Tight Bizjet Inventory Creating Need for Urgency, Caution
Aircraft transaction and brokerage professionals are saying buyers are being forced to move quickly, concede to seller terms, and look in China and Russia.
With preowned inventory tightened up and the year drawing to a close, brokers and other business aviation leaders speaking at the recent Corporate Jet Investor Miami forum are warning buyers to be prepared to move on an available aircraft, but carefully, and advising that they may have to look for inventory in places such Russia or China.
“Time is really a constraint in terms of trying to conduct any sort of transaction, certainly by the end of the year,” said Par Avion founder and president Janine Iannarelli. “But…I counsel people to still go slow because the last thing I want to do is overlook a point.”
Keri Dowling, president of Air Law Office, added that buyers must be “prepared to hit the ground running,” meaning that they need to “frontload” everything as much as possible with the structure set up and the team established. And, she warned, “The mentality these days is the seller is always right.” She noted that recently an aircraft buyer’s team lost a deal because they changed an inspection acceptance duration from three to five days and the seller walked away.
“You have to prepare your clients that the seller really is running the show," Dowling said. "You need to be prepared upfront and ready to go so the seller can't walk away with an asset that you really want or need.” As for moving on an available aircraft, she added, “It’s a matter of single-digit hours for turnaround time these days. The days of three or four days to think about it and get your money in place and figure it out are gone.”
Jeremy Stumpf, vice president of Freestream Aircraft, agreed. “Time is of the essence,” he said. “The perfect aircraft likely will not be available.” The message, he added, is that you need to move when you find an aircraft that may check the most boxes and “make changes to customize the aircraft after you close. The most important thing is to secure the aircraft.”
Amanda Applegate, a partner at Aerlex Law Group, advised that buyers should assemble teams that have expertise in cross-border transactions. “Certainly, in the last six months, I've seen far more cross-border transactions than I've seen in probably the last five years,” Applegate said. “These are coming out of registries or countries that perhaps you wouldn't have looked at before.”
“We are looking around the world for aircraft all the time,” said Hamish Harding, chairman of Action Aviation. He noted that he is finding them in places such as China, but that raises other complexities. “The Chinese sellers who used to be a bit flexible are now being very inflexible," Harding said. "They want everything bought as is. You’re lucky if you get out of China and close in Singapore, but contracts are pretty one-sided right now.”
But, he added, if a buyer wants a high-end aircraft, China, Russia, and certain other countries may have them.
He also said that buyers can sometimes create a sale by making an attractive offer. For example, he explained, an aircraft owner may be taking a new model next year and wasn’t anticipating selling just yet but might be willing to do so at the right price.
However, new buyers are entering the market unprepared. Harding noted that new clients come in with dollar figures in mind but without any idea of what aircraft would fit their needs.