Looks Like Things Ain't So Bad!
Today’s blog marks a full year of entries for me. I started writing this forum on my flight back from Orlando in October of 2008 and I just finished pushing my way through all the commercial trappings of Orlando International Airport on my way home to Tulsa one year later. I can say that the mood of the two shows could not have been more different. We all remember the group therapy session that was NBAA 2008. In today’s blog, I share with you some of the things I took away from this year’s show.
My stay in Orlando was much shorter this year. I arrived on Monday afternoon and left at the end of the day on Wednesday. JBA was represented by six employees, down from nine last year. Most people I spoke to confirmed that their company also brought fewer attendees this year in an attempt to curb expenses. Based on this and the decisions of several OEMs to forego their convention hall presence and after-hours parties, my first impression of the show was one of frugality. I think this is probably a good thing considering some of the challenges we faced this year.
During the first few hours of the show, I took notice of a smaller number of displays on the convention floor and the crowds were noticeably thinner than in previous years. Most vendors you might expect to see were there, just in smaller numbers. It was the operators who seemed to decide that attendance was optional this year, which is a shame because they are the people all the vendors are really there to see. I was able to connect with several customers there, but several I had hoped to see stayed at home. Those that did come also sent fewer numbers.
Those were my first impressions. As they say, first impressions can be deceiving. Once I started talking with the other vendors, I quickly discovered that everyone is very busy at the moment. In the back of my mind I was hoping to hear all of my friendly competitors were twiddling their thumbs and it was only JBA that was doing so well lately. With few exceptions, all the pre-owned sales guys confirmed a huge increase in activity over the last few months and the last two weeks have been the busiest anyone can remember. Buyers are finally making realistic offers in hopes of actually securing an airplane for corporate use. Until recently, most offers we have seen have come from opportunists hoping to steal an airplane well below market.
It also became clear that if some of those opportunists have not secured their airplane in certain markets, they missed the boat. Some data I gathered around the NBAA “water cooler” confirms that we are now seeing some pretty significant price increases in the G-550, Global XRS and Falcon 900EX EZ markets. By that I mean an airplane that may have closed last month for X dollars, is now demanding X + $2M - $3M. If you were looking to upgrade, that trade delta is quickly getting bigger.
The way these markets usually work is that buying activity jumps around a bit. If all the sellers of G-550’s are now increasing their price, buyers might start making offers on comparable aircraft from Dassault or Bombardier. That being the case, I would expect the rest of the newer long range aircraft would start moving pretty quickly. If I were a betting man, I would expect the next flurry of sales might come from the Challenger 605 market.
The surge in activity has to come from somewhere and newer long range aircraft is almost always where it starts. After that, I might look for buyers in the new mid-sized markets to start making offers. I am afraid that if your aircraft is older than 15 years old, you are pretty far down on the list.
Even though this show did not have the flash or big announcements of previous shows, there was a quiet confidence in everyone that was very refreshing. I was talking with a few gentlemen who have been in this industry since I was in diapers. One of these men said something that really stuck with me. Over the last thirty years of selling aircraft, there have really only been about 3 or 4 really bad years. The rest of those three decades exhibited a robust growth in the number of transactions and the value of the aircraft over time. It would be interesting to see what other industries could exhibit such long term steady growth in the U.S. over time. In hind sight, I am sure the U.S. Auto Industry would gladly trade profitability curves with us.
I had better wrap up my blog for today. I am happy to say that I have several leads to follow up with and a few offers and proposals to get out as a result of my time in Orlando. I’ll be back with more next week, but as always, feel free to email me any questions you might have or any suggestions for future topics. As long as the buyers don’t start thinking about turkey and dressing too soon, I think we are looking at a very active time over the next several weeks. I think the best thing you could do for the pre-owned jet sales this year is to tell all the retailers to keep Christmas decorations out of their windows until December 1st this year. Good luck with that!
Toby J. Smith
JBA Aviation, Inc.