2009 Show me the...
by Jay Mesinger

So, 2008 is gone and 2009 is finally here. I really believe that some portion of 2009 will continue to be tumultuous, with further job lay-offs, a continuing eroding business landscape, and further economic surprises.

One big difference in 2009 from 2008 is that we all know it is coming. 2008 took many of us by complete surprise! One of the things that I hope will result from the resetting of our global economy will be a more simple financial groundwork. Simplicity will lend itself to greater transparency and hopefully a more confident consumer. Since we are basically a consumer economy, consumer confidence will be essential for a meaningful and sustainable recovery.

Remember several years ago a movie that coined the phrase, “Show me the money”? That was a very simple business mantra. I do not mean to be as crass as to say to a buyer, “Show me the money.” I do mean to use the phrase a couple of different ways to demonstrate what I hope will create a simpler environment. Let me break this down into two parts that represent the two very distinct sides to an aircraft transaction, the buyer and the seller.

If a buyer were to come into the market today and look at all of the aircraft listed for sale, they would see two interesting things. First, they would see a far greater supply of inventory, and second they would see the greatest percentage of inventory is listed without an asking price. “Make Offer”, has become the asking price replacement of our modern age. I always see in a transitory period when markets are either moving up or moving down, sellers are reluctant to put a flag in the sand. Maybe it is because no one knows how long the transition will take so they are afraid of committing to a price if the market has a sudden about-face. Maybe it is because sellers do not feel there are really any buyers so why show your cards until there are people who are really willing to make an offer.

Whatever the reason, if consumer confidence is to make an appearance again it will do so because the buyer believes the market is at bottom. No one really knows where that is, but they are sure it is not in yesterday’s pricing. I am not sure which comes first, consumer confidence brought on by buyers feeling it is safe to buy again and that pricing has in fact stabilized at a bottom, or is it the seller who tries to attract a buyer with a real asking price that helps a buyer feel the market has stabilized. My sense is that it will be the consumer, the buyer who will decide when it is time to be confident, and will do so because they see prices stabilized.

The “Make Offer” will be replaced, at least by those who are serious about selling, with a price that is set and established by a desire to really sell. Therefore, “Show Me the Price”, will be the buyer’s mantra for the seller.

Now let’s get to the buyer’s responsibility in this new simplicity. Another anomaly of a transitory market is that it seems to attract people who are only half committed to buying. Today we are all working deals that do not go to fruition based on buyers who are daily distracted by the current economic news and the fear that they are overpaying, therefore not sticking to the transaction. Some are actually leaving their deposit and walking from the deal based on the spread between what was contracted and the continuing eroding market. Others are taking advantage of the time that is needed to contract the deal in order to keep looking for a better deal.

In either case, the number of completed deals is dwarfed by the number of deals that fall apart. So, if a buyer wants to get the best deal from a seller who is committed to selling their airplane and is currently demonstrating this by pricing accordingly, the buyer needs to stay focused, keep all stakeholders on their side focused, and show the seller the money. Simple. To draw a seller down to a price that was once unheard of, then not respond like a buyer if the seller says ‘yes’ to the offer, but only use that negotiated price to keep working the seller and never showing the seller the money, is not a fully committed buyer.

So, if confidence is to return to an industry, all sides must show their willingness and ability to participate. Sellers will need to show the buyer the price and the buyer must be willing to show the seller the money. Both sides must be willing to really put skin in the recovery game. No one said that either side has it easy. No one said that writing a check to sell rather than just to buy was palatable or easy. This recovery will be difficult for both sides.

If you are a seller you will wonder, “What’s so hard about buying at the bottom?” As a seller you must wonder, “Does anyone feel my pain?” I assure you as one in the middle, I feel the pain of the seller who is watching the value of their asset dwindle, and I understand the struggle of the buyer to step back in at the right time. In both cases the steps can be fruitful if we inject the simplicity I speak of.

It is time to be simpler, more transparent and mindful of all the emotions and realities of 2008. Never before has time been so impactful to a transaction than now. Everyone must be sensitive to the feelings of the primary stakeholders, the buyers and the sellers. 2009 is here. We must be diligent, thoughtful and very considerate of this time. The attorneys, the lenders, the maintenance facilities must all participate in swift and diligent efforts to get to the end game more quickly and more simply than ever.