One of Warren Buffett’s favourite allegorical figures is ‘Mr. Market’, a nameless force in the marketplace that speaks loudly, although not always rationally. Listening to what Mr. Market says and gauging that against your own opinions is one of the keys of Warren Buffett’s investing.
Mr. Market operates in the aircraft markets as well, although he seems to focus much more on less lucrative items than on underlying fundamentals of asset prices. One such opinion which he speaks loudly is the layout of aircraft interiors. Most aircraft come out of the factory with several pre-set interior layouts that give customers a few options to choose from. The difficulty with this is that Mr. Market has a habit of speaking loudly about its preference for those interior layouts long after the initial purchase has been made.
Certain layouts can have a drastic impact on a buyer’s desire to purchase, thereby having an impact on the aircraft’s price and importantly, the time needed to resell the aircraft. There are many such nuances throughout the different aircraft types, but examples of this are the Gulfstream’s galley location, the number of seats in a Citation XLS, the lavatory locations in early Falcons and Lear 55s, and seating numbers in Falcon 2000s. The marketplace shows a clear preference in each of these instances, so make sure you understand the implications on resale value your interior’s layout may have for you.
Ask your broker for market statistics or preferences if you are considering buying a new aircraft. By all means do not hesitate to purchase just because the marketplace may not prefer what you want; after all, this is a highly bespoke asset that must match your desires. But make sure it is an informed decision, one that takes into account the impact it will have when it comes time to resell.
Mr. Market is often a fickle creature, but the patterns he has developed over the years can often be found by looking at trading history of each model. And remember that when buying you can ignore Mr. Market all you want, but when it comes time to resell your aircraft, you will have to pay attention to what he says.
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 our team at enquiries@colibriaircraft.com
