We’ve been thinking a lot about the opportunity of the pre-owned Pilatus market these days. At JetSwiss, we have opportunities to purchase aircraft, to sell someone else’s aircraft, and to assist with procuring an aircraft/setting up a flight department (Acquisition/Summit Services) several times a year. Each one of these circumstances represents an “opportunity” for revenue and profitability.
Is the objective to maximize each ‘opportunity’ to its fullest potential? Some would say that the goal of any business should be to maximize profits. This is exactly the attitude you should have. However, if a person steps back and looks at the 30,000-foot perspective–there’s a difference between selling your used lawnmower to your neighbor at a fair price and selling it to him by ripping his lips off his face! Big difference…
So, when is enough, enough?
In today’s Pilatus market, we are witnessing the ‘difference’ everywhere. Sellers who purchased their aircraft (say before January of 2021) or “pre-crazytown” Pilatus market values are now asking absurd prices. OR, my favorite Seller—he just bought a brand new aircraft and now he wants $1.5m more than sticker for it?!?!?! Did you sincerely want to fly the aircraft when you ordered it in the first place? Is this what “opportunity” looks like? Or, perhaps it’s free market capitalism at its best?
As of writing this edition, pre-owned values are still hanging in there quite well, with current prices reflecting the following percent of their original new sticker price:
/45 99%
/47 103%
NG 102%
NGX 125%
Yes, folks “opportunity” is flourishing!
So, what do we do about it and what is the cost of ‘opportunity?’
Since our last publication in July, the Pilatus PC12 market has added 12 more airframes:
4 – /45’s
6 – NG’s
2 – NGX’s
In the last two months, the number of aircraft for sale has gone up by 14%. Conversely, the average price of an aircraft has stayed the same. We feel that this is somewhat indicative of a normal year-over-year demand worldwide for the aircraft. On average, if you calculate the past 10 years of pre-owned sales, there are roughly 115 aircraft that are sold annually. This tells us that demand is still well in front of supply at current levels.
Again, so where is the “opportunity” here? In our opinion, we have exited the greed level of ‘opportunity’ in the market. We have now entered what we are quantifying as a somewhat healthy marketplace for buyers and sellers: terms are more equitable and normal for inspections, there’s a little bit of negotiation surrounding each project, and values have flattened out. They’re not going up dramatically, and they’re not decreasing dramatically. So, the ‘opportunity’ from our perspective is to execute a quality project for clients (both buyers and sellers), price aircraft for sale at fair market values, and advise our buying clients to purchase at fair market values when possible. Sprinkle in TO LIFT and a lot of diligence and you have ‘opportunity’ working!
Our biggest tool to execute this is our PVR (Pilatus Value Ranking). In conjunction with an outside consultant, we’ve spent the last two years developing a mathematical algorithm that takes the Pilatus marketplace and ranks each aircraft available from best value to worst value. For our sellers, we advise them to price the aircraft to be in the top 10 of the PVR ranking. Conversely, we advise our buying clients to purchase in the top 10 of this PVR. Again, ‘opportunity’ is defined—JetSwiss style.
In summary, the opportunity today is for smart sellers and smart buyers to execute a quality, fair, diligent, and neighborly transaction. Simple as that. It reduces risk, creates solid long-lasting relationships, promotes a stable marketplace, and everyone walks away feeling like a winner. This is what we do. But don’t kid yourself. We are reminded a half dozen times a year of bad actors. It’s the real estate agent that told your neighbor his house was worth $300,000 more than the market—Just to stick a sign in the yard and standing in the driveway after work, your neighbor couldn’t wait to tell you what he was listing his house for! Funny, that same neighbor was nowhere to be found 138 days and four price reductions later. He was certainly not boasting about his process then, was he? It’s these bad actors (insert: Aircraft Brokerville here) that provide organizations like ours, OPPORTUNITY.
Much like “beauty is in the eyes of the beholder” so is ‘opportunity’. Our monthly PULSE publication is a great step towards knowing when to spot a beautiful opportunity. Give us a shout to discuss ‘opportunity’ and what it may mean for you!
Fly safe,
Bub