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The summer of 2009 was a tough one for business aviation. Companies were selling their aircraft to save costs and values were falling. But despite the grim market, Mark Payne and Brian Proctor decided it was the right time to launch their own aircraft consulting company. They called it Mente Group.
Mente Group started with just the two founders in an office in Addison Texas. They now have a team of 10 and closed transactions worth $1.5 billion in the last five years.
As well as the core business of advising buyers they also launched Mente Complete which specialises in advising people who want to buy and complete VIP airliners. Mente Complete is run by Proctor along with: Don Hammer – an aircraft technical specialist; Cheryl Stack, an interior designer; and Jeff Bosque a completions specialist. Hammer advised Mark Cuban, the owner of the Dallas Mavericks Basketball Team, on the completion of his Boeing 757. Mente Complete is now working on a project with Cuban’s 767.
Corporate Jet Investor asked the two founders five questions to celebrate Mente’s fifth anniversary.
Corporate Jet Investor: You launched in 2009 when the market was depressed, did you expect the downturn to last so long?
Brian Proctor: We knew the downturn was severe. At our previous firm where we were partners, we went from six transactions a month to 1.5. When we saw that type of market transformation, we knew it was serious. What we didn’t fathom was how persistent the effects would be. Fortunately, we started very lean, and we have been very disciplined in how we have grown the firm.
Mark Payne: With the incredible shift in values and flood of pre-owned inventory I suspected a very long road to recovery. But even with that said, it has lasted longer than I anticipated and we’re still dealing with fallout from it today.
Corporate Jet Investor: Has Mente grown as fast as you forecast in 2009?
Mark Payne: By any standards, starting a new company in the midst of the 2009 market would have been considered sketchy. Lots of hard work and intense focus on success helped us get off to a great start. We’ve been thrilled with our growth and overall success.
Brian Procot: Our goal the first 12 months was to conduct 12 transactions. We exceeded our goal, and we are excited to say that Mente just eclipsed $1.5 billion in transaction volume since July 2009.
Corporate Jet Investor: You offer a lot of different services, which are the biggest part of your company?
Mark Payne: Brian and I have always had a different approach to the aviation marketplace. Making smart decisions around aviation assets is core to what we do every day. Even the name of our company, Mente Group, highlights that approach: “with mind, thought, intellect.” It hasn’t surprised us that our clients appreciate a methodical, strategic approach to airplanes and aviation solutions.
Brian Proctor: Our business is differentiated in the marketplace by our strategic consulting and fleet planning capabilities. We have very sophisticated models and products for our clients. Consulting represents about 30 per cent of our revenue. Transactions of shares, acquisitions and sales of whole aircraft, and inventory trades naturally flow out of the consulting we do, and they account for 70 per cent of our revenue. This is consistent with our expectations when we started the company.
Corporate Jet Investor: What is the biggest issue facing business jet buyers today?
Mark Payne: The internationalization of the marketplace has created more hurdles for buyers today. In many years past, projects that were once US-centric are now spread worldwide; nearly 50 per cent of our business involves an international component. Navigating the challenges of values, international aircraft pedigrees, title, technical issues and complex closings has made the purchase process that much more complicated.
Brian Proctor: The ‘cost of ownership’ model in place for the first 50 or so years of this industry has turned upside down within the last five years.
Traditionally, aircraft values have cycled with the economy, generally averaging 3 per cent to 4 per cent of decline per year. In the last five years, those averages have been more like 6 per cent to 10 per cent, depending on aircraft type. So, the fundamental question is, is this a cyclical change or structural change in residual values?
I know that banks are sensitive to this, but I don’t know if the secondary effects have been felt across the industry. We spend considerable time studying residuals, and trying to prepare our clients for the realities of the current market, but when factoring in best case and worst case into residual planning, the total cost of ownership is much greater than it historically has been.
Corporate Jet Investor: What one piece of advice would you give to buyers?
Brian Proctor: It’s no coincidence that the name of our company is Mente. It is from the Latin, meaning-literally-with mind, or with thought, or with intellect. We would advise any buyer to think through ownership before pulling the trigger.
There is no question that a business jet can radically improve the effectiveness and efficiency of a business person. However, as we say, you buy an aircraft to make your life simpler, not more complicated. If you don’t have a good plan and team in place before you begin, the consequences could be impactful.
Mark Payne: Put together an experienced team for the project and spend an inordinate amount of time on the buy side of the equation. Know the markets, understand potential residual value pitfalls; buy value, technically sound aircraft with good pedigrees. Small mistakes can cause big headaches down the road.