Alireza Ittihadieh says buyers should wait, Steve Varsano says world is getting brighter
Like you, we spend a lot of time tracking the market. At our conference in Hong Kong (Corporate Jet & Helicopter Finance Asia 2012) this week many of the more than 100 delegates attending were impressed at how realistic many of the presenters were.
Alireza Ittihadieh, CEO of Freestream Aircraft Bermuda, who described himself as “Doom and Gloom,” said that he is advising buyers that there is no hurry to buy and that he sees prices falling further. He argues that the global economy needs to improve and that there are no signs of a business aviation upturn. Ittihadieh says the earliest it will happen is 2013.
But not everyone agrees. We just recieved a PDF produced by FlyCorporate magazine and Steve Varsano, founder of The Jet Business, a London virtual aircraft showroom.
Varsono says that things are improving.
He writes: “I know there are some micro-markets doing better than others, but on the whole, the world is getting brighter for sellers of pre-owned aircraft: Interest rates remain low, pre-owned aircraft inventories are declining, average sales prices are increasing, middle American businesses – including the farm belt, manufacturing plants and automobile companies – are starting to order new aircraft again and the dollar remains weak, giving non-American buyers a further discount.”
“In a nutshell, there are unbelievable opportunities to acquire pre-owned aircraft at huge discounts compared to their new counterparts. These big price reductions have given the pre-owned market a boost.”
To boost his argument, Varsano accompanies his article with this chart:
Varsano’s chart is fantastic. Now is clearly the time to buy. Inventory is falling, buyers better hurry up before there are no aircraft left.
However, lets zoom out. The second chart from Amstat, one of the leading aircraft data companies shows we are coming down from a high in 2008.
Varsano is right, things are improving but only from a truly awful base. Inventory is falling but only from a 10 year high. It may be too early to call the up-turn.
Ittihadieh warns that all pre-owned aircraft values could fall by a further 10% (and it is worth noting that he specialises in larger aircraft that are having a better downturn than light jets). One veteran broker who heard this agreed. “Only 10%?,” he said. “I would take that.”
Ittihadieh is telling buyers that he will personally guarantee money that buyers lose if they hold back and aircraft values rise. David Dixon, president of Jetcraft Asia, who has over 30 years’
experience of aircraft sales, said he broadly agreed but was not willing to provide his own cash if he was proved wrong.