Traditionally, every CFO in the world spends September crunching the numbers and evaluating where their business stands; hoping to then combine the 4th quarter forecast and establish their draft P&L totals. This has occurred, I am sure.
What has also occurred: the Dow has also dipped below 30,000, rates have been cranked up by the FED (probably more to come), and the word ‘recession’ is now in almost every article or news hour segment. Yes, I am sick of talking about it too. Herein lies the quiet before the storm…
What has not occurred for our aviation-loving audience: a November election, peace in Ukraine, China invading Taiwan, the Dow going back to 22,000, OR the massive amounts of ‘money on the sidelines’ being deployed to purchase capital assets like aircraft.
So, how is this affecting the Pilatus market you might ask? Simple. Supply and demand economics 101, combined with poor airline post-pandemic performance, and my personal favorite, the good folks of ‘Brokerville’ artificially pushing asking values up from 102% to 128% than the original sticker new price for any given model year! Yes, you heard this right. Let it soak in just a minute. This overinflated market, in conjunction with what has NOT OCCURRED (see above), is precisely why there is dust on the phone. We feel that the market is waiting for the first shoe to drop. This may be a global event, further decreasing Dow, or more specifically, the Pilatus owner who wants to sell before year-end dropping his price. Maybe all three, who knows.
Last month we noted that we expected the end of the year to be as hectic as ever. There’s only one little problem—new aircraft deliveries are delayed from almost every OEM. This means that the used aircraft market is stalling to sell their aircraft. Sure, they’d love to capture all the money with the current inflated high market, but they also don’t like the idea of being without an aircraft for three months. Now, this is certainly not the case for every seller, but it is worth noting. Also worth asking, how many aircraft on the market are really for sale, or are they just throwing out silly asking prices (with the help of “Brokerville”)? As of today, roughly 40% of the market has been for sale for four to six months! This is nuts. Why do you ask? Because sellers are getting bad advice and they’ve been asking too much for their aircraft.
What I do know is our clients did not get to the level of success in life by NOT planning, NOT procuring the necessary resources, and by NOT surrounding themselves with expertise. Smart buyers today are engaging the right resources. They are preparing themselves for the best possible outcome, regardless of timing (end of the year). Conversely, the smart sellers are asking the right questions, analyzing the data, and pricing their aircraft correctly. When these two meet, an aircraft transaction will take place! Sounds simple, I know. We just may not see this little love affair consummated until November 5th, or perhaps in December.