It’s hard to believe it is August already. Maybe the title of the article should have been, “Can You Be Flying by December 31st?” The answer is maybe, maybe not.
Last year about this time, people started to get very serious about wanting to buy a preowned airplane. They also wanted it in service by December 31 to take advantage of bonus depreciation.
Then, the world was in the middle of the first wave of the pandemic; global travel was virtually shut down; although restricted, domestic travel was all the rage; and people were buying second and third homes in the U.S., and the next hurdle was getting to them. First-time aircraft buyers who had been threatening to buy airplanes were storming in to act on the threats.
As a country, we were beginning to experience what continues today—major supply chain issues. Long delays were occurring in our industry on the maintenance side of things. Engines and APUs were having constant delays and setbacks in delivery due to parts not being manufactured and shipped at a pace we as a world had been used to. Other production and replacement parts were also seriously impacted.
These delays alone were causing me to advise every single new client that hired us to purchase an airplane and have it in service by a guaranteed Dec. 31, 2020, date to not even start the process if that mandated a contingency to walk away at the end of December on a transaction that could not complete. I knew I would not have any luck writing that into a contract with a seller.
In 100 percent of the cases, my buyers all said “no problem, we understand and it would just be nice, but not a necessity.” That was smart buying! By the way, these supply chain delays are still happening.
Last year at this time, there was not a low supply of aircraft that developed by the end of 2020. In fact, today we are at a very low point of inventory to choose from. If there is anything that might impact the final preowned sales numbers of 2021 it will not be demand, but the ability to fulfill this demand. Let’s take a look at the factors that are creating this phenomenon.
First, our world is still basically shut down. Yes, it is opening up slowly but cross-border work must be checked almost daily. This keeps those of us in the U.S. from being able to readily import aircraft and therefore our inventory universe is reliant on U.S. aircraft.
Meanwhile, the corporate side of our industry is just—and I mean just—starting to wake up. Soon I am confident this portion of our industry will start to transact and that will provide an additional supply of inventory to choose from.
Next, and one of the most impactful reasons that our inventory supply has gone down, is the fact that we had a record number of first-time buyers starting in fourth-quarter 2020 that still continues today. This group of buyers only depleted our available inventory rather than contributing to the supply with a relinquished airplane.
Let me explain: it’s like going to a party and not bringing any hors d'oeuvres or wine. You just consume the host’s food and wine. First-time buyers did not have anything to contribute back to our supply. All of these things have contributed to the short supply of aircraft.
These contributing factors will ebb and flow. They always do. Those of you who have been in the business aviation industry for years know it is very dynamic, not static. Demand and supply move like a pendulum.
The real question is should you get into our industry now or wait? My sense is if an aircraft fits your needs now, don’t wait to buy. That, of course, means you should not overpay, nor should you lower your expectations for quality. It just may mean that the keyword is patience.
It also means that although it could take 60 to 90 days to find the perfect preowned airplane, you should be ready on day two! Have your legal, management, and consultant team in place on day one.
Success is not an option. Just understand the factors that create success. If you want a chance at a December 31 in-service transaction, then get started as soon as you finish reading this.
Jay Mesinger is the CEO and Founder of Mesinger Jet Sales, an international aircraft brokerage firm. With 47 years of successfully buying and selling aircraft, Mesinger Jet Sales has a global reputation for personalized, transparent service.