The Results Are In
In last week's blog entry I referenced a sharp increase in activity we have seen at JB&A over the last couple of weeks. I also mentioned three areas to look for confirmation of that activity in a broader sense. Those three areas are as follows:
- Deposits in escrow with a handful of title companies in Oklahoma City
- Pre-purchase inspection bookings
- Number of resale transactions
I spoke with a couple of the bigger title agents in our industry this week and am pleased to report that they are all extremely busy. In fact, they were all so busy that they didn't have the time to provide actual numbers of deposits in escrow today compared with last month. Following is a quote from Kirk Woford of Insured Aircraft Title Service, Inc., one of the most experienced title companies in our industry "We have seen a serious uptick in business. I'll need to check on the different numbers and get back to you."
I also had a chance to speak with several pre-purchase inspection facilities this week. I am currently involved in a pre-buy at Western Jet in Van Nuys, CA and was told by the General Manager that they were busier than they had been in quite some time, as evidenced by a ramp full of Gulfstreams. I also spoke with Duncan Aviation in Lincoln Nebraska. The representative I spoke with confirmed that they had an extremely slow first quarter, scheduling only one or two pre-buys for those three months. They currently have ten to twelve aircraft scheduled into pre-purchase inspection, quite a jump in a short period of time. I have also been doing a lot of work with GDAS/Gulfstream which is seeing quite a bit more pre-buy interest today than they had previously.
Unfortunately, it does not appear that the increased activity at the early stages of aircraft transactions has translated to an increase in retail sales just yet. May numbers are still preliminary, but they appear to be only slightly higher than April figures, right in line with what we saw for the first three months of the year. I think this surge in buying power is so leading edge that it will still be another month or two before we see some impact to the bottom line.
There seems to be two phenomenon at work in the market that I think will begin to change things a bit more rapidly than most buyers are expecting. The first is the large number of buyers making honest attempts to buy airplanes right now. The second is a large number of sellers deciding to remove their aircraft from the marketplace after coming to terms with what their aircraft is truly worth.
I experienced this first hand in the Citation XLS market over the last week. When I began making a serious run at an airplane or two 10 days ago, there were 37 aircraft on the market representing just over 11% of the active fleet. This week six XLS's have been removed from the market because of such depressed prices. Mitigating this a bit is the fact that a couple more have come to the market to replace some of them, and those aircraft new to the market appear to be priced very attractively. But, it took a real buyer or two for Sellers to recognize just how bad things had gotten. Before last week, there were no offers being made which would help anyone determine true aircraft values. Inventory levels became artificially inflated with several aircraft owners that could not, or would not, sell their aircraft for realistic prices.
I think this will continue to happen in various markets, starting with the newest, lowest time models of current production aircraft. Once the best buys in those markets are scooped up, what is left will be at slightly higher in prices. If buyers don't see value there, they will move on to the next market segment and pick up those best deals. This is how inventory is worked off and prices begin to move up. Unfortunately, I don't think there is enough pent up demand for aircraft older than 20 years to establish any stability there just yet.
Hope you found this information helpful and that it encourages you to run out and buy that airplane you have been wanting for so long. As always, if there is anything I can do to help, just give me a ring.
Toby J. Smith
JBA Aviation, Inc.