Perspectives is a featured column in the Global Aviation Newsletter written by Peter Menza, a business aviation industry expert and Global Aviation’s Vice President of Client Services and Acquisitions.

Peter Menza, Global Aviation Vice President of Client Services and Acquisitions
Peter Menza, Global Aviation Vice President of Client Services and Acquisitions

In this month’s column, I’m going to take a page out of the look back category and attempt to portray what is different in today’s market vs what took place in the past, dating back to pre – September 11, 2001.

The industry is full of stories about the “best of times” and the “worst of times”. I would offer that both are accurate assessments and can be summed up in one word: cyclical.

Cycles in business are not new. The aviation industry is not immune from the swings in political or financial challenges that we face year in and year out. That said, one can argue that certain new and profound changes in technologies have shifted some elements of the market and the ability to accurately predict where things are headed at any one point in time. At present, the trend is less than optimal.

Last week I participated in an industry forum that was positioned to discuss aircraft market conditions, OEM assessment, Wall Street analyst forecasts and broker/consultant sentiment for what the customer is telling us.

First, the inventory of available aircraft for purchase is extremely robust. As discussed in a previous column, there are more products available than potential buyers.

Over a ten-year period the number of available models (types of aircraft) for sale has just about doubled, while the overall volume of flight time has remained about the same. More assets flying less.

Second, at the OEM level, there is a continual struggle to decide how many types and numbers of aircraft are enough. Technology and changing demographics force the OEMs’ to spend millions of dollars on research and development to address perceived growth in certain areas of the world. OEMs’ have little choice but to invest so they can remain relevant.

A wise man once told me that we (the industry) never build enough aircraft –we build too few or not enough to meet the need.

Third, the quantitative analysts are looking at the numbers of aircraft in the market available for sale, the retreating valuations of the thinly traded asset and are forecasting a flat line of growth for the next 36 months. They forecast a potential for positive change with the advent of a CAPX (capital expense) event, or a seismic change in overall usage.

Finally, the brokers/consultants weighed in on what the guys who are writing the checks have to say. Here is really where the rubber meets the road.

Business aviation is not going away anytime soon. Many companies and high net worth (HNWI) individuals cannot perform their mission without unfettered access to an aviation asset.

Granted the means by which some travel has changed. There is more more charter, more fractional ownership, jet cards etc. However, the need for the actual aircraft is still ever present, and someone has to safely and efficiently operate that aircraft to meet the requirement.

The amount of new wealth being created worldwide is staggering. With that wealth comes the ability to purchase aviation assets. Despite the staggering surge in worldwide wealth, the North American market still represents the lion share of business aviation aircraft. We read all the time that consumer confidence drives the economic engine. This is also relevant with those who purchase and/or charter aircraft. What differentiates today’s market from fifteen plus years ago is the advent of information access and a propensity for the buyer to achieve perceived value in the acquisition process.

While the tenants of the buy decision remain the same over time, the means by which prospects get there is morphing. Gone are the days when buyers work their way up a product line from light jet to a large cabin model. Depressed market pricing today affords people an opportunity to consider much more aircraft for the dollar than fifteen years ago. As such, certain categories of aircraft become less attractive.

On the flip side, we are beginning to see different buyers enter the market that fifteen years ago would not have considered an aviation asset. These buyers are data driven and rely on external sources to vet the voluminous amount of available information to help hone their decision.

In short, things take a little longer to complete and buyers are more willing to wait for the right deal. While we are in turbulent times, the industry is on stable ground. The strong companies that work hard to meet customer needs during those times are the ones the customers remember when their new needs arise. For all of us on the service side of the business, this is our lifeblood.

More from the Global Aviation September 2016 Newsletter…

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