When our daughters or sons bring home a new significant other, we look them up and down and then start a line of questioning: “So, can you tell us about yourself?” On and on with the hope of learning if your child has found the right partner. Is this newfound relationship going to be a solid partner?
The pedigree or foundation is fundamental to anything one wants to become associated with. It could be a house, a building, or a business. Will it be a good fit? Will it add value to your portfolio? Is it resellable? Can it enhance your asset base?
Now let’s talk about how the last few years in the preowned business aircraft market might have taken the eye off the pedigree ball and what this might become as a differentiating factor going forward for our fleets. When prospects hire us to acquire an aircraft, we set up very rigid criteria for the search.
It always starts with pedigree. Who owns it? Has the owner provided for the best maintenance and operational excellence? How many owners has the airplane had, and do they all represent high-quality people and operations?
Next, we dig deeper into the maintenance and the history. Has there been any damage, and to what severity? A further hard look is taken for repairs and any nonstandard reoccurring inspections because of the repairs. Where in the world was the airplane operated? On and on with questions that help us differentiate the good ones from the mediocre ones—or even the ones we must stay away from.
Why drive so deep into areas all of you must know by now? Well, here comes the twist!
Starting with the pandemic and the surge of first-time buyers who seemed set on capturing 100 percent bonus depreciation, our available inventory was worn totally thin. In fact, often there would only be one (or none) of a specific category of plane on the market.
Feeding frenzies ensued. Bidding wars and price escalations were the norm. But here is one more thing that became the norm: a shift away from the basic hard questions that should have been asked and whose answers should have been a guide. Foundation, history, operational history, and repair history.
Buyers were so desperate to get an airplane bought, even if it did not quite meet the mission or check all the boxes. The priority for many shifted to just buying an airplane. I began to hear questions like, “Are third-world countries so bad to buy from?” “Was that damage really that bad?” “Is an engine program really that important?” “So what if it was not a recognizable past owner?”
Many critical questions were overlooked; the idea of the airplane transaction being able to close and provide the buyer with the depreciation seemed to be all that mattered. So what happens next to these airplanes?
One day, they will come back on the market and those who could not previously check all the boxes concerning pedigree and history will start to stand out less positively than those whose boxes were checked with the right answers. Values may begin to separate, and the cream will rise to the top.
Those buyers who ignored the right questions and the right answers may find that there was a cost to that path. Those who asked all the right questions and respected the answers—even if it meant not buying at that moment and waiting for the boxes to be checked—will be rewarded with the added value that comes with patience, as well as all the right due diligence.
Jay Mesinger is the CEO and Founder of Mesinger Jet Sales, an international aircraft brokerage firm. With 49 years of successfully buying and selling aircraft, Mesinger Jet Sales has a global reputation for personalized, transparent service.
The opinions expressed in this column are those of the author and not necessarily endorsed by AIN Media Group.