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The scourge of the off-market aircraft; often referred to as 'fools gold'

by Jeremy Cox 1. October 2010 11:02
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Business and other segments of General Aviation are by nature fairly exclusive realms. What I mean by saying this, is that seeing that there are 6,880,000,000 people on this planet, while there are almost 32,000 business jet and turbo-prop aircraft that are in operation around the world. This equates to 215,000 people to every business aircraft, which in reality is not a true figure because there are really only approximately 200,000 actual business aircraft owners, therefore there is less than 0.003% of the world’s population that can actually be classified as a business aircraft owner. You really have to try hard to be more exclusive than that.

Unfortunately there are many who believe that when an aircraft is put up for sale, it should be marketed and sold in a stealthy and even more exclusive way than befits the actual marketplace. What do I mean by this? I shall explain:

The potential market for any given business aircraft is about a quarter of a million people. Of course it can be argued that this market is much larger than this, but the total market has historically only grown by about 900 aircraft per year since 1990. The numbers are as follows:

Heavy Jets Added to the Fleet Every Year (Average Since 1990)

160 Average

Medium Jets Added to the Fleet Every Year (Average Since 1990)

219 Average

Light Jets Added to the Fleet Every Year (Average Since 1990)

210 Average

Turbo-Props  Jets Added to the Fleet Every Year (Average Since 1990)

329 Average

Total Business Aircraft Added to the Fleet Every Year (Average Since 1990)

918 Average


In light of the numbers above, it is evident that the business aviation fleet (marketplace) is growing at a pace of just under 3% of the total fleet, per annum.

There are currently 2,641 Dealers, Brokers and Trading FBO’s that are listed in the AMSTAT database. This total consists of every corporate entity that has been involved in at least one aircraft sales transaction. Out of this number, it is fair to suggest that half of these entities are merely a shell company that was formed for one-single aircraft transaction, thus this number changes to 1,321. Lastly it is realistic to say that the rest are either bankrupt, or they have not bought or sold an aircraft in over a year, and therefore in my opinion, is not therefore active. Our number of Dealers, Brokers and Trading FBO’s now drops to 925 in-total.

In 2007 between January 1st and December 31st, there were 2,681 Retail-to-Retail transactions worldwide. In 2009 between the same period, 1,604 Retail-to-Retail transactions took place, again worldwide. Since January of this year; to-date (September 28th) there have been 1,212 Transactions. What is very revealing about these numbers is the fact that only 20 Dealer, Broker and Trading FBO companies transacted 6 or more aircraft during the whole of 2009, while the rest were sporadic sales.

So after looking at the numbers I would like to return back to both the title and the premise of this article, which is my firm belief that selling a business aircraft ‘off-market’ is a very bad plan. Please allow me to explain:

The true market of potential buyers active within today’s Resale Business Aircraft Market is minute (<0.003% of the world’s population.)

The average number of business aircraft sold, per Dealer, Broker and Trading FBO companies is about 1.7 aircraft 2009 figures: 1,604 transactions between 925 companies), but in truth almost half of the resale transactions (>40%) are being conducted by slightly over 2% of all of these companies put together (JetBrokers, Inc. is one of the companies that is firmly placed within this 2% grouping.)

There are approximately 25 websites where business aircraft are advertised for sale. There are 2 subscriptions only, multiple listing services that specialize in the tracking of business aircraft sales. There are 4 print magazines (in English) that are dedicated entirely to advertising business aircraft for sale; with 25 plus that advertise (in English) both small/light/general aviation craft as well as business aircraft.

The average days on market (the number of days from listing agreement signing to transaction closing) is currently running at about 350 days. Most professionally brokered aircraft sell within between 60 to 180 days if they are correctly priced.

A professionally business represented aircraft will have its entire collection of records audited and the aircraft will be evaluated for condition, value and proper placement (the list of ‘like’ aircraft next to sell), with appropriate pricing. An ‘off market’ aircraft will not have these advantages.

A professionally business represented aircraft will have accurate and industry standardized written specifications along with descriptive and effective advertising copy. An ‘off market’ aircraft probably will not.

A professionally business represented aircraft will be advertised in places that have proven time and time again, to be seen and read by qualified buyers. An ‘off market’ aircraft probably will be offered either ‘under the table’, or worse in an unidentifiable condition, i.e. with no serial number and generalized and probably inaccurate specifications. This instantly makes the ‘off market’ aircraft of no tangible interest to real buyers.

It is human nature that every human has at least one person in their lives that they tell all of their secrets to. If a business aircraft owner is motivated to sell ‘off market’ because they do not want to attract attention to either themselves or their company, within a day or two the top 2% of all of the Dealer, Broker and Trading FBO companies will know about it, and within a month, everyone will know about it, all 925+ companies. By this time the aircraft will have become damaged goods if it has not been snapped up by a bargain hunter. Why? There will be so many companies and individuals that have an attempt at vending the aircraft to potential buyers, so much so that facts, prices and layers of middlemen will become so confused and mismanaged that the ultimate selling price shall reflect a loss to the owner that closely mimics how a damage history affects aircraft value. This is where the term ‘fool’s gold’ is appropriate.

The seller ultimately shall unknowingly leave so much money on the table, instead of it being yielded to him/her through a formal brokerage agreement, just to satisfy the now in-built strata of middlemen.

‘Bedroom brokers’, meaning individuals that have no formal place of business, or corporate structure to transact an aircraft transaction, and yet they are actively trolling the marketplace for unsuspecting buyers and sellers alike. Well the ‘off market’ aircraft is their meat and potatoes so to speak. This is because they are either unwilling or unable to secure formal exclusive listings of aircraft inventory to represent, market and sell, and therefore the ‘off market’ aircraft is a gift horse that they cannot resist getting involved with. Well now both a seller and a buyer have set themselves up as prey for these individuals who care only for their commission, and not about the arrangement, handling and successful conclusion of an equitable sales transaction. Professional brokerage companies will only work for one commission. I have known of bedroom brokers that have accepted as many as three commissions, all resulting from the same transaction.

With all of these factors weighed in, hopefully now you can see how an ‘off market’ aircraft is really a scourge, rather than the jewel that it could be, if you chose the formal path of representation instead of the nefarious approach.

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Jeremy Cox | Aircraft For Sale


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