May
21
2012

WHERE ARE WE HEADED?

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“Where are the aircraft resale markets headed?” is among the first questions posed to me in just about every conversation I have as of late.  Don’t you know I wish I could look forward with complete accuracy 100% of the time?  Then I might be writing this blog from a beach in some exotic locale as opposed to my present state of being crammed into an economy seat on a commercial airliner.   While in the past I felt I read the tea leaves pretty well, the clarity of the water seems to have gotten murky again in our so called economic recovery.  Just when you think the analytics are showing you some sort of trend, a bend in the road appears.  Actually sharp curves depending on the make/model of airplane in focus.

Many of us who make our living dealing in business aircraft are a little tired of trying to get ahead of the market and would welcome signs if not of an increase in sales, then how about a little predictability based on developing trends?  One would like to be able to bring “X” airplane to market at fair market value, strategically position it so as to sell in a time frame commensurate with current conditions and provide for a decent return to its owner.  Again, establishing a price that takes into account the market one is working with and reviewing the available historical data as well as current market conditions–not have the entire marketing plan go right down the drain because of the unexpected wild card play.  Such as bringing an airplane to market at a price that shocks while insuring it will be the next to sell.   Lately I have seen and heard of a couple of examples of such that go beyond undercutting the competition which I see as the more damaging effect of resetting the market.  This is not selling.

I fully understand a need to sell a business jet if under financial pressure to do so, but one can generally wholesale an airplane to a dealer in short order.  Those sorts of deals are generally done very quietly and efficiently.  I have nothing against wholesale transactions since after all; the whole concept of dealer inventory would not exist were it not for such opportunities—opportunities that are then passed on to a buyer in the form of an enhanced airplane.  The dealer returns the airplane to market at a competitive price and the sales process starts.

It’s when airplanes are introduced into the market at what is clearly a price that establishes a new floor from the very start of the sales process and the airplane is aggressively promoted at that new low floor price that the damage is done.  In an industry that has struggled with buyers being mostly price driven these past few years this approach at best runs the risk of further stagnating an already soft market place.   While the sale of that particular bargain-priced airplane may be an anomaly, the buying public has become so used to lower and lower prices that recovery from the newly established floor may not happen for a very long time…if ever.  Sure deal done and presumably both parties go away happy, but is this really helping the aircraft markets long term?  Or delivering value to the beneficial seller of the airplane?  My twenty-five years plus of selling tells me not.

When tasked with selling an airplane at retail does the salesperson not have the responsibility to the owner to return the best fair market price to them as possible?   What message is being used to convince sellers that there is no hope unless one not only undercuts the competition but does it in such a way that there is no competition?  What happened to market dynamics guiding buyers and sellers as to what a fair price is?  I once heard that if price were the only thing that sold airplanes, then we wouldn’t need sales people.  Are we there?  I hope not!

Where is the market headed?   Into the summer.

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