Aircraft Sales Insights

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Benefits of Aircraft Dry Leasing – An Often Misunderstood Form of Private Jet Flying

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By Shawn Dinning

Successful businesses adapt and progress with the times, and aircraft dry leasing is a perfect example of how many aircraft owners and users are adapting to the current market environment. If we told you there was a way to have all of the practical, operational, and efficiency benefits that aircraft owners enjoy, without actually becoming an aircraft owner, would you believe us?  Aircraft dry leasing does just that.  Very similar to an auto lease, here’s how it works:

Dry Leasing includes the following:

  • Aircraft Lessee commits to an owner/lessor for a period of time, usually 6 months to 3 years.
  • Lessee is charged a monthly rental rate for the aircraft.  This rental payment grants the lessee 365 days/year of exclusive access to the leased aircraft. (Same Level of Access that an Owner has to an owned aircraft)
  • Just like in the auto leasing business, the lessee is responsible for all variable and fixed operating costs of the aircraft for the entire period of the lease, as the rental payment does not cover these items e.g. fuel, maintenance, pilots, insurance, etc
  • At the end of the lease period, the lessee turns the aircraft back into owner/lessor, with no further liability, regardless of the change in aircraft value (which has been depreciating for the last 4.5 years!).

 

Owner/Lessor Benefits

 

  • The owner/lessor can generate lease proceeds on an asset that they are not ready to sell.  For example, an owner who is upside down on the aircraft can use the rental proceeds to pay down the loan amount closer to the actual aircraft value.
  • The owner/lessor can generate rental proceeds while waiting for market conditions to improve for sellers.

 

Lessee (Aircraft User) Benefits

 

  • Off-Balance Sheet Transaction
  • No Residual Value Risk (Even if the aircraft loses value)
  • Allows the lessee to try an aircraft type out before lessee commits to an actual purchase of that type
  • Allows lessee to change into different aircraft more frequently, without having to worry about the depreciation of the aircraft
A dry lease solution makes sense in the following scenarios:-Someone is seriously considering ownership, but they are not comfortable with the upfront cash costs (down payment on a loan) of buying an airplane, or they are not comfortable with the risk of future depreciation (in 2 to 3 years) of the aircraft that he/she is buying at today’s fair market values.- A company that does not wish to have an aircraft listed on their balance sheet as an asset or liability. Dry leasing would address this problem.-Someone wants to “try out” the experience of aircraft ownership withou worrying about resale obligations in the future.-Someone has an order for a brand new aircraft with a multi-year wait on the delivery. A dry lease can provide interim lift during the waiting period.-A company has a temporary multi-year project that will require an additional aircraft in the fleet for the term of the project. When the project is over, the company will no longer have a use for that aircraft.

Want to acquire a 10 to 20 Year Old Aircraft?  Dry Leasing May Help.

Aircraft lenders are eager to finance airplanes 10 years and younger, but are much more restrictive on financing aircraft that are older than 10 years. They typically require a much higher “down payment” on the older aircraft, to the tune of 30% to 50% of the aircraft acquisition price.For example, on a 1998 Challenger 604 (DJI happens to have one available for dry lease), the down payment on a typical loan deal would range anywhere from $3,750,000 on the high side to $1,500,000 for select borrowers. Contrast that to the typical security deposit on a dry lease of this airplane of approximately $350,000 (for lessees with good credit).

Conclusions

While not for everyone, aircraft dry leasing provides you, the flight department or aircraft end user, the same exact experience and operational flexibility as aircraft ownership, except you are required to return the aircraft to the owner/lessor at the end of the lease term, and there is no risk to the lessee of residual value decline. At the end of the lease term, you can either renew the lease, or go out in the open market and buy an airplane if the market is favorable for that.

Please feel free to contact my office at Dallas Jet International to learn if dry leasing may be a viable alternative for your business aircraft needs.

 

1998 Challenger 604, Serial Number 5376

DJI currently has a Challenger 604 available for dry lease. If you have any questions, call me at (214) 459-3303  or write sdinning (at) DallasJet.com to discuss the particulars.

Consider dry leasing an aircraft - it may bring larger aircraft with longer flight profiles into financial reach!

Shawn Dinning, Director of Sales & Acquisitions

Mr. Dinning acquired his formal education at the United States Air Force Academy in Colorado Springs, Colorado, in the areas of Operations Research and Management Science and also holds a degree in Aeronautical Science from Embry-Riddle Aeronautical University. Mr. Dinning brings 16 years of aviation experience from a variety of aviation disciplines, including FAR 91, FAR 121, FAR 135, defense, and shared ownership sectors. A former full-time professional pilot, Mr. Dinning holds a current Airline Transport Pilot (ATP) certificate, and is type-rated in the Gulfstream V/G550/G500/G450/G400/G350/G300, Bombardier CRJ-200, and Citation 510 Mustang. He has logged over 5500 flight hours, with 3500 of those hours in corporate turbine aircraft. Mr. Dinning has been consulted in publications such as Business & Commercial Aviation on various issues related to turbine aircraft transactions.

Mr. Dinning brings to Dallas Jet International a rare and highly valuable skill set of operational and business acumen, and has become a leader in the professional marketing and procurement of corporate turbine aircraft all around the globe. He also specializes in aircraft mission analysis, aircraft valuation, and cash flow and operating cost analysis for private aircraft owners. Mr. Dinning has a track record of successful transactions that is well known amongst his clients and colleagues. His reputation for intelligent and meticulous management of aircraft transactions have made him one of the most respected aircraft brokers in the industry.

Dallas Jet International – An Emphasis on Relationships with an Operational and Technical Perspective

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Dallas Jet International is a member of the National Aviation Resellers AssociationProfessionals who pride themselves on prioritizing the focus of each transaction appropriately own Dallas Jet International (DJI). Long-term relationships come first, business objectives second, and aircraft third. This long-term focus and emphasis on the people and business that the aircraft will be serving ensures that each decision is made in the best interest of the client, many of whom have relied on DJI to represent their interests in multiple aircraft transactions over many years.

 

DJI is owned and managed by former professional pilots and aircraft managers who stay current and active during the free time away from the business. President and CEO Brad Harris and Managing Director of Aircraft Sales Shawn Dinning are experienced ATP pilots with current type ratings in 13 different aircraft from Citation 500 to Gulfstream G550. They have more than 13,000 flight hours between them. An aircraft sales professional with an operational and technical background can more fully assess and appreciate a particular aircraft’s strengths, weaknesses, opportunities and risks. Harris and Dinning use this depth of knowledge to their clients’ advantage.

 

DJI operates independently and is at liberty to transact within any make or model of aircraft. Their sole criteria is to ensure the best match with the client’s needs, exclusively representing buyers during aircraft acquisitions, thus preventing conflicts of interest. Harris and Dinning rely on excellent strategic market intelligence, ability to negotiate and expertise with complex transaction structures for clients with diverse financial positions and strategies. They use the latest technology to research and list aircraft, and they have cultivated an extensive network of industry relationships to find information and aircraft unavailable to many competing brokers and agents.

 

DJI has managed numerous aircraft in the past, and continues to manage aircraft for certain local clients. DJI clients now have access to one of the industry-leading charter/management and maintenance operations with DJI’s announcement of its brand new business alliance with Pentastar Aviation, a large Pontiac, Michigan-based Charter/Management and MRO (maintenance) company. While brokering aircraft transactions is a large part of DJI’s business, the purchase of aircraft into inventory for resale is becoming an increasingly big part. DJI is putting the message out to owners, brokers, banks, etc, that the company is in the market to buy aircraft, including trade-ins and repossessions.

 

“Buyers and sellers need expert representation in the business aircraft marketplace,” explains Brad Harris. “We manage the complexities of the process from start to finish to our clients’ advantage. While we are often labeled as ‘brokers,’ our clients call us ‘trusted consultants’ who rely on us to buy, sell or manage their aircraft in a manner that meets their objectives with the best possible financial results.”

 

Shawn Dinning adds, “Never underestimate the value of a reputable broker. Our clients benefit from the fact that aircraft buyers and sellers (who are not represented by DJI) prefer to work with clients represented by DJI because they know they will have a smooth transaction process.” Dinning advises anyone who is hiring a broker to really get to know that firm’s background, aviation experience and reputation within the industry.

 

Founded by Brad Harris in 2001, Dallas Jet International joined the National Aircraft Resale Association (NARA) in 2008 because the company wanted to be part of a group that creates a competitive advantage for members and their customers by leveraging a global collective knowledge and maintaining the highest professional standards.

 

For more information about Dallas Jet International and their capabilities, visit their website at http://www.dallasjet.com/ or call the Southlake, TX, office at 817.328.2900 or the Dallas, TX, office at 214.459.3303.

This article was originally published in February 2012 on the NARA blog.

Fact or Fiction – You have to be a Fortune 500 Company to Afford a Business Aircraft

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Business aircraft are not just for the Fortune 500By Shawn Dinning, Dallas Jet International (DJI)

The vast majority of companies using business aviation–85%–are small and mid-size businesses and other entities, including nonprofit organizations. For every Fortune 500 company that relies on business aviation, there are several small businesses that also need their airplane. Our typical client range includes companies with revenues of $20 million annually up to over a billion, but some individuals and companies have far less than that.  The notion that only publicly traded companies own airplanes is very much a myth.  In some ways, owning an aircraft provides smaller companies more of a competitive advantage than the larger companies. They are differentiating themselves from their competitors by providing faster and more personalized service to their customers. Companies that own a private aircraft are more nimble, more responsive, and better able to take advantage of opportunities and respond to risks by ensuring their people are where they need to be, when they need to be there.  Studies show business use of general aviation adds value to a company’s bottom line.

 

But, let me change gears and caution prospective aircraft owners.  I see many companies and organizations realize the benefits of business aviation, at which point they become highly motivated to purchase a private aircraft.  While this is a successful revelation in every sense, I have seen these same individuals, companies, and organizations act in haste and become embroiled in a less-than-ideal ownership situation.  Examples of this scenario include acquisition of the wrong type of aircraft, purchasing an aircraft with poor pedigree and maintenance history, or having paid entirely too much for the aircraft.  In the aircraft business, whether you buy new or pre-owned, a seven figure blunder can happen in the blink of an eye.

 

Dallas Jet International is your partner in aircraft research, acquisition and all components of aircraft transactions.  We will help you acquire an aircraft that meets your travel requirements cost-effectively. We help you balance the initial investment with operating costs. We also provide options for reducing your cost, such as remote management and staffing using our alliances with major providers of those services.  Contact us to find out how we can assist with your situation.

 

Shawn Dinning, Director of Sales & Acquisitions

Mr. Dinning acquired his formal education at the United States Air Force Academy in Colorado Springs, Colorado, in the areas of Operations Research and Management Science and also holds a degree in Aeronautical Science from Embry-Riddle Aeronautical University. Mr. Dinning brings 16 years of aviation experience from a variety of aviation disciplines, including FAR 91, FAR 121, FAR 135, defense, and shared ownership sectors. A former full-time professional pilot, Mr. Dinning holds a current Airline Transport Pilot (ATP) certificate, and is type-rated in the Gulfstream V/G550/G500/G450/G400/G350/G300, Bombardier CRJ-200, and Citation 510 Mustang. He has logged over 5500 flight hours, with 3500 of those hours in corporate turbine aircraft. Mr. Dinning has been consulted in publications such as Business & Commercial Aviation on various issues related to turbine aircraft transactions.

Mr. Dinning brings to Dallas Jet International a rare and highly valuable skill set of operational and business acumen, and has become a leader in the professional marketing and procurement of corporate turbine aircraft all around the globe. He also specializes in aircraft mission analysis, aircraft valuation, and cash flow and operating cost analysis for private aircraft owners. Mr. Dinning has a track record of successful transactions that is well known amongst his clients and colleagues. His reputation for intelligent and meticulous management of aircraft transactions have made him one of the most respected aircraft brokers in the industry.

Fact or Fiction? “Buying an Older Airplane Can Save Me A Ton of Money!”

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You’ll find that in today’s market it is possible to buy a Gulfstream III for under three million. Buying an older airplane sounds really attractive, until you learn that your first major inspection is going to cost you $500,000 to $1 million; whereas a newer Gulfstream IV will have a purchase price of seven million but your first major inspection might only cost $250,000.  (These numbers are estimates only.  They can and will vary).

As a rule, older aircraft have more expensive inspection requirements. Newer aircraft cost more initially in purchase price but are less expensive to keep and to fly.

Buying an Older Airplane Is Not Always a Bargain

We’re certainly not “anti-old airplane,” because in some cases these can represent a really great value.  There might be five Gulfstream  IVs on the market today that have dropped below the unthinkable price of $7 million, , but four out of the five aircraft will have underlying drawbacks that could cost the new owner significant amounts of money in either maintenance or lost residual value when the airplane sells

One of our jobs is to help you balance current value with future burden.  It can make sense to buy an older aircraft with higher operating costs.  You have to do the math, and really project into the future to determine what inspections may become a liability and how your utilization of the airplane overlaps those milestone inspections.  Dallas Jet International’s leadership and technical consulting staff are all highly trained and experienced in mitigating these risks for purchasers of older aircraft.  Make no mistake, the older aircraft, if they are quality, can be some of the best deals in the global marketplace.

If you are considering the purchase of an older pre-owned aircraft, it can be a great deal for you.  Prices on older but quality pre-owned aircraft are at historic lows.   However, don’t go it alone.  With representation from a  firm like Dallas Jet International that possesses sound guidance, technical oversight, and negotiating experience, you will ensure that you are not making a multi-million dollar buying blunder.

Shawn Dinning, Director of Sales & Acquisitions

Mr. Dinning acquired his formal education at the United States Air Force Academy in Colorado Springs, Colorado, in the areas of Operations Research and Management Science and also holds a degree in Aeronautical Science from Embry-Riddle Aeronautical University. Mr. Dinning brings 16 years of aviation experience from a variety of aviation disciplines, including FAR 91, FAR 121, FAR 135, defense, and shared ownership sectors. A former full-time professional pilot, Mr. Dinning holds a current Airline Transport Pilot (ATP) certificate, and is type-rated in the Gulfstream V/G550/G500/G450/G400/G350/G300, Bombardier CRJ-200, and Citation 510 Mustang. He has logged over 5500 flight hours, with 3500 of those hours in corporate turbine aircraft. Mr. Dinning has been consulted in publications such as Business & Commercial Aviation on various issues related to turbine aircraft transactions.

Mr. Dinning brings to Dallas Jet International a rare and highly valuable skill set of operational and business acumen, and has become a leader in the professional marketing and procurement of corporate turbine aircraft all around the globe. He also specializes in aircraft mission analysis, aircraft valuation, and cash flow and operating cost analysis for private aircraft owners. Mr. Dinning has a track record of successful transactions that is well known amongst his clients and colleagues. His reputation for intelligent and meticulous management of aircraft transactions have made him one of the most respected aircraft brokers in the industry.

 

Buyer’s Market? How to get a read on a supply levels within specific aircraft markets

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Does it seem like “a lot” of aircraft of a particular type are for sale? It depends on the size of the fleet to begin with.

By Shawn Dinning

In a previous blog post, I went through various aircraft markets and compared snapshots of those markets 3 years ago to snapshots of those same markets today. In all cases, aircraft markets (and associated aircraft values) have fallen dramatically, in some cases 50 to 60%.

What I would like to do now is take a look at the markets today from a slightly different perspective – “Percentage of aircraft fleet for sale”.

Everybody is seemingly in tune with how many aircraft are available for sale in a given market. For example, if I go to my database and research reports of aircraft, and extract all Citation Excels available for sale, I see a total of 26 aircraft available for sale.

To diverge from my topic for a moment, the database and research that DJI uses is much more robust than any retail website that aircraft buyers might be familiar with. If I go to the industry’s most popular retail website for aircraft listings, there are 13 Citation Excel listed for sale. So, by tapping into a broker’s resources and databases, a prospective buyer would have access to 100% more airplanes in this particular market! Like in any market in any type of product, there is a small portion of the 26 Excels that isn’t truly for sale, but you get my point.

So, 26 Excels sounds like a lot of airplanes for sale and a lot to choose from. It would suggest that it is a “Buyer’s Market”. So, now you know how many Excels are available for sale, but do you know how many have been produced and are in operation today? Amazingly, there are 369 Citation Excels in operation today.  This large number is due to a relatively long and stable production run of the aircraft, in addition to widespread marketplace acceptance of the Excel. This paints a much more telling picture of the state of the Citation Excel market. Yes, 26 airplanes is a sizable number of aircraft. However, you must process that number in the context of the entire fleet, which consists of 369. Percentage-wise, only 7% of all Citation Excels in operation are available for sale. This is not that many. This comes back to the supply and demand basics that we all know. While 26 airplanes is a notable supply number in absolute terms, it is not that sizable in the relative perspective.

It is this relative perspective that seasoned aircraft brokers, lenders, and appraisers use (along with other statistical data) to gauge the health and momentum of the market.  All things being equal, a broad rule of thumb to use is that 10% is a good line of demarcation between a slow market and a “heating” market. So, the Excel market is not as over-supplied as one would think. There is clearly no rationale for prices to drop further in this market, if you’re looking at supply alone. The constant stream of Citation Excel transactions at today’s prices is proof of a limited supply and stable, steady demand

Compare this market to the Hawker 800XP market. There are 52 Hawker 800XP aircraft for sale, in the context of 423 in operation. This equates to 12.3% of the fleet for sale. As any Hawker 800XP seller knows, the market has a high relative supply, and thus prices have not found a way to completely stabilize.  In order for prices to truly stabilize, supply/inventory must be sold to effect a lower supply percentage, or demand must increase on the available supply.

Everybody has heard that the 10 years and younger, large-cabin market has shown signs of increasing momentum this year. DJI conducts a lot of business in this realm. The percentage of Fleet for Sale for Gulfstream V aircraft? 5.7%. Data does not lie.

Below is a summary of fleet percentages available for sale.  As you go through this list, try and correlate your perception of that particular market’s momentum with the percentages.   You will notice a strong correlation.

  • Gulfstream V (GV) – 5.7%
  • Gulfstream G450 – 4.2%
  • Gulfstream G550 – 3.9%
  • Gulfstream GIV – 19.9%
  • Falcon 900EX EASy – 8.5%
  • Falcon 2000EX EASy – 12.5%
  • Falcon 50 – 21.2%
  • Bombardier Global Express XRS – 3.4%
  • Bombardier Challenger 300 – 6%
  • Bombardier Challenger 604 – 14.1%
  • Bombardier Lear 60 – 15.3%
  • Bombardier Lear 60XR – 16.5%
  • Hawker 800XP – 12.3%
  • Cessna Citation X – 6.3%
  • Cessna Citation Excel – 7%
  • Cessna Citation XLS – 6.1%
  • Cessna Citation CJ3 – 5.8%
  • Embraer Legacy 600 – 17.2%
  • Embraer Phenom 100 – 11.5%

While certainly not the only indicator we use to quantify a particular aircraft market, it is a great indicator that all aircraft sellers and buyers should be aware of. These numbers change monthly, if not weekly. Please feel free to contact me to further discuss these types of valuable data sets. It is my ultimate goal to help sellers and buyers have the intelligence to make smart decisions in the transacting of their high-value aircraft.

 

Shawn Dinning, Director of Sales & Acquisitions

Mr. Dinning acquired his formal education at the United States Air Force Academy in Colorado Springs, Colorado, in the areas of Operations Research and Management Science and also holds a degree in Aeronautical Science from Embry-Riddle Aeronautical University. Mr. Dinning brings 16 years of aviation experience from a variety of aviation disciplines, including FAR 91, FAR 121, FAR 135, defense, and shared ownership sectors. A former full-time professional pilot, Mr. Dinning holds a current Airline Transport Pilot (ATP) certificate, and is type-rated in the Gulfstream V/G550/G500/G450/G400/G350/G300, Bombardier CRJ-200, and Citation 510 Mustang. He has logged over 5500 flight hours, with 3500 of those hours in corporate turbine aircraft. Mr. Dinning has been consulted in publications such as Business & Commercial Aviation on various issues related to turbine aircraft transactions.

Mr. Dinning brings to Dallas Jet International a rare and highly valuable skill set of operational and business acumen, and has become a leader in the professional marketing and procurement of corporate turbine aircraft all around the globe. He also specializes in aircraft mission analysis, aircraft valuation, and cash flow and operating cost analysis for private aircraft owners. Mr. Dinning has a track record of successful transactions that is well known amongst his clients and colleagues. His reputation for intelligent and meticulous management of aircraft transactions have made him one of the most respected aircraft brokers in the industry.

Market Volatility and Your Aircraft Purchase Decisions

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With the last week of market volatility in Wall Street and across the globe, I have been asked where the aircraft market is going, and what aircraft buyers and sellers should be considering as we approach the home stretch of this year.  While I don’t ever say I can predict the future, my response to my clients’ inquiries on the future involves a major discussion of market volatility, including where we are and where we’ve been.

Market Volatility in The Last Three Years

The height of the bubble that was the aircraft market was reached in early 2008.  Since early 2008, most markets have been in a steady, and sometimes rapid, decline.  While there is frequent discussion on the major causes of this market decline, allow me to review some raw numbers with you.  Below are average aircraft “Basic Selling Prices” as recorded in Q1 of 2008 and then in Q2 of 2011.  These prices are average, and I must advise you that aircraft were selling at higher and lower prices than the averages listed here, but these numbers are certainly good reference points.

Q1 2008  Q2 2011 % Change
1998 Gulfstream V $40,750,000 $22,000,000 -46%
2002 Gulfstream V $45,500,000 $26,000,000 -43%
2004 G550 $54,000,000 $37,000,000 -31%
2007 G550 $58,000,000 $41,000,000 -29%
2001 Falcon 900EX $34,800,000 $19,500,000 -44%
2007 Falcon 900EX $42,900,000 $28,000,000 -35%
2001 Falcon 2000 $22,200,000 $11,000,000 -50%
2007 Falcon 2000EX EASy $34,000,000 $20,000,000 -41%
2001 Bombardier Global $45,000,000 $25,000,000 -44%
2007 Bombardier Global XRS $60,000,000 $39,000,000 -35%
2001 Hawker 800XP $8,900,000 $4,000,000 -55%
2007 Hawker 850XP $13,300,000 $7,000,000 -47%
2001 Lear 60 $8,100,000 $4,100,000 -49%
2007 Lear 60XR $12,500,000 $6,900,000 -45%
2001 Citation Excel $8,500,000 $4,000,000 -53%
2007 Citation XLS $12,200,000 $6,900,000 -43%
2005 Citation CJ3 $7,200,000 $4,600,000 -36%
2008 Citation CJ3 $8,000,000 $5,700,000 -29%

 

As you can see, aircraft values have dropped dramatically over the last 3 years.  In some cases, values have dropped over 50% from their 2008 highs.  “Market Correction” is an understatement.

When people see these numbers, they are often shocked.  Aircraft owners and aircraft lenders have been hurt significantly by these value decreases.  Aircraft buyers, especially first time buyers who do not currently own an aircraft, are almost giddy about buying an aircraft that is 40%  cheaper than it was three years ago.

Are We At the Bottom?

A very common question for me is whether we are at the bottom of the market.  The question is difficult for me to answer, as the market has segmented itself.  Markets with the most momentum are 5 year old and younger large cabin aircraft such as the Gulfstream G550 and the Bombardier Global XRS.   These markets have shown a clear bottom, mostly in the latter part of 2009, and have stabilized at prices above the 2009 bottoms.  Markets that are still in a decline are all of the aircraft that are 20 years and older.  Even in markets such as the Lear 60 and Hawker 800XP, significant oversupply is making it difficult for prices to show any signs of appreciation in the near future.

Taking a Step Back – Looking At the Market Opportunity

In particular, aircraft buyers should take a look at this market from a broader historical perspective.  Are prices going to go lower?  In some markets, there is clear data that prices hit bottom over a year ago.  In other markets, they may.  But, in ALL markets, prices have made a major correction, in some cases over a 50% correction.  If anyone is seriously in the market, this could be just the right opportunity to secure a tremendous deal within the historical context of the market.  Moreover, the quality aircraft will always sell first. So, this could very well be the time to take the “pick of the litter” in many depressed aircraft markets.

In future articles, I will take some time and look at individual aircraft markets, showing you how a particular market is behaving in the context of the broader market.

Shawn Dinning, Director of Sales & Acquisitions

Mr. Dinning acquired his formal education at the United States Air Force Academy in Colorado Springs, Colorado, in the areas of Operations Research and Management Science and also holds a degree in Aeronautical Science from Embry-Riddle Aeronautical University. Mr. Dinning brings 16 years of aviation experience from a variety of aviation disciplines, including FAR 91, FAR 121, FAR 135, defense, and shared ownership sectors. A former full-time professional pilot, Mr. Dinning holds a current Airline Transport Pilot (ATP) certificate, and is type-rated in the Gulfstream V/G550/G500/G450/G400/G350/G300, Bombardier CRJ-200, and Citation 510 Mustang. He has logged over 5500 flight hours, with 3500 of those hours in corporate turbine aircraft. Mr. Dinning has been consulted in publications such as Business & Commercial Aviation on various issues related to turbine aircraft transactions.

Mr. Dinning brings to Dallas Jet International a rare and highly valuable skill set of operational and business acumen, and has become a leader in the professional marketing and procurement of corporate turbine aircraft all around the globe. He also specializes in aircraft mission analysis, aircraft valuation, and cash flow and operating cost analysis for private aircraft owners. Mr. Dinning has a track record of successful transactions that is well known amongst his clients and colleagues. His reputation for intelligent and meticulous management of aircraft transactions have made him one of the most respected aircraft brokers in the industry.

Aircraft Finance Update – Availability of Funds Increasing in International Markets, Lenders Still Want “Skin in the Game”

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aircraft financeI just returned from  Fort Lauderdale, Florida, where DJI attended the annual National Aircraft Finance Association (NAFA) meeting and conference.  Here’s what I observed this year.

 

As one might expect, the core attendance of this conference includes most of the major players in the aircraft finance arena.   Banks, capital companies, private equity firms, and finance brokers were all in strong attendance.   Some people asked me why an aircraft broker/dealer would go to a finance conference.  The answer is that the two specialties are highly reliant upon each other.  The availability and adaptability of aircraft lending makes such a significant impact on the transactions of which I am a part.  Part of the value that DJI adds to the transaction process for our clients that we understand the options and the constraints of the aircraft finance space, so we found this conference highly valuable to our organization and our clients.

 

Having said all of that, these were some of my impressions from the recent event:

 

  • Appetite to Lend Money: Despite the fact that most of DJI’s transactions have had buyers who were paying cash, it was very evident to me that most of the aircraft lenders out there are looking for more business and looking to grow their portfolios.    This is good news for all involved in aviation.  As the supply of financing makes a comeback, aircraft prices will stabilize, and in certain markets, show signs of gradual increase.

 

  • Wide Scope of Lending Solutions:  While some lenders might suggest that they have a financing solution for almost everyone, one of the big themes of the conference was that, while no single lender can appeal to all aircraft buyers, there is enough variation between the focal points of the various lenders, that almost any reasonable financing need can be met.  In other words, whether your next planned transaction is a $50 million large cabin aircraft, or a $2 million turbo-prop finance lease, there are professionals in the lending space who focus on that area of aircraft finance and who want to earn your business, assuming that you are credit-worthy.  The one exception is that most lenders are still shying away from aircraft older than 25 years.

 

 

  • “Skin in the game” is essentially mandatory in this credit market.  In other words, most loan structures that lenders are comfortable with are going to require the borrower to advance 15% to 30% of the transaction value, and in some unique cases, 50%.  Keep in mind that back in 2007, some lenders were advancing 110% of the transaction value so that buyers could take the excess advance and apply it to aircraft improvements!

 

  • International Market: Most of the lenders are focused on the international marketplace and are vocal about the fact that the international marketplace is where much of the growth is going to happen in the business aircraft segment.  Here in the US, this is important to the sellers, as many of the future buyers on DJI’s US listings are going to be from another country, and many of them are going to need financing to make the deal happen.  Brazil, China, India, and Russia are all showing signs of significant growth in their appetites for business aircraft.

 

Overall, the conference was an excellent event, and one which left the DJI team  cautiously optimistic.  If any of you out there have questions about financing as it relates to the purchase or sale of a business aircraft, please do not hesitate to call me.  I would enjoy the opportunity to chat with you.

 

Shawn Dinning, Director of Sales & Acquisitions

Mr. Dinning acquired his formal education at the United States Air Force Academy in Colorado Springs, Colorado, in the areas of Operations Research and Management Science and also holds a degree in Aeronautical Science from Embry-Riddle Aeronautical University. Mr. Dinning brings 16 years of aviation experience from a variety of aviation disciplines, including FAR 91, FAR 121, FAR 135, defense, and shared ownership sectors. A former full-time professional pilot, Mr. Dinning holds a current Airline Transport Pilot (ATP) certificate, and is type-rated in the Gulfstream V/G550/G500/G450/G400/G350/G300, Bombardier CRJ-200, and Citation 510 Mustang. He has logged over 5500 flight hours, with 3500 of those hours in corporate turbine aircraft. Mr. Dinning has been consulted in publications such as Business & Commercial Aviation on various issues related to turbine aircraft transactions.

Mr. Dinning brings to Dallas Jet International a rare and highly valuable skill set of operational and business acumen, and has become a leader in the professional marketing and procurement of corporate turbine aircraft all around the globe. He also specializes in aircraft mission analysis, aircraft valuation, and cash flow and operating cost analysis for private aircraft owners. Mr. Dinning has a track record of successful transactions that is well known amongst his clients and colleagues. His reputation for intelligent and meticulous management of aircraft transactions have made him one of the most respected aircraft brokers in the industry.

Sell Your Aircraft with Confidence…Even in a Slow Market!!

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Sell Your Aircraft with Confidence…Even in a Slow Market!!In my last blog article, I discussed the importance of confidence, decisiveness, and speed in the business turbine aircraft purchase process.  If you don’t have a well-researched confidence in the aircraft market – what I like to call “market intelligence” –  you will lack what it takes to “pull the trigger” and engage an airplane at the right price.  The purchase opportunity to sell your aircraft will pass you by, and that could mean hundreds of thousands of dollars as well as hundreds of hours of wasted effort.

 

In the aircraft selling process, I can confidently say that confidence, decisiveness, and speed are equally as important.  You must react immediately to a prospective buyer’s offer.  Not only must you react quickly, but you must react properly.  What does it mean to react properly?  You and your broker MUST know whether the offer is competitive.   To know  the offer is competitive, you must understand three things:

 

  • Current Market Offerings:  How many other aircraft of the same make/model are for sale, and where are they priced?  What are asking prices and projected “strike prices?  What are the confidential or “off-market” aircraft priced at?  At DJI, we use our research process to capture all of this data.   And, don’t underestimate the off-market airplanes for sale.  They represent a significant portion of the market, and they are often some of the better deals that drive the market pricing.  If a broker doesn’t keep you informed of the entire market, they aren’t giving you the real picture.  Without a good broker, you’re “flying blind”.

 

  • Recent Sales: What have similar aircraft recently sold for?  In the real estate business, you would ask, what are the “comps”?  This data is very closely guarded by most buyers and sellers of recent transactions, and only a well-researched and well-connected broker can provide you with this data.  In many cases, recent selling prices tell the story much more clearly than an analysis of 35 different asking prices, 50% of which are probably over-inflated prices with unrealistic sellers.

 

  • Market Trend Analysis: Where has the market been, and where is it going?  This is the most subjective part of market analysis, but it’s also extremely important, because it gives you the ability to evaluate an incoming offer in the context of trends.  This is especially important when there is a lower than usual selling volume in a particular market.  You may not have recent selling prices due to inactivity, so you must evaluate an offer based on its larger historical context.  At DJI, we keep selling price histories over many years, so that we know where the market is cyclically.

 

Now that you retained an excellent broker like DJI, you can be armed with this information as offers come “flying” in, or come “trickling” in.  You can suggest counter offers with confidence and market reinforcement, instead of just countering $150,000 or $350,000 below your asking price like you’ve always done.  You can do this with speed so you can show the Buyer that you are earnest and educated in your efforts to sell your airplane.  Many buyers are attracted to Sellers who are knowledgeable and represented by firms like DJI.  Buyers assume that, if the seller takes that much care in pricing and marketing their airplane, then the same seller must take similarly excellent care of their aircraft maintenance.

 

So, remember, even in a down market,  corporate jet sellers who sell with confidence will always win the race.

 

Shawn Dinning, Director of Sales & Acquisitions

Mr. Dinning acquired his formal education at the United States Air Force Academy in Colorado Springs, Colorado, in the areas of Operations Research and Management Science and also holds a degree in Aeronautical Science from Embry-Riddle Aeronautical University. Mr. Dinning brings 16 years of aviation experience from a variety of aviation disciplines, including FAR 91, FAR 121, FAR 135, defense, and shared ownership sectors. A former full-time professional pilot, Mr. Dinning holds a current Airline Transport Pilot (ATP) certificate, and is type-rated in the Gulfstream V/G550/G500/G450/G400/G350/G300, Bombardier CRJ-200, and Citation 510 Mustang. He has logged over 5500 flight hours, with 3500 of those hours in corporate turbine aircraft. Mr. Dinning has been consulted in publications such as Business & Commercial Aviation on various issues related to turbine aircraft transactions.

Mr. Dinning brings to Dallas Jet International a rare and highly valuable skill set of operational and business acumen, and has become a leader in the professional marketing and procurement of corporate turbine aircraft all around the globe. He also specializes in aircraft mission analysis, aircraft valuation, and cash flow and operating cost analysis for private aircraft owners. Mr. Dinning has a track record of successful transactions that is well known amongst his clients and colleagues. His reputation for intelligent and meticulous management of aircraft transactions have made him one of the most respected aircraft brokers in the industry.

The (Air)Speed of Business

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Most people are surprised when they hear me say that the airplane business often moves at lightning speed.  In one of the worst down markets since the inception of business aviation, it would seem logical that everything moves with the speed of a tortoise.  When you analyze the aggregate numbers of the current market and the rate and volume of transactions, it truly is moving slower than normal.  Values are at record lows, with some markets continuing subtle descents.  So, how can our current business environment be associated with speed?

Speed will get you the very best airplanes.  What we are seeing today is that most airplanes that are transacting are on the market for a very brief period of time, as compared to the airplanes that are not transacting.   I’ve seen airplanes last as little as 2 days on the market, even in this environment.  Quality always goes first.  It is the broker’s job to get our clients first in line to this quality, “best deal” airplane.  We do this by being nimble, quick, decisive, and proactive.  Each day we study and research the various business aircraft markets, and  educate our clients on the statistics of the markets as well as past and predicted trends.   By providing that “market intelligence”, we give our clients the confidence they need to act swiftly when the right deal presents itself.

How does the best deal present itself?  My experience indicates that it presents itself in one of 3 ways:

  • Unannounced, aggressive price reduction. A seller makes the decision to aggressively reduce their price after watching their aircraft sit on the market for months with little to no interest.  The reasons for the price reduction could be many, but the bottom line is that there is a sudden price reduction.  The relationships that DJI has with all of the various brokerage firms who, like us, represent sellers, prove invaluable here.  Guess who the seller’s broker is going to call before they announce the price reduction to the retail open market?  They are going to call me and many of my peers first.  Because of these relationships DJI will always have news of a price reduction before the open market hears about it.  By capturing that information early, we can position our clients first in line to the deal.
  • A transaction falls through, suddenly making a quality airplane available again. There is always a relatively high chance that an aircraft deal can fall through.  Our motto is to never give up on a good deal.  It’s not sold until it’s sold!  DJI’s staff tracks pending deals in the various business aircraft markets.  By doing this, we will know a deal is falling through before the open market.   Again, this knowledge allows us to act quickly and swiftly to get our buying clients first in line to the best values.
  • An airplane is being newly offered.  If you wonder how a $10 or $20 million airplane can sit on the market for only 3 days, wonder no more.  I can assure you that the buyer and the respective agent knew about that airplane well before it hit the market.  Again, the market intelligence that we provide will get our clients first in line to the deal.  A large number of the best value aircraft transactions are consummated before even being published on the open market.

The only way to acquire this solid market intelligence and capitalize on the best value aircraft is to retain the professional services of a broker such as DJI, that conducts this level of research.  Speed and market intelligence provide our buyers an unmatched competitive advantage over unrepresented buyers in this marketplace.  The best deals are won with quickness and confidence, even in a Buyer’s market.

As our readers may know, approximately 50% of DJI’s brokerage business is representing sellers.  In a future article, I will write on the importance of speed and market intelligence in the aircraft selling process.  The consequences for sellers are significant if they do not have the proper information to act swiftly and confidently in the marketing and pricing of their aircraft.

Shawn Dinning, Director of Sales & Acquisitions

Mr. Dinning acquired his formal education at the United States Air Force Academy in Colorado Springs, Colorado, in the areas of Operations Research and Management Science and also holds a degree in Aeronautical Science from Embry-Riddle Aeronautical University. Mr. Dinning brings 16 years of aviation experience from a variety of aviation disciplines, including FAR 91, FAR 121, FAR 135, defense, and shared ownership sectors. A former full-time professional pilot, Mr. Dinning holds a current Airline Transport Pilot (ATP) certificate, and is type-rated in the Gulfstream V/G550/G500/G450/G400/G350/G300, Bombardier CRJ-200, and Citation 510 Mustang. He has logged over 5500 flight hours, with 3500 of those hours in corporate turbine aircraft. Mr. Dinning has been consulted in publications such as Business & Commercial Aviation on various issues related to turbine aircraft transactions.

Mr. Dinning brings to Dallas Jet International a rare and highly valuable skill set of operational and business acumen, and has become a leader in the professional marketing and procurement of corporate turbine aircraft all around the globe. He also specializes in aircraft mission analysis, aircraft valuation, and cash flow and operating cost analysis for private aircraft owners. Mr. Dinning has a track record of successful transactions that is well known amongst his clients and colleagues. His reputation for intelligent and meticulous management of aircraft transactions have made him one of the most respected aircraft brokers in the industry.

 

 

Aircraft Sales and Acquisitions in Today’s Market – A Conversation with DJI’s Shawn Dinning

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Shawn Dinning, Dallas Jet International’s Managing Director of Sales discusses his background and approach to aircraft sales.

Photo by Shawn Dinning, Dallas Jet international's Managing Director of Sales

As Brad Harris noted in his article, the primary asset Dallas Jet International brings to bear in an aircraft transaction is the experience and expertise of the  professionals assigned to our clients’ aircraft sales transactions.  So, this article will delve into the background and motivations of that other professional – namely, me.

My position at Dallas Jet International is Managing Director of Aircraft Sales and Acquisitions.  Aircraft transactions are my domain, and I manage the aircraft purchase and sale process comprehensively for my clients from beginning to end.  Usually, when a client begins the aircraft transaction process, we will assign the project to Brad or myself, usually (but not always) based on who has the relationship with the client.  In some cases, there may be an aircraft transaction  involving an aircraft with which one of us has significant expertise that would be useful in getting the best outcome for our client. From that point on, that “project manager” will lead the transaction through completion.   There are times when Brad and I feel that we can effect the best outcome for a particular client’s situation by working together.  The rest of our company team supports the transaction process.  Dallas Jets International  provides the very best aircraft transaction experience in the world, bar none, because our system is so comprehensive and holistic.

As an example, one of my clients called me last month to tell me that he bought a yacht and a high-end auction car at the end of the year.  He said the buying process was horrendous compared to his last aircraft purchase experience with Dallas Jet as his acquisition agent, and for equipment that was not nearly as complex or expensive as the aircraft he had purchased.  Maybe he will become our first client if DJI decides to get into the yacht brokerage business!

Finding My Calling

I didn’t always want to be an aircraft transaction specialist and consultant.  My entrance into aviation came from my goal to be a fighter pilot in the US military.  And that, really, came from my exposure to many of my parents’ pilot friends who had flown in the US military.  I am the son of an airline captain and flight attendant.  Obviously, my immediate family was steeped into the aviation tradition, and that’s how I caught the bug.

I figured out that the best chance I had to get into the cockpit of an F-15 in the Air Force was to apply to the United States Air Force Academy in Colorado Springs, Colorado.  Everybody told me I was crazy because they only accepted people who had 1600 SAT scores and who were in the Boy Scouts since birth, neither of which described my credentials.  Nevertheless, I applied through the recommended channels for a Congressional Nomination and for an Appointment to the Air Force Academy and the Naval Academy at Annapolis.  The Naval Academy was my backup, and I would have gone there in a heartbeat.  I received the letter confirming my congressional nomination from the U.S.  House of Representatives and the letter confirming my appointment to the Air Force Academy within 1 day of each other.  The appointment letter arrived on Christmas Eve!

In a bad stroke of luck, a medical ruling during my Junior Year (3rd year) at the Academy derailed me from pilot training.  In one 30 minute doctor’s visit, things changed dramatically for me.

Fast forward several years and economic cycles later, I pursued my dream to fly via the civilian world.  About 5000 hours into my flying career, I had the pleasure and fortune of meeting Mr. Brad Harris (CEO of Dallas Jet International) at a private airport in Fort Worth.  It was a random encounter, and nobody introduced us. We just started to talk.  He invited me to go sit with him in one of his client’s airplanes, as he told me about the business that he was running.  It sounded like a match made in heaven for me.  For the next 8 months, I followed up with more emails and phone calls than Brad knew what to do with.  He finally offered me a position to learn and eventually oversee the day-to-day transaction operation at Dallas Jet International.  He said that my academic, military, business, and flying backgrounds would be a perfect fit for the company’s vision of hiring the best people in the business and growing the list of satisfied airplane owners and clients.  Brad Harris has been one of the best mentors I could ask for, and has groomed me to contribute significantly to the success that our company currently enjoys.

My Favorite Part of the Profession

In its purest form, an aircraft broker and transaction consultant is all about obtaining the highest price in the minimum time for a selling client, and getting the best airplane for the best price for a buying client.  If we didn’t save a lot of money and heartache for our clients, we wouldn’t be in business.  And to be clear, we save our clients a lot of money and many hundreds of hours of wasted effort.  And, as much as I love saving other people’s money, I value the relationships more than anything.   Make no mistake that trust and relationships are at the heart of any successful aviation brokerage firm.  Trust is the number one reason I am hired to represent a client in his multi-million dollar aircraft transaction.  I wouldn’t want it any other way.

On Buying Aircraft

It is important to know that I truly get to represent the interests of the airplane buyer, and I don’t have to promote a bias toward a particular manufacturer or type of aircraft.  This is such a key aspect of the value that Dallas Jet brings to the aircraft transaction process.  So many people think that we represent a certain line of airplanes, or that we collect referral fees from sellers who want us to push an airplane on our buying clients.  Of course this doesn’t happen at Dallas Jet, but it has been known to happen in this very unregulated business in which we compete.  Every buying client’s situation is different, and it is my job to gain a very detailed understanding of the client’s needs before I recommend the type and serial number of airplane to pursue.  No client or transaction is the same, and I absolutely love that!  I’ve placed clients into Gulfstream, Bombardier Lear/Challenger/Global, Dassault Falcon, Cessna Citation, Hawker Beechcraft, Embraer, Pilatus, and Piaggio aircraft.  It all depends on the client’s particular requirements and mission, and it is really crucial for me to have the freedom to make the best recommendation for that situation.

On Selling Aircraft

Representing sellers is much more challenging in this market, but nonetheless enjoyable.  I particularly enjoy the opportunity to get to know that particular airplane and its attributes so well that I can represent the airplane as though I had been the owner for the last several years.  With this knowledge, I can represent the aircraft in its best light, because every airplane really is unique.  It is my job to spend several days with the aircraft to learn who maintained it, what post-delivery modifications have been done, the status of maintenance inspections, and what options that set it apart from other competing aircraft on the market.  In many cases, I already know the airplane very well because I have represented it in previous transactions.  In some cases, I’ve even flown the aircraft.  Next, I  get to know all of the competing airplanes of the same make/model that are also on the market.  And, I have to be able to explain the reasons why a prospective buyer should buy one type of airplane over the other, because buyers these days always seem to be considering multiple types of aircraft.  This is where our hands on knowledge of the various airplanes available pays dividends.  Between Brad and I, we’ve flown/managed/operated most of the business aircraft out there.  We have 12 jet type ratings and 14,000 hours between the two of us.  It is essential to know the pros/cons of every aircraft out there, without bias.

My Advice for Potential Sellers

The number one mistake that sellers make in today’s market is either overpricing or underpricing their aircraft.  Both mistakes can cost an airplane owner hundreds of thousands, if not millions, of dollars in lost sales proceeds or in extended holding costs.

The number one reason airplanes are incorrectly priced is either consultation with an inexperienced broker, or no broker consultation at all.  Our market research process at DJI provides our customers with the confidence they need to price the airplane to sell, with no money “left behind on the table.”   Secondly, the selling process can expose an aircraft owner to so much un-needed risk, and it is my job to protect and even “shepherd” my clients through that process, so that they are not taken advantage of.  Protecting my clients’ interest throughout the selling process and making it smoother than my client expected is certainly the most rewarding part of selling the aircraft.  My advice for prospective aircraft sellers and buyers?  Hire a good broker!  Better yet, hire DJI!

The Future of Aircraft Sales

As we all know, information is king in the 21st century.  The speed and availability of information has certainly transformed the world of aircraft transactions.  The internet revolution is the main contributor, and has made non-detailed market information available to the aircraft end user.  As we say in the business, it’s just enough information for the aircraft end user to be dangerous and really make a poor decision   One of the enormous emphasis points at Dallas Jet International is to stay ahead of the flow of information.  If you fall behind the leading edge of current market information, you lose significant negotiating power, and your clients lose on buying and selling opportunities.  We never let that happen at DJI.  Our clients are the best-informed in the business.  We are constantly developing techniques and systems to deliver information to our clients faster than the internet or our fiercest competitors.

And, despite all of the technology and information flow, buying and selling airplanes has become more complicated, particularly with a growing number of international buyers/sellers and various governing bodies throughout the world, all of which have something to say about buying and selling airplanes.

Technology is accelerating faster than ever.

However, it still takes old-fashioned values of attention to detail, valuable professional relationships, attentive customer service, and unparalleled expertise to move airplanes in today’s dynamic business environment.

Shawn Dinning, Director of Sales & Acquisitions

Mr. Dinning acquired his formal education at the United States Air Force Academy in Colorado Springs, Colorado, in the areas of Operations Research and Management Science and also holds a degree in Aeronautical Science from Embry-Riddle Aeronautical University. Mr. Dinning brings 16 years of aviation experience from a variety of aviation disciplines, including FAR 91, FAR 121, FAR 135, defense, and shared ownership sectors. A former full-time professional pilot, Mr. Dinning holds a current Airline Transport Pilot (ATP) certificate, and is type-rated in the Gulfstream V/G550/G500/G450/G400/G350/G300, Bombardier CRJ-200, and Citation 510 Mustang. He has logged over 5500 flight hours, with 3500 of those hours in corporate turbine aircraft. Mr. Dinning has been consulted in publications such as Business & Commercial Aviation on various issues related to turbine aircraft transactions.

Mr. Dinning brings to Dallas Jet International a rare and highly valuable skill set of operational and business acumen, and has become a leader in the professional marketing and procurement of corporate turbine aircraft all around the globe. He also specializes in aircraft mission analysis, aircraft valuation, and cash flow and operating cost analysis for private aircraft owners. Mr. Dinning has a track record of successful transactions that is well known amongst his clients and colleagues. His reputation for intelligent and meticulous management of aircraft transactions have made him one of the most respected aircraft brokers in the industry.