AINsight: Preowned Market Experiences Surreal Change

 - May 30, 2018, 5:02 PM

Like watching a movie that is unbelievable, this preowned aircraft market of ours at times now seems just that—surreal or unbelievable. In what seems like a matter of weeks it has shifted dramatically with respect to available inventory. We went from days of oversupply and what felt like a freefall of residual values, to one of tight supply and near impossibility of finding the airplane that checks all of the boxes; at least for buyers in North America. The e-blast dialog from brokers and dealers has changed from “Must sell” or “Drastic Reduction in Price” to “WANTED!”

Don’t get me wrong on two very distinct fronts. There are still aircraft brokers who are reducing their prices and claiming they want to be next to sell, based on a motivated seller. But if you look at those individual sellers, what you will quickly see is a history of their airplanes being overpriced for sometimes years and in some cases still above market. They are the ones going down in their asking prices. Then you see those smart sellers who realize as they come on the market that there is still a sense of reasonableness involved in selling. One must be sensible and methodical about setting a price, even in an aggressive marketplace.

So what is the formula? Same old basic ideas. Watch carefully the demand of the category of aircraft, and look carefully at the offering. Is the pedigree good? Has the maintenance been stellar? Are the records impeccable? Does the airplane have damage or major repairs? These are still key indicators of top-of-the-line aircraft. These are the boxes that most buyers are still demanding be checked before paying top prices. There is a limit to that willingness to pay what is becoming a newly defined top dollar price.

Is it five to ten percent more than before the shift in demand versus supply? Maybe. A word of caution, do not get too aggressive, or you will soon become that seller who starts advertising a price reduction! This will not become the days of old when buyers paid a 10 or 20 percent premium for new or like-new airplanes. Prices are being adjusted to a more bullish position on an airplane-by-airplane and category-by-category basis.

So, why surreal? It is the speed with which this market demand has shifted. There has not been a time in the last 11 years where our domestic economy and global economy have grown at the same time. This reassurance of wealth globally always sends the aircraft market soaring. The idea of this type of safe, secure, and efficient travel has never been far from the minds of those who partake. Rather, it has been out of financial reach for the participants for all these years. Seems like when times are good they become very good for our collective industry. It would, of course, be smart to remember how fast it can change. Hang on and let’s ride it up, and remain smart about the ride down. If all of us are smart on the way up, we can manage a downturn better than we all did in 2009.

Jay Mesinger is the CEO and founder of Mesinger Jet Sales, an international aircraft brokerage firm with 44 years of experience in the industry. Mesinger Jet Sales has a purchasing strategy and pricing formula that is constantly being adapted to an ever-fluid marketplace providing their clients with the best market intelligence for acquisition expectations and sales pricing.