Planning for your next business jet purchase

As published in BusinessAir Magazine issue 10 2018

If you are keeping up with the market trends you are becoming aware of a market dynamic we have not experienced since before 2008.   In most markets, you can’t just wake up and decide to purchase an aircraft and assume you can get one in service within a couple of months.

The market has turned from over supply to a reduced supply and in some models, a tight supply of quality aircraft.   Barring any outside disruptions, we see this continuing for at least the next few years if not longer.

I have written previously about how the number of aircraft built since the 2008 crash, is substantially lower than the years preceding 2008.  OEM’s reduced supply trying to match the tepid demand.  Owners kept their planes longer resulting in even high quality aircraft having more hours because they are trading later than initially planned.  The results are fewer late model low time aircraft.

If you are buying used, you will need to be both patient and ready when the right plane comes along. It will take planning to know what you want, the parameters you are willing to accept and the budget you can live within.

If you are a flight department manager, it is critical to let your executives know that it could take several months to place the new aircraft in service.  It might take months just to find one that meets your criteria.  If it requires added equipment, paint and interior the process can be extended 2-3 months providing you can find a shop to do the work.  If you are an executive, you need to plan for this longer time period and get your acquisition team together in advance of the go ahead to buy.

On the new side we are starting to see some backlog build.  There will not be many last minute deals because the OEM is overbuilt. If you have requirements for certain equipment and interior configurations you will need to plan on buying and spec’ing your own aircraft.  The typical OEM on larger aircraft requires at least 12 months and preferably longer to spec to a buyer’s specification.

What this means for buyers of a new plane is that if you have an aircraft coming off of a lease, mission changes or other reasons to upgrade, you need to start the process of fleet planning 6-12 months before your expected order date.  This could mean fleet planning as much as 24-36 months out before the in-service date.

On a used plane, you need the fleet planning done so that when you enter the market you can execute if the right plane comes along.  Fleet planning six months prior to starting shopping for an aircraft will go a long way in making sure you are ready.

It cannot be said enough, you also need to assemble your whole acquisition team prior to looking at your first aircraft.  Far too many times the team has not been assembled and you find the right aircraft and you do not have the right people ready to help.  The new tax laws might mean a change in the previous structure and there are a few gotchas that can upset your ability to take the full depreciation in year one.   It is far better to have all of this reviewed and in place so there are not last minute costly issues.

It is time to be a boyscout.

NBAA and the Mouse

When I moved to Florida in 1985 we learned a bunch about the state.  Things like we only thought summers up in the mid-west were hot and humid, how to outrun an alligator, and continuing the alligator theme, they have been here for a million years, you are in their backyard not the other way around—and never forget this little tip.  Another one, people perfectly capable of driving in their home states are instantly complete idiots when they come to Florida—perhaps it all of the sunshine burning out their brain cells or tropical punches.

The other more important, although not the most scientific item we learned was the economic indicator of the “mouse”.  You quickly learned after only a few years in the sunshine state that one of the better indicators of the economy was the parking lot of the “mouse”.

When I first heard this I thought it was a joke and perhaps it was intended to be a joke.  However, after many years of being in Florida, and watching the Orlando area, it has proven to be a good general indicator of economic sentiment.

Given the season, a more full parking lot indicated that on whole the economy was good.  A family going to the “mouse” or any of the other theme parks is not cheap.  Families just do not take these kinds of vacations when times are a little tight or when they are worried about job insecurity.  Serious economists would call this tracking discretionary spending. I like calling it the “mouse” indicator better.

So what does this have to do with NBAA?  The “mouse” indictor and the NBAA indicator have quite a bit in common.  Neither are scientific, but with some careful observations you can gain a lot of knowledge about the future state of the aviation market.

NBAA is always a good way to judge what is going on with the aviation market.  The amount of new announcements, the types of displays, and the look of sales people.  Do the sales people look comfortable, or concerned?  If you are good at observing people you will cut deeper than the corporate message and the optimistic talk and you will peel the onion back to a better picture of their reality.

Many sales organizations have pre NBAA meetings.  The tone of these meetings will reverberate back into the core of the sales people. Not making your numbers and the pep talks about needing a good show place stress on the team that will show up no matter how optimistic the smile is and the corporate messaging.

So when you go to Orlando this year for NBAA, observe the faces as much as the message.   Go see the “mouse” or one of the other theme parks and spread a little optimism and please if you are going to leave your driving brain at home, take the bus, Uber or Lyft.