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

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

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

There has been much discussion in today’s market about the value of various aviation assets.  Many industry “experts” and financial institutions are wrestling with the precipitous drop in aircraft values across brand and category.

Recently, some colleagues have challenged an old industry tenet that portends that a state of equilibrium, with an equal number of buyers and sellers, creates price point stability. I happen to agree with their position that this theory is wrong.  In short, there is too much inventory across product line and category for the number of buyers we encounter today.

We have to ask the question, “What then makes a company or individual want to purchase an aircraft in today’s dynamic market? Or, for that matter, anytime?”

Means, Motives & Requirement

Means, Motive & Requirement. Metaphorically speaking, like a crime scene, all three of these components need to be in play simultaneously for an aircraft acquisition event to take place. Allow me to expand upon each of these components.

Means

This is the financial capability the company or High Net Worth Individual (HNWI) must possess in order to contemplate an acquisition. There are many metrics that sellers (i.e. OEMs, brokers etc.) and prospective buyers themselves use to qualify and justify the buy.

My rule of thumb has always been that the buying party usually generates 10x the value of the asset in revenue, or has a demonstrated net worth equal to or higher than that. In concert with this, money is cheap today. Finance options along with various lease considerations can skew my qualifying stick – albeit not by much.

This is the emotional pull, the driving component that makes the buyer want to move forward. The motive can include desires to save time, spend time with family, take advantage of tax benefits, and expand company reach for customers. It can also be simply because the buyer can afford to do so.

Years ago, an industry mentor suggested that I should purchase stock in the companies that buy our product or for that matter, those that buy any OEM aviation asset. His point: companies that make this type of capital investment are investing in the growth of their respective entities, increasing shareholder value and generally have their eye on the target. My mentor was very wise.

Requirement

This is the most obvious component of the three-legged stool. Unless you have a defined mission, it is both problematic and not a cost effective to buy, lease or share an aircraft. Many a boardroom conversations have taken place across the country as to why capital expense should be directed to an aviation asset. While our industry will curry no favor in the hearts and minds of the uninformed, major corporations, as well as mid-sized and small privately owned companies, would not be able to conduct business without access to business aviation assets.

So the purchase of an aircraft seems pretty straight forward, right? Not really. This is a process and it takes time, money and education to bring all of the above into play at the right time. Buyers spend money with people they trust and know. It is important to understand that just because someone can afford to own an aircraft, it does not necessarily mean they should.

While ownership has its merits, charter is often times a great segue for HNWI and companies to explore the benefits that business aviation brings to the table. In many instances, charter is where the spark begins for those who will ultimately purchase an aircraft to meet their need.

We have a well-defined and professional Charter Operation here at Global Aviation. Aircraft are impeccably maintained and professionally crewed to the highest industry standard. With years of experience, the Global Aviation team helps its customer base select the best and most cost-effective aircraft to meet the stated mission profile.

Providing all the requisite support considerations makes the charter experience seamless and enjoyable. We welcome the opportunity to showcase our services as your travel requirements dictate.

Read more from Global Aviation’s April 2016 Newsletter…

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