““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 ”
Sage-Popovich's Nick Popovich
Nick Popovich looks like a bouncer and can talk like a longshoreman. But he also has a keen understanding of geopolitics, international finance and commercial trends. He runs a far-flung global aviation business, Sage-Popovich, from his 120-acre ranch near Valparaiso, Ind. He drives a Bentley, breeds thoroughbred Rocky Mountain horses and enjoys fine cigars.
For more than 30 years, when a banker anywhere in the world has had an aviation loan or lease that was circling the bowl, Popovich has often been the go-to guy. This ex-airline pilot and his team have grabbed more than 1,400 airplanes-everything from King Airs to 747s-from those who could not pay.
His adventures would make fine fodder for the silver screen. Popovich can regale you for hours with artfully told tales of jobs that range from the humorous to the bizarre and are packed with pathos, larceny and thrills.
And while all of this is great fun, what is far more interesting is to understand how the 57-year-old entrepreneur built his business, by accident and from scratch. Along the way, he listened to customers, fashioned customized and integrated solutions to their needs, embraced technology, diversified and concentrated on marketing packages of value-added services. He keeps his business nimble and is able to react quickly to exploit opportunities anywhere. The man can work a phone better than a Chicago pol and is a maestro when it comes to business relationships and networking. Forget the Discovery Channel-Popovich should be a case study at Harvard Business School.
What advice would you give someone who is on the verge of having his airplane repossessed?
Talk to the bank. Banks don't want to repossess the airplane and I don't want to repossess the airplane. Chances are you can work something out. What banks want to know is that the airplane is properly protected and insured. They might not want you to fly the airplane or might limit how you use it until you get current, but nine times out of 10 they are going to work with you.
What trends are you seeing now in your business?
The trend we are seeing is that we are actually telling banks not to repo. If you are a bank and you have a $3 million note on a Hawker 700 that is worth $1 million, what do you do? You have a $2 million deficiency plus now you have to insure it, store it and worry about maintaining it. So we have advised the banks to inspect the airplane. Is it current on its maintenance and reserve programs? Is it insured? If so, work something out with the guy because you are better off. If not, the bank has no choice [but to repossess].
Is there a part of the market that is worse than the rest?
Citation IIIs and VIIs and early Falcon 20s and 50s. You can buy a 50 for $3 million.
Are you seeing more repossessions in Europe now, given the economy there?
Our last six commercial repossessions have all been European airplanes-Romania, Greece, Turkey and the UK. And now South America is starting to pop up. We just did a repo in Venezuela.
How was your business last year?
On a dollar basis we were off 25 to 40 percent. We are not just a repossession firm. We do consulting work, insurance work, expert-witness work, a tremendous amount of valuation work, parts sales, and then we have our charter operations. We manage a new G550 and have a Challenger and a Hawker.
What about the repossession piece of it?
Our repossession business probably was level as to the number of airplanes, but revenues were down because we were discounting our services. We had a lot of banks that were just buried in airplanes and that have been our customers for a long time. Some of the big banks are in such trouble they can't comprehend it. I've got one bank with a $2 billion problem and they just don't know what to do.
Where is the corporate market going?
I've got a list of corporations that have gotten out of their airplanes [because of public criticism]. It is the stupidest thing I've ever seen, when you do the economics. It is funny, because the people who are protesting the most about corporate aircraft are the ones who are flying them all the time.
When you look at the time and cost savings, it does not make sense not to fly [privately]. The problem is that it looks bad when a broke company is flying a multimillion-dollar airplane. But it wasn't the airplane that put them in bankruptcy. It was their contracts or trade policy or something else. It sure as hell wasn't the airplane's fault. You can't let public perception interfere with your business decision to fly. It either is a good business decision or it isn't.
So when is the corporate market going to come back?
My prediction is that in two years we'll have an airplane shortage. The CEO is going to get tired of waiting three hours at O'Hare. They're going to come into this market and drive it again. There is going to be a seller's market again.
How did you build your business?
I was a partner in an airline in the Caribbean and our banker wanted a favor. He wanted me to look at some airplanes and I ended up repossessing them for him. I called some people that I flew with and we pulled two airplanes out. Forty-eight hours later the money was in my account.
When we got the money, I looked at my partners and said, "You guys own an airline. I'm outta here." My ex-wife and I started this business, just being selective and working with a couple of clients at a time and building relationships. Then in 1986, Chernobyl happened and transatlantic traffic took a dive. My clients started calling me with lease returns, so I called people I knew and we started adding people.
Then in 1991 when Desert Storm happened, we had the same problem, so we added more people and we also started the valuation side of the business. We're doing lease deliveries and returns. We're doing maintenance oversight. Today we have 48 employees and 65 partner companies all over the world.
Do the pilots you use get any special training to fly repossessions?
They get an hour of talking to me.
How long does it take you to put a repossession mission together?
We can probably be ready in six hours. But typically we start talking to the lender before they decide to pull the trigger. That can be as long as 45 to 60 days. Generally the lender asks us for advice. But there are cases when you get a call from a lender who has just had it with the borrower and says, "I want you there now." In those cases we have a two-hour turn time. About 20 to 25 percent
of our cases are like that.
Do you ever send any special security with the pilots?
The majority of our repos are self-help, which means we cannot breach the peace. If a fight starts or someone objects and it gets ugly, we have to walk away.
We try and keep the peace. Before we get hassled we stick the repossession notice on the airplane. Then we call the local police department and ask for an incident report number. We tell them that we have just repossessed this airplane and document the time, date, officer's name and report number. They send out an officer and file a report and then technically the airplane is ours. We talk to the service center, if we are taking it from there, and arrange to pay any outstanding fees-parking, fuel, maintenance. I never want to stick anyone for their fees. It is a small community and word gets around if you don't treat people right.
Even people you are repossessing from, you need to treat with respect. Ninety-nine percent of these people got in trouble because the value of the airplane dropped and the bank said, "Hey, the value of your $4 million airplane just dropped to $3 million and you need to come up with a million bucks." How many people can come up with $1 million cash? It is no fault of their own-they bought the airplane in good faith and they are still making their payment.
What happens in a typical repo?
By the time it is time to move the airplane, we know where the target is and how we are going to grab it. We get the call and we send a scout to where we think the airplane is. They check the hangar and figure out where the records are. Once we feel we know what we are doing we get on my airplane with the crew and fly down, taxi up near the airplane, grab it and go.
If you can, right? Not all of these airplanes are in great shape.
We have one airplane sitting at Gary [Ind.] that we are going to scrap. That was our last declared emergency, a Hawker 800. The airplane was left outside for a year and a half in Jacksonville. Climbing up through 14,000 feet, the entire instrument panel went blank in a thunderstorm. So we diverted to Savannah and fixed it, but once we finally got it here we decided the airplane was scrap.