CJI Town Hall: Industry experts predict soft landing
Business aviation’s chances of a soft landing after the boom of the past two years stand at 40%, according to Ford von Weise.
The global head aircraft finance, Citi Private Bank, gave delegates at yesterday’s CJI Town Hall three scenarios for the industry post-boom: “[Scenario] one, a robust future, what we might call as business as usual today. The second is a resilient future, what we might call soft landing, and then thirdly is recession, which in our industry, is a hard landing,”
With a resilient future, or soft landing, at 40%, von Weise forecasted the likelihood of the other scenarios at robust future 25%, recession, or hard landing 25% and room for error at 10%.
Josh Mesinger, vice president, Mesinger Jets, agrees: “I think there are a lot of factors at play. I like the idea of resilience. I think our industry has a lot of resiliance. I personally don’t see a bubble bursting. I’m excited to see more inventory come to market.”
Citi Private Bank’s chief investment officer, David Bailin, predicts a resilient scenario (or soft-landing) despite the current policy of raising interest rates and quantitative tightening implemented by the US Federal Reserve. Although it’s possible the policy will constrain further growth globally, it should be mitigated by growth in inventories and recovery in production leading to increased corporate profits, according to the bank.
“I’ve never worked so hard to give four clients $15m unsuccessfully.”
Meanwhile, fellow speaker, Jay Mesinger, CEO and founder, Mesinger Jet Sales has been left frustrated by new buyers slowing or cancelling transactions. “This is such an interesting topic. From the transactional perspective, the side the Josh, Adam and I share, it has been a frustrating time.”
There have been reports of some sellers forbidding pre-purchase inspections. “It’s just a function of how difficult the transactions are. Aircraft will come on in the morning, by lunchtime there are 10 full price offers and I wanted to run an add recently that said “Hire Mesinger Jet Sales and let us manage your greed,” because sellers just don’t want to stop!” he said.
Fellow panelist, Wes Romaine, vice president, ACI Aviation Consulting, said: “What we are seeing from a supply demand standpoint is obviously: demand is through the roof so high, and supply is so constrained. I think what we’re seeing roughly 2-2.5% across each segment of aircraft that are 28 years or older”
The panel identified “fence-sitters” as potential buyers and sellers waiting it out to evaluate the market. Adam Mesinger, director of business development, Mesinger Jet Sales said “Many are just not willing to deal with the lower-pedigree options that have come up, but are re-adjusting their mind to the changing values, so are ready to jump when the right one comes up.”
This lack of supply within the industry has naturally allowed the sellers to heavily influence the value of used aircraft. “With this demand, pricing has been driven through the roof and really each transaction sets this new benchmark,” said Romaine. “From our perspective, it is setting the benchmark for fair market value.”
Watch the full video here.