What’s the best advice for buyers and sellers entering today’s used international aircraft marketplace, and why does it help to broaden the search as widely as possible? Jet Tolbert discusses…
Looking back over our recent aircraft sales, it’s clear there has been a stronger international flavor lately. While this micro trend doesn’t infer that all deals are international, there is definitely a growing element in the market that both buyers and sellers could use to their advantage.
Though there are many variables to aircraft transactions and every deal is unique, following are some observations and tips that buyers and sellers of used jets could use to their advantage when developing their strategy…
Strong International Seller Presence
According to JETNET iQ, as of Q4 2018, 62.3% of the business jet fleet resided in the US, meaning that almost 40% doesn’t... In fact, if you’re looking for a specific aircraft type on the market, you can expect to find foreign-registered aircraft for sale representing nearly every make and model.
As of this writing, as much as 50% of some make/model fleets that are for sale are registered in Europe. Moreover, just because an aircraft has an N-register doesn’t mean that its owners are from the US. But why does this matter? Let’s elaborate…
US Aircraft Buyers: Higher Risk, Higher Reward?
As a US-based buyer you could approach your shortlisting process one of two ways. You could narrow your risk exposure by considering only US-based aircraft (and in doing so you’d be narrowing your market options). Alternatively, you could take on extra risk associated with buying internationally-based aircraft and importing them, and also broaden your shortlist.
By automatically assuming the lower-risk approach, however, buyers have fallen short.
By limiting their options to aircraft on the N-register (and in some cases ruling out as many as half the available airplanes for sale for the desired make and model), low-risk buyers can actually heighten the risk of overpaying for their business jet.
Think about it: Shopping only the domestic market could be the difference between looking at the market as 5% of the fleet for sale versus 10% of the fleet for sale which is a significant difference between a tight, seller’s market and a softer, buyer’s market.
It’s true that in today’s market, should a buyer see ‘the one,’ it’s necessary for them to act fast or miss out — but this must be tempered with a longer-term view that there are more aircraft coming up for sale, and more opportunities on the way. There should be no reason to over-pay for an aircraft in today’s market.
US Aircraft Sellers: Knowledge is Key
Savvy sellers will be aware that there are plenty of US-based buyers unwilling to consider an internationally-based aircraft. Indeed, there are ways to create greater bargaining power and yield a higher sale price if the right buyer can be found. That buyer will be interested in acquiring the right US-based aircraft quickly.
To capitalize, it becomes important for the seller to develop a marketing plan that identifies the target market and reaches all potential buyers within that market directly.
Moreover, the seller will need to have the details and history of all the competitive aircraft for sale in the same (and similar) market segments, and develop an understanding of the value trends for aircraft in similar market segments. All of this will help create a compelling value proposition for their aircraft.
US Aircraft Sellers: Don’t Overlook International Buyers
US sellers may conclude that talk is cheap; anyone from anywhere can express an interest in buying an aircraft. While it’s true there are many tire-kickers in the market, there are also genuine and qualified buyers willing to export aircraft from the US market.
So the best strategy will include reaching out, beyond the obvious US-based buyers to the target buyers in other regions, too. Again, it will pay to qualify and advise each prospect on the value proposition of your aircraft, as well as the sale process.
Whether a prospective buyer is domestic or internationally-based, the actions of some will raise a red flag.
It’s important to understand the differences between domestic and international transactions to know if behavior should be deemed a warning sign, or is cultural practice.
For example, many international buyers take more time to process the transaction due to their local banking and aviation regulations. International banking system can cause a difference of wire transfer times by as much as several days, or even a fortnight.
Nevertheless, most international buyers will try to keep their US counterparty well apprised of the process, providing copies of outgoing wire transfers when ordered as well as other regulatory updates as needed.
Another item worth consideration is that international buyers will have to sort the ferry flight to the importing country, a process that takes time. But there are temporary registration options to offer international buyers to help ease this process.
International Buyers: Enhance Your Chances
In reality, American sellers tend to place a higher grade on offers received from a US buyer. As an international buyer, submitting your offer with details on the purchasing entity and proof of funds will help give your offer more credibility. But many sellers will want more assurance that you are genuine and ready to perform.
Expect to provide these assurances with the deposit terms and a closing on US soil. Offering details on your past aircraft ownership history can also go a long way in demonstrating to the seller that you’re familiar with the transactional process and are likely to close.
Whether you’re a buyer or seller, international or US-based, it’s always a good idea to be selective about who manages the sale or acquisition of an aircraft for you – especially in today’s marketplace, where there is such a strong international presence and many potential pitfalls.
The right partner will present all details in context to paint an accurate picture of the market and enable a well-informed decision at each phase of the sale or acquisition.
More information from www.americanaircraftsales.com