Aircraft Brokers at NBAA See Transaction Upturn
On the eve of NBAA 2013, aircraft brokers here are expressing confidence that values of pre-owned aircraft have stabilized and pre-owned business aircraft transactions are on the upswing.
“I’m getting more calls from buyers wanting to come off the fence, and perceiving real value at this point,” said George Marburger, managing director of Jeteffect. Said Jetcraft president Chad Anderson, “It does feel like we’ve hit bottom,” which passes for good news in this market, while Alireza Ittihadieh, president and CEO of Freestream Aircraft, said he’s “cautiously optimistic” about the market, going forward.
The pre-owned market is already robust. In 2012, business aircraft resales (pre-owned broker/dealer-to-retail business jet and turboprop transactions) hit an all-time high of 3,625, according to the National Aircraft Resellers Association (NARA). NARA counts a total of 2,269 broker/dealers worldwide, although the majority of mainstream jet sales activity is dominated by a relatively small number of brokerage firms.
With more than 40 brokerages and brokerage services companies exhibiting here in Las Vegas, the convention offers access to a gold mine of expertise for anyone interested in buying or selling a business aircraft.
Ittihadieh, of London-based Freestream Aircraft (Booth No. N704), noted the robust sales volume “has been very helpful in establishing pricing information. Now we’re able to give people aircraft values categorically, with side-by-side comparisons,” he said.
Marburger, from the Palm Beach, Fla. office of Jeteffect (exhibiting at the static display), said low-time, late-model aircraft are most in demand, but pricing has been kept in check by OEM order books. “We’re driven by new airplane orders,” he said. “The longer the backlog, the higher the value goes on pre-owned aircraft. Every time we think [an aircraft model] is sold out, it seems like the manufacturer has one sitting around to sell, and that’s helping to keep pre-owned pricing down.”
Jetcraft’s Anderson concurred. “If you pushed Gulfstream hard, you could get a G650 by the end of 2014,” he said. “If you pushed Dassault you could probably get a Falcon 7X in 12 months, and if you pushed Bombardier you could get a Challenger 605 in three months. That new product chain helps guide our pre-owned market. Without really long backlogs, which there aren’t, that’s going to keep everybody in check.”
North America Improving But Anderson said Jetcraft (also at the static display) isn’t writing off the market for older aircraft. “North America is back in action, which is a help for older aircraft,” he said. “It has the most support and most educated clients out there, and North America has the most tolerance for the old aircraft.” These aircraft don’t sell quickly, however. “A five-year old or younger airplane, you might expect 90 to 120 days [on the market]. Older, out-of-production aircraft, we’re telling clients to be ready to wait six to twelve months,” he said.
In August, Jetcraft acquired Switzerland-based ExecuJet Aircraft Trading, giving the Raleigh, N.C.-based company offices in locations including Basel, Dubai, Hong Kong and Moscow. This show marks “the first major industry function with our entire team–Jetcraft and our new colleagues from ExecuJet,” said Anderson. “The objective is to reinforce the message that we are as one, and we’re here and serious about doing business.” Jetcraft features two Bombardier Global jets at its display.
Don Dwyer, managing partner at Guardian Jet (at the static display), advises owners considering an upgrade to focus less on how the value of their aircraft has declined and more about what their money can buy: “They say, ‘My airplane was worth $10 million, now it’s worth $7 million.’ Well, the $20 million airplane they want to buy is now $14 million. So in a good market where everybody felt comfortable to upgrade, it cost $10 million. In this down market it costs $7 million.”
Dwyer, who shares managing partner duties at the Guildford, Conn.-based company with brother Mike, advises prospective buyers to “look at total ownership cost, and the best way to do that is understand the value of what they want.” Here at NBAA, in addition to showcasing a Falcon 50, Falcon 2000 and Global 5000, Guardian Jet is unveiling a new website and an online aircraft value calculator that will allow anyone to obtain that valuation. The Aircraft Value Calculator Powered by Guardian Jet prompts users through a series of questions about an aircraft, including year of manufacture, time on airframe and engines, whether on an engine care program, configuration and other detailed, model-specific questions. Once submitted, an email response provides the aircraft’s market value.
A Global Market
Brokers note that the pre-owned market is now global, and putting together and consummating deals now requires a variety of skills and contacts few organizations can marshal. Yet despite the expertise brokers bring to aircraft transactions, they say many buyers and sellers still try to go it alone, confident they can do it themselves and save the fee they’d otherwise pay to the broker.
“With the Internet now you have information at your fingertips and you can Google anything and get an answer,” said Marburger. “But you can’t evaluate the value of an aircraft on the Internet, and [buyers] don’t know the neighborhood. There are certainly many people who think they know what they’re doing, but they make mistake after mistake.”
On the sales side, Ittihadieh advised, “The approach for owners should be, ‘What can the broker do for me and not how much is he charging me.’”
Conversely, in a market like this sometimes the broker doesn’t want the client. “The market downturn taught a lot of people a lot of lessons,” said Anderson. “In ’06, ’07, ’08, it was harder to make the argument that a seller needed a broker. Now, to be frank, we spend as much time qualifying the seller as they spend qualifying us, because it’s up to good agents to pick the right accounts that are market-ready and willing to be guided. Because they have to be ready to take advice that sometimes isn’t easy to hear.”