The largest display area in the NBAA 2016 static park at Orlando Executive Airport is that of the National Aircraft Resale Association (NARA)—bigger even than the impressive displays of the OEMs, and in fact the largest ever single display at any NBAA Convention. NARA has 34 aircraft in its display “and all are for sale,” board member Sabrina Prewitt, who is also senior v-p at Jack Prewitt & Associates, told AIN. The array includes four G550s, a G650, a 7X, a Global 6000 and a GIV-SP.
According to Prewitt, “NARA members make up 5 percent of the broker/dealers in the world, but accounted for half of all transactions inthe $9.2 billion market last year. We’re proud of that. The U.S. market is going well and most of the market is here.” She asserted that NARA has “raised the standards” and standing of aircraft brokers. NARA now has 42 broker/dealer members, with other members taking the total to 101.
This AIN writer walked around NARA's static display to gage the market sentiment and was somewhat surprised to find that many brokers have started recently to enjoy a resurgence in pre-owned aircraft sales.
First stop in the static was Nick Schneider of Boca Raton, Fla.-based Global Wings, who said the market “seems to have opened up in the last 30 days. That was the theme from a number of NARA members at our meeting on Monday.” He added that the previous four to six months were “quiet,” but that the NARA consensus is that there has been “a lot more discussion and expressions of interest, and in the last 30 days people have started acting on their interest.” He suggested that this could indicate that the bottom of the market has been reached, although he admitted, “The interest for us has been mainly U.S. based.”
Next stop was Jack Prewitt of Jack Prewitt & Associates, who also said there is “a kind of consensus” that market conditions have improved. “It will go back up but I can’t tell you when it’s going to start. It’s been going down for eight years and I think it’ll take eight years to come right back up to where it was. Airplanes are extremely undervalued.” He said some owners have spent millions of dollars buying their aircraft, but in the current market will have to accept they won’t recoup that expenditure if they sell.
Dallas, Texas-based Mente Group’s COO, Richard Emery, said his company is heading for its “best year ever;” he attributes that success to being on retainers with 17 clients to provide advice and analysis and tell them the best times to buy and sell aircraft.
He advised a client recently that a two-year-old aircraft represented the best value, but noted that the average aircraft depreciation rate has increased to 6.5 to 8.5 percent, and in some cases as much as 10 percent, from 2 to 4 percent. Tasked with “having to keep the lights on,” OEMs are discounting new aircraft, and this also has an accelerating knock-on effect onolder aircraft, which depreciate sharply. But he suggested, “I don’t think there’s ever been a better time to buy an aircraft.”
Not many buyers want to accept this reality yet, he noted. “Typically we are looking at 200 days to sell most models of pre-owned business aircraft. However, if they are competitively priced they can sell within 90 days.” Choice in the number of large-cabin, long-range aircraft, which Mente specializes in, is diminishing, and as a result resale values on aircraft less than five years old is stabilizing. He also said pre-owned inventories are flat—perhaps another sign that the market is saturating.
“With our client base we are seeing limited activity on brand-new aircraft transactions, which we attribute to a generational shift,” he said. “Also, CEOs and business founders have the mindset of a ‘capacity-sharing generation’ akin to Uber, Lyft and Airbnb millennials.
“They are more diverse and less brand loyal. They will be prouder that they struck a good price on their aircraft, rather than boast they picked up the latest business jet. The status of a new aircraft transaction is less important to our clients. They are value driven and price conscious,” he said.
According to Emery, “Today’s problem is that there are too many models to match market demand. If product development slips, the brand is at risk.” This is putting the OEMs under a lot of pressure, he concluded.
