This week I traveled to San Antonio to attend the annual conference for NARA (National Aircraft Resale Association). While there, I compared notes with some of the other top dealers and brokers in the country, as well as a good cross section of the banks currently lending on aircraft, aviation attorneys, tax advisors, OEM’s, maintenance facilities, title agents and other service providers. I came away with a truck load of information and a general sense that things are finally getting better. The content of my blog posts will likely be pulling from this conference for the next month at least. I will try to hit some of the high spots in this post, but some of the information will require deeper analysis than I can accommodate here.
The first thing I learned from a straw poll of the other dealers and brokers is that we are all in about the same boat. All members claimed a sharp reduction in the number of aircraft sold so far this year. Most could only claim a handful of transactions, some could not claim any. In addition to a reduction in aircraft sales, those that provide FBO & charter services all pointed to a sharp decline during the first quarter. Fuel sales all seemed to be about 25% off, charter was anywhere from 20%-70% depending on geographical location of the provider.
In contrast to these figures, all members claimed a significant uptick in activity and prospects over the last two to three weeks. Nobody could point to an underlying reason, but everyone agreed that a surge of interest had finally surfaced. It’s possible that the recent stability in the stock market, wide selection of aircraft available and drastically reduced prices have worked together to stimulate some prospects into action. I’ve heard it said that our economy is like a large ocean liner. Once the rudder is turned, it can take miles before the ship begins to respond. I am just hoping that the rudder was turned in the right direction for our industry.
The OEM’s had some interesting things to say. All those present admitted to a drastic ramp down in production, significant order cancellations, varying levels of “white tail aircraft” available for immediate delivery and suspension of various aircraft that were previously in development. Three manufacturers have gone so far as to offer variations on a guaranteed “buy back program” to their customers. These OEM’s have announced that they will guarantee the buy back of aircraft purchased from their new or used inventory at various percentages of purchase price (some as high as 100%) for the next few years. Some are tied to the future purchase of a new aircraft, others have no strings attached whatsoever. I think this is a very good indicator that the OEM’s are confident that prices have bottomed out and their risk of having several aircraft turned back in next year is low.
A lot was said about how ridiculous some of the pricing is today. Clay Lacy decided that they just couldn’t or shouldn’t price one of their listings any lower, so they offered a free set of steak knives with the purchase of the aircraft. Although this marketing campaign got a few hits, the airplane has not been sold yet. Some markets just don’t seem ripe for activity yet, regardless of pricing. Others seem to have hit on a magic number in buyers’ minds that generate offers.
I think the most notable quote of the conference came from Dan Dickenson of General Aviation Services. He said “you know, when someone finally stops hitting you with a hammer, it feels really good!” I think that sums up the nature of today’s pre-owned market beautifully. Things seem much better today in contrast to the constant beating we have been taking since last fall.
More to come next week.
Toby J. Smith
JBA Aviation, Inc.