April 29, 2011

Used Bizjet Sales: Size Matters, Say Market Leaders

Jahid Fazal-Karim, a stakeholder and board member of Jetcraft Corporation, has sold more than 1,500 aircraft in a 17-year career, averaging nearly 100 sales a year in transactions that circle the globe. On the eve of EBACE) he spoke from his office in Zurich with BCA Senior Editor George Larson about the state of the market.

Describing 2010 as a “pivotal year,” Fazal-Karim says, “What I see mainly is a two-way market. At the higher end. Global, G550, I can see clearly that we are in recovery mode, with fewer good aircraft available on the market and prices going up, I wouldn’t be surprised if asset values go up quite fast.”

But the recovery so far is limited to the heavy jets, he says: “At the lower end; Lears, Cessna, Hawkers, frankly, the crisis is not over yet, and there are a lot of airplanes available.” And in between? “Not great,” he adds.

“On the actual market side, I can explain it. The higher end is selling because the emerging countries such as China and in Asia are buying the big aircraft. Also the Middle East is buying the heavies. We’re seeing it in Nigeria, an oil-based economy that’s emerging from the crisis and growing. These customers are gobbling up those planes.”

The effect has been reduced in mainland Europe and the United States, and Europe will have a tough year for 2010. “The U.S. recovery is happening faster than Europe’s,” he says. “It’s not going to be easy, and I’m not optimistic.”

Aside from issues of sovereign debt, the price of oil is influencing the aircraft market. On oil: “We need to find a balance,” he says. “A high oil price is not a bad thing because we sell airplanes to oil and gas wealth. In Russia, though, that’s a commodity boom, not just oil and gas. In 2008, I was going to Russia once a month. Last year, I had no trips, and so far in 2010, I’ve been there twice.”

Fazal-Karim says he has four principal lines of revenue: brokerage fees, trades, looks back on the second half of 2009 as a good season with lots of good airplanes at good prices and enough people with cash at the right moment. He earns a fee based on successful transactions, and life is tougher now. “Now we have a lot of buyers with cash but no more distressed sellers, so we’re spending a lot of time to reeducate our buyers: sorry, but we can’t find you that airplane at that price.”

As he anticipated the opening of EBACE2010, he said the major manufacturers need to address gaps in their product lines. “Gulfstream has the least market gap. The G250 is a great airplane and the G450 in the lower $30 million bracket, frankly, a very complete line. Dassault has a gap in the low $20 millions. Bombardier’s gap is between the 605 and Global 5000, and they will have to compete with the Gulfstream 650. We call it the ‘Global 7000’.”

He says for Cessna “it’s a natural to do the canceled Columbus. George Larson

Looking farther out, he notes, “If I were still a senior VP in sales at Bombardier and you asked me what is my biggest threat 10 years from now, the answer would be Embraer.”

Bob Rockwood, an aircraft broker with Bristol Associates of Washington, D.C. who publishes a monthly e-mail on the market, agrees that heavy jets are recovering, but he notes that it’s always been that way. “Recoveries are top down, so the large, long-range markets start trading first, then the activity filters down.” Large organizations and people with a lot of cash are the first in, and they buy heavies. “This pattern existed before international markets became a real factor,” he says. “What is interesting is that there still doesn’t appear to be much upward price pressure despite the fact that there are very few planes actually for sale,” he writes in an e-mail.

 

Written by www.aviationweek.com