Fall is officially here in Tulsa, Oklahoma. A few cold fronts have made their way through our part of the country, and mornings are now crisp enough to require a jacket before the sun warms things up. Homeowners have begun putting their lawnmowers away in exchange for rakes and leaf blowers. This change occurs every year and if you have lived in this part of the country for any amount of time, you know what to expect.
It would appear the seasons have also begun to change in the U.S. economy, and they have certainly changed in the business aircraft resale market. Although we may have had some mild cool fronts pass through this summer, the first “hard freeze” seemed to take place a few weeks ago. Older and midsized aircraft have been experiencing some price erosion for some time, but the recent fluctuations in the U.S. and global stock markets have caused the number of potential buyers to drop across the board, including the ultra-long range aircraft, which previously seemed to be immune from any market chill.
According to Bob Doll (Director of BlackRock Advisory Services) there are three primary reasons for all the selling happening on the stock market right now. 1) High amounts of forced selling (primarily by hedge funds), 2) fear related selling due to the freezing in the credit markets and 3) recession-related selling (not wanting to own the stock if earnings are down). In the business jet market, I have only seen a few examples of forced sales in recent months. A vast majority of the sellers in this market have not changed their game plan. Conversely, buyers seem to have gotten an earful from all the talking heads on their TV screens, and have either pulled back or at least reduced their acquisition budgets.
With this change in our season, different tools are required to keep buyers and sellers talking. If you are relatively new to corporate aviation, you might only know the rules that have applied over the last five years or so, where sellers have had the upper hand in most markets. JBA has been helping clients to buy and sell their corporate aircraft over the last three decades, through many changing seasons. We can explain why ignoring that low ball offer might not be in your best interest in today’s environment, where it might be the best approach in better times. We know how to convey a customer’s strong desire to sell, without damaging the market further with constant price reductions. We can explain why buying an aircraft with less than perfect pedigree still might not be in your best interest, despite the significant price discount. We’ve been here a while and know how to dress, no matter what the weather is like.
A weekly blog is a bit risky. My views on the market seem to change every week based on my last conversation. I will try not to make any rash statements here, but I feel a lot better about this market than I did last week. Maybe I just needed to separate myself from all the pessimistic vendors or maybe I just needed to be by my phone to take some calls. But in the last week, I have received an offer on a new listing, been asked for proposals on two new listings, begun narrowing the search for an acquisition client and been asked for numerous market reports from customers who have been on the fence for quite some time. I think all we need is a little mild weather in the stock market for a few weeks and we just might see a lot of this pent up demand unleashed. If there is anything we can do to help you prepare for that time, please let us know.
Toby J. Smith
JBA Aviation, Inc.