but the average is 463. In other words, while half of the business jets offered ‘For Sale’ today have been on the market just over eight months, there are a large number that have been ‘For Sale’ nearly twice as long.
Of those sold year-to-date in 2017, they were listed on the market for an average of 439 days - that’s one year, two months and 13 days.
So if you are going to sell, be prepared either to price your aircraft aggressively right now, or wait and bet on a better pricing struc-ture down the road. You risk experiencing the same need to be aggressive in the future, so beware.
The use of an experienced aircraft broker familiar with your aircraft type and the competitiveness of the market for similar models is a must. If your aircraft serves international travel and might be attractive to operators throughout the globe, ask the prospective broker how many deals they do outside the US, their recent transactions and the selling prices of the aircraft they have represented.
Inquire how your aircraft stacks up against the competition in the market and what you can do to enhance its competitive position. Be prepared to make some tough decisions, however, and remember what one experienced broker told me in 2009 that is still true in 2017: “The offer that you get today is likely the best one you will receive”.
The next thing to consider is what are your current and future air travel needs? I’ve met aircraft owners who were glad to have sold their aircraft, but never one who was glad to be flying on the airlines again. There are many options. If your company is accustomed to op-erating several aircraft, understand what impact the loss of one aircraft will have on your schedule.
There are more variables in the equation than just how many hours you need to fly, including overnight travel, upcoming maintenance in your remaining aircraft, and corporate policies regarding who can schedule and use the business aircraft.
A meeting with your flight department manager will provide you with answers and options.
If you have a new aircraft on order for a future delivery date and you sell your current steed, you will need short-term lift. Your most likely options are Charter and Jet Card programs. Both offer short-term lift, options for aircraft size and capability, and no long-term contracts or commitments.
Charter is booked on a per trip basis. Jet Cards are pre-purchased charter that may come with additional incentives or guarantees for future air travel. Cards tend to start selling at 25 hour blocks of time that guarantee costs for a year.
Another option may be a short-term lease of a fractional share. One Conklin & de Decker client who was awaiting delivery of a global business jet was offered a 24-month lease on a fractional share involving a (smaller) long-range business jet. These deals are rarely advertised and depend on the availability of shares. But they exist, and they should be explored.
Selling your current business aircraft for less than you anticipated is not a pleasurable decision. But selling today is likely to get you the better price versus waiting. Next month, I’ll look at selling and trading up, either in size or newness.