During NBAA17 in Las Vegas, Alud Davies of Corporate Jet Investor interviewed Don Dywer, Managing Partner at Guardian Jet, about the state of the pre-owned aircraft market.
Watch the full CJI Interview video on YouTube or read the transcript below:
The market’s hot. The market is very, very active.
There’s a lot of buyers and sellers. Every good airplane that we have, that comes on the market, seems to sell very, very quickly.
Clearly the U.S. market is the hottest—although we’re starting to see signs that it’s picking up in Asia. And then Europe’s recovering. It’s got to.
The “Trump Bump” has lasted. I’s hard to say why, but corporate profits are very good here. The markets are an all-time high.
We’re feeling like people are generally optimistic, so the buyers that we’re talking to are interested in upgrading.
It’s not a question of, “hey, I need to get out of my airplane and the market’s gone, the world’s going to heck.” It’s really that buyers are looking to upgrade.
We’re seeing a huge influx of first-time buyers.
It might be because the value of their new airplane is somewhere not that much more than maybe the quarter [fractional] share.
They were buying [jet time] before, so there’s this huge influx of new and young buyers, which is exciting to us because we’re a generational business.
It’s a good market right now and we think it feels like it’s going to last for a while.
The expectations of sellers and buyers, I think, are getting closer together.
Certainly, if you go buy a car or TV today—and I’ve been saying this since 2009—you want to get a great deal. If you buy a house, you want to get a great deal.
So yeah, that the expectation of the buyer is he’s getting a great deal.
But there’s also this realism on the part of the seller.
Our sellers are usually going to something different. And when they’re upgrading, they’re profiting more from what they’re upgrading to than what they’re what they’re selling. We’re not struggling with expectations of buyers and sellers.
I’ve heard people say that deals are getting harder and harder to do, and I’m not seeing that.
I think that people are now moving quickly, I think they’re the best airplanes are not lasting long on the market.
If you’ve got an airplane that’s in an exotic location, that’s been smoked in, with damage history, then yeah, it’s hard to sell.
Or your expectation on pricing isn’t real.
But, when a good airplane comes on the market and 40 days later, we’ve got a buyer and it’s going in to pre-buy, then you’ve squeezed that expectation between the buyer and the seller.
I don’t think the deal is harder so you know when we talk to first-time buyers.
We have been saying that we don’t like to dive into the deep-end. We like to walk into the shallow end.
So when we’re advising first-time buyers, we tend to look at trying not to buy the most airplane or the biggest airplane they can get for whatever their budget.
We focus more on the operating costs and how they’re really going to use the airplane. With this influx of first-time buyers, they’re about how they’ve used airplanes in the past. But we want to be careful. It’s very attractive right now to buy a lot of airplane for whatever price value you’re at.
We want to be careful about the long-term ongoing expenses, and the things that will surprise you.
For example, if you spend $4 million on an airplane and then you get a $1M C-check surprise, that’s a big, big number.
We tend to tend to want to help them understand what their real risk and owning an airplane is.