November 21, 2024
During a Corporate Jet Investor virtual town hall meeting on aircraft transactions today, industry executives from around the world said uncertainty in both the economy and business aviation is providing opportunities for buyers. However, where they are, isn’t necessarily clear. And getting a deal done has plenty of hurdles.
David Crick of DavAir Group in Australia said, “Even though we’ve seen a significant decline in the number of transactions, there is limited data on actual prices assets are transacting at.”
He philosophized, “It’s a little bit like the wind. You can’t see the wind, but you can see the effect of it.”
He added, currently it’s still difficult to see the broad impact. In the last month, there has been a double-digit increase in some long-range intercontinental jets for sale.
Hamish Harding of Dubai-based Action Aviation told listeners, “We’ve seen quite a lot of aircraft deals…going on hold for now.”
“Now it’s hard to get financing…it’s really a cash buyer’s market. There’s certainly activity, but nobody knows which deals will close,” he said.
Harding added, “Anytime we’ve tried to get a banker to do anything, they’ve all gone, ‘I’m not quite sure what the residuals are going to be at the end of this. We’re really not doing new deals right now.'”
Companies that specialize in business aviation financing are also not currently approving new financing, according to Harding.
Both Harding and Crick said it will take discounts as high as 20% to get deals done. Sellers who don’t need to drop their prices are putting their private jets on what Harding called a “soft sell” mode.
At the same time, he added, “We’ve come across (Gulfstream) G650s at very good prices, (Bombardier) Global 6000s, a (Dassault Falcon) 7X, and that kind of thing, where there are deals to be done, if you are a cash buyer, and they may not be available in six months time.”
Speaking about cash buyers, Jay Mesinger of U.S.-based Mesinger Jet Sales noted, “I’m seeing some come in and at least say they’ve got cash, but they are making four or five offers and are just peppering the market with low offers to see what sticks.”
He described the current market as a high school dance. Boys go to one side of the gym and girls go to the other. “There’s no dance until one brave boy and girl come to the middle of the gym and dance,” he told attendees.
In terms of deals, he thinks there are sellers who “need to get out.” He doesn’t see those deals reflecting the marketplace. He added he has yet to see any bite at the lowball offers yet.
Daniel Hall, a senior appraiser at Ascend by Cirium in New York, said the market is currently stopped. He sees an extended downturn. “I think we could be in this for a long time,” he told the more than 350 participants.
He added as OEMs pause production that will reduce supply. However, he noted the industry is currently struggling with a lack of accurate “real live” data.
There hasn’t been a significant change in used aircraft inventory since the start of the COVID-19 Coronavirus pandemic, he said, adding, “I personally don’t see activity returning until we see some level of economic certainty as that’s what the business jet market is fundamentally driven by.”
Private jet owners that have aircraft for sale are in a better position than the commercial airline market. There are over 13,500 airliners now in storage. That’s 58% of the narrowbody fleet and 70% of the widebody fleet. He called it the tip of the iceberg.
“One potential positive for bizav (sellers) is the lack of (many) large fleet operators. In the commercial market when a large airline does go under, that can release a lot of inventory into the market, and we don’t really have that in the bizav space,” he noted.
Mesinger said even for motivated sellers and cash buyers, there are short-term complexities. They include organizing site visits, inspections and everything that goes into the transaction.
Mesinger recalled in 2009. He had a seller come to him with a Challenger 300 who wanted to sell at a significant discount. Other brokers were upset at him for listing such a steep markdown.
In other words, current prices you see out there for used private jets may not be representative of one-off opportunities.
What does it all mean? If you have cash and have your eyes on the pre-owned private jet market, now may be a good time to go to the middle of the gym and see if you find a partner.
Editor’s Note: During April, Private Jet Card Comparisons is donating $75 from each subscription to Feeding America’s COVID-19 Coronavirus Relief efforts.
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