This is a post by guest author Dean Kantis, founder and owner of Micro Jet Network, Inc and Charter My Jet. Dean was asked to contribute to this blog because of his expertise in aircraft brokerage and matching aircraft owners and operators for charter operations. Any thoughts expressed below are entirely Dean’s and do not necessarily reflect the views of Universal Weather and Aviation, Inc.
There are many areas encompassing aviation, from private executive jets that charter flights like an upscale Uber sharing concept, to pre-paying aircraft block hours on cards, to shared ownership, to private use. Depending on what your needs are, there are things you need to consider for buying and selling an aircraft over the next year.
Whatever your preferred means of aviation transportation, here’s our forecasted outlook for 2018 and what both aircraft buyers and sellers need to know:
1. It’s vital to know what type of market we are currently in
Since the October 2008 crisis, we have definitely been in a buyer’s market. Prior to October 2008, we were certainly in a seller’s market and that was justified by the many buyers purchasing multiple “aircraft slot positions” which they resold for a profit and received their original 150,000 USD deposit back. For the larger jets, there were much higher premiums yielded from the sale of “aircraft slot positions.” Today we are in a buyer’s market and there are no signs that we are even near a seller’s market any time soon. Existing inventory is not moving at par or even at any type of premium for most aircraft. Almost all sales were to buyers who bought aircraft at huge discounts. For the few aircraft sellers that can say they sold their aircraft, it was because they came down to a realistic market price, worked with the buyer’s terms, and sometimes even agreed to creative payment structures or were open to taking the aircraft in on trade. However, if in 2018 the U.S. Congress gives bigger incentives to the current depreciation tax laws, then we could see the buyer’s market become a seller’s market. That would mean it will become much easier to sell existing aircraft since many buyers may not need financing or bank approvals (and all of the layers of requirements that come with such steps in getting financing approval). Instead, these buyers will be writing their own company checks and wiring 100% of the funds so they can take advantage of such aircraft tax deductions.
2. What sellers need to do in order to sell their aircraft
It’s easy to purchase a plane, but much more complex to sell it. One may think that advertising the aircraft on appropriate websites along with good pictures and pertinent information would lead to a sale. Unfortunately in this market, those steps won’t lead to a sale. Buyers of aircraft are savvy individuals, dominated by men looking for the latest and greatest models. But the truth is, that if the seller is going to sell, it’s got to be at a “fair market” price and throwing out a lowball offer isn’t a fair starting point. When buyers make offers, too many times we see them make an offer that’s far too low which may lead to insult the seller. However, on the other hand, a low offer may be the starting point to where both parties may communicate in order to arrive at a middle point, fair to both the seller and buyer. So, prior to listing an aircraft, it’s omnipotent to make sure recent sales are pulled with comparable options, engine and airframe hours, and plans, and then using these data sets to reach the expected sales price. The end result here is that the seller always wants the highest net sale price after all expenses are paid out of closing, and having an unrealistic sales price to start with could mean he/she could be stuck with holding costs in the hundreds of thousands of dollars (or more) over a year or longer, while he/she rides the market down since the plane wasn’t able to be sold due to unrealistic pricing expectations. One suggestion to a seller would be to set proper expectations starting and set a fair market price from the moment the aircraft is listed.
3. What exactly is the art of closing a sale
There is truly an art to closing an aircraft sale. So many times, us brokers find ourselves a few days or even a few hours away from an aircraft closing only to find out that something led the sale to fall through. Next thing you know, we see the buyer pulling funds from escrow. It hits the seller and their broker hard, especially after the broker has committed over 5,000 USD in advertising monies, an average of 100 hours or more in time invested for this sale. Making it almost to closing isn’t good enough. Closings are all that count in the world of sales. The only words a broker can’t wait to say are that the aircraft has been sold. A suggestion to sellers would be to choose the right broker for the job and one that charges a reasonable commission could mean the difference between wasting 6-12 months having the aircraft sit on the market. Experienced aviation brokers usually are paid around a 1.5% commission on a multi-million-dollar aircraft and for the smaller aircraft, a 25,000 to 50,000 USD flat-fee-commission is ubiquitous. The end result by choosing an experienced but reasonable aviation broker will ensure you get your aircraft sold. Both the buyers and the sellers want to hear the words “Congratulations, we closed.”
If U.S. law is changed in 2018 to instead accept a 100% aircraft depreciation write-off that can be used in the same year of the delivery of the aircraft, (as there is talk about this right now), the market will likely turn to that of a seller’s market and that would mean that both new and used aircraft values would go up and maintain higher resale values due to increased demand and a more limited supply of aircraft offerings. Overall, for those sellers who are serious about selling their airplane, it’s imperative that you consult the professional assistance of an experienced aviation consultant or broker who can provide them with recent aircraft sales, then set the “ask price” correctly from day one. This will allow the seller to send the proper message to all buyers and to their respective brokers, that this is a bona fide sale. The market will do the rest.
Category : Best Practice
Dean Andrew Kantis is the CEO/Founder of TheJetNetwork. Since 2007, this Fort Lauderdale, FL based company provides experienced aviation acquisition, consulting and “jet – matching” services. TJN specializes in providing light, medium, heavy and commercial aircraft, aviation financing, ACMI and Dry Leases, as well as aviation entities such as Part 121, Part 135, Part 141 and Part 145 entities. TJN works with buyers, sellers, lessees and lessors. TJN has been involved in over $250 million dollars of aviation transactions. Kantis, also founded Charter My Jet in 2015, which “matches aircraft owners looking for subsidized charter revenue with the best Part 135 charter operators.” Dean can be reached at email@example.com.
This guest author’s views are entirely her own and do not necessarily reflect the views of Universal Weather and Aviation, Inc.
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