““CEOs go to their vacation homes just after companies report favorable news, and CEOs return to headquarters right before subsequent news is released. More good news is released when CEOs are back at work, and CEOs appear not to leave headquarters at all if a firm has adverse news to disclose. When CEOs are away from the office, stock prices behave quietly with sharply lower volatility. Volatility increases immediately when CEOs return to work.” —David Yermack, a New York University finance professor, whose recently released study shows a correlation between when CEOs take their private jets on vacation and movements in their companies’ stock price ”
Preowned Annual Report
As inventories decline, a buyers' market may be fading.
This year turned out better for business jet sellers than some analysts had predicted, as quite a few models staged impressive gains. Gulfstream’s G550, Bombardier’s Challenger 300 and Cessna’s Citation CJ3 are among the aircraft that exhibited clear signs of a market traversing the slippery slope of the bust-to-boom cycle.
That doesn’t necessarily mean that their values increased, but their inventories shrank—a change that generally leads to price appreciation sooner or later. For some models, the inventory reduction represented a fresh development. In other cases, the decline continued a trend that had begun before 2013.
Resigned to the misery that the market has dealt them over the last five years, sellers seemed to resist brokers’ advice that they needed to reduce their asking prices in order to have any hope of rolling out of their current aircraft and into other ones. The only way to achieve equilibrium has been to lick the wounds on the sell side and take advantage of market forces on the buy side of the equation. For example, a GIV owner—who may have seen his aircraft’s value plummet from $15 million to $5 million in five years—might take some comfort from knowing that he can now buy any GIV-SP for what he paid for his current model and might even be able to get into an early GV for $15 million or so.
Of course, the first question such buyers ask is, “Has the market stopped going down?” Having answered that query incorrectly at least twice since 2008, I now usually reply, “Values are so low today, what does it matter?” Admittedly, that’s easier to say when you’re not the one with seven-figure money at risk.
What’s next? Some believe that 10-year-old and newer aircraft may be oversold and could actually tick up in the next 12 months. Though others might consider that notion preposterous, keep in mind that people usually start saying we have a buyer’s or seller’s market when we’re actually beginning to see a change in the other direction. While buyers have held the upper hand for several years, we may now be witnessing a slight shift toward more equal power for buyers and sellers.
Bryan Comstock (firstname.lastname@example.org) is president of Jeteffect, a jet sales and acquisitions firm headquartered in Long Beach, California.
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