Over the last few years there has been more and more references to the private jet market being a ‘Buyer’s Market’. Typically, when someone refers to a ‘Buyer’s Market’, they mean that a) there is more supply than demand and b) it is an environment of declining prices. Both points are true in almost every aircraft model right now. In this current atmosphere that looks to favour the Buyer, we have advice and warnings for Buyers as well as counsel and silver linings for Sellers.
For Buyers
There has never been a better time to buy a private jet. Prices are at all-time lows, and there are some great values to be had. For example, the Bombardier Challenger 604 market is full of very capable machines at very reasonable prices. There are many good options for you to look at and decide which is best for your needs and desires.
However, you are not the only Buyer. Aircraft markets are very active right now. For good aircraft at reasonable prices there are a number of Buyers looking and ready to buy. If an interested Buyer puts in an unreasonable offer, or takes too long in placing a letter of intent or progressing with a transaction, there are other Buyers who will step in and take their place or who will outbid them. Your best moves as a serious Buyer are to:
1) Be active. When you see an aircraft you want to pursue, send your representative to view it and the records. This shows the Seller you are serious and interested in the asset, not just the price. Your offer will hold more weight because you have seen the asset and records and are not just someone looking for a “low price deal”.
2) Prepare a thoughtful Letter of Intent. A LOI that shows you have put thought into the transaction process will be regarded more seriously than a two line LOI with only an offer price. A very short LOI can be perceived as a Buyer not putting thought into how they will actually purchase the aircraft and are only concerned with pricing – not a reassuring signal to the Seller. With a more detailed LOI, your terms will show the intent and reason behind your offer, not that you are solely focused on getting a low price.
Also, “distressed sales” are rare. We come across Buyers looking for a “steal-of-a-deal”, but these are very few and far between. The few distressed sales available have very high competition, because they are being bid on by many Buyers and aircraft dealers. Also keep in mind that “distressed” often involves an owner with dire financial needs who may have let the aircraft upkeep and maintenance slide. These deals can require a lot of due diligence and money post-transaction that have to be accounted for.
So while it is a great time to be in the market for a private jet, there is strong competition for good aircraft, and a Seller has choices as to which Buyer to go with.
For Sellers
The marketplace is significantly more active than 18 months ago. There are many Buyers out there. If a Buyer poses hard terms to you that put you at a significant risk or in a bad position, don’t be afraid to move on to another Buyer. If you are priced in accordance with the market, you will get further interest; rarely is there only one Buyer for an aircraft. A different Buyer may not be at the price you want, but you have to look at the transaction as a whole – terms included. A Seller should not feel that they have to accept someone’s bad terms because it is a “Buyer’s market”. Negotiate to agree to terms that benefit both Buyer and Seller, and if a Buyer is hard and firm on something that puts you at risk, then consider finding someone else.
In assessing your asking price, Buyers will not place emotional value on your jet. Often, owners have fond memories of their aircraft, its faithful service for them and where it has taken them. Owners see the money and effort they have put into their custom interior and maintenance standards. However, a Buyer will not place a monetary value on these things. The majority of aircraft for sale will all meet the same maintenance requirements and an interior is very personal to taste. Buyers approach the purchasing process in more objective manner and focus on items such as engine programs, age, hours and avionics, but rarely place financial value on the softer emotional connections that many Sellers have.
Most importantly, Sellers must stay current on your aircraft’s market. Today’s Buyer will be looking at several different aircraft and will know how much they can purchase them for and how your jet is in relation. Your broker needs to keep you aware of your model’s marketplace and competing models, so you can stay relevant and competitive. If you are overpriced, you will be overlooked.
For both Buyers and Sellers, a successful transaction is one in which both parties win. This requires negotiation and compromise. Know what terms you are willing to be flexible on and which you need to hold firm. This active market provides opportunities and benefits to everyone.
Blogs are written from real world experience by Colibri Aircraft’s individuals. If you have any questions or comments about the topic of this blog, please feel free to contact us at enquiries@colibriaircraft.com
