LAKE ZURICH, IL — General Aviation Services based here northwest of Chicago has been selling airplanes since 1969. Current president Greg Duckson, who bought out partner Dan Dickinson to become the company’s third owner, says the used market has stabilized and that his firm will be in a good position when the upswing begins. Comments Duckson, “I’m real thankful — we’re still doing deals. Our head’s above water; we’re not underwater on any aircraft we own. We only own a couple of airplanes right now. I feel lucky, really, to be in that position.”
Duckson, 44, started selling aircraft during college, for Northern Jet in St. Paul, MN. He became the owner of General Aviation Services in 2005.
When asked about the business today Duckson responds, “It’s hard, primarily because there just aren’t a lot of transactions. We broker a lot of airplanes, so if there are a lot of transactions going around we’ll get our fair share. Most of the people want to sell, and most of our clients right now that aren’t selling are trying to figure out if they should just hang tight and wait for things to get better.
“The stats that I’ve seen on utilization show that it’s down about 30-35 percent. I think that’s across the board, if you talk to the big NetJets people or Flight Options or the charter people. They’ll all tell you about 30-35 percent, which happens to be about the same percentage of aircraft for sale. Most aircraft types have about 35 percent of what they built for sale. Some are plus or minus.”
In a competitive market, he says, only some 10 percent of the aircraft type would be available for sale. At 30-35 percent, it’s a buyer’s market.
Duckson relates that he doesn’t think the used aircraft market has hit bottom yet, though the decline has slowed. “Obviously, we’re looking at prices every day,”he says. “Some of our competitors are saying that they think we’ve hit bottom. I think it’s somewhat wishful thinking.
“I think in reality what’s happening is that we’re starting to see prices slow down a little bit — they’re still moving downward. If you think about it, about a year ago prices may have been down nothing in some markets, in other markets maybe just 5 percent. So in the last ten or eleven months it’s really come down hard.
“What I’m hoping is that we have more of a V-shaped curve to our market — that it will bounce back as quickly as it fell. Is it realistic? I think we have some long-term economic issues that will prevent that from happening.”
Central to a rebound is a reduction in supply available, says Duckson. That requires an increase in transactions — in buyers. He estimates that some 15 to 20 percent of the supply on the market needs to move before a significant recovery can get underway. That may include retiring many older business aircraft, he says [see sidebar].
“The OEMs are struggling,” he says. “A lot of our friendly competitors have taken risks on positions over the past couple of years and they don’t know what to do with them now.
“I would say that 30 percent of the aircraft that we have for sale are from our good banking relationships. Those are airplanes that they’re taking back in repossessions.”
Among the categories of aircraft available for sale, the larger cabin class bizjets are the slowest to move, according to Duckson. “It seems like the small business owner/entrepreneur that wants to buy an airplane for under $2 million, those type of aircraft are having more transactions,” he explains. “The Lear 31s, the 35s, the Beechjets seem to be moving a bit more. The big corporate stuff is a lot slower.”
Two of the biggest challenges in getting the market moving again is finding people willing to spend, and availability to financing. Regarding the latter, the market has considerably changed, says Duckson.
“The key is timing,” he says. “The first ones to be moving will be the savvy brokers and dealers out there that have the financial capability of doing that. You’ll see them start buying stuff again.
“But for the most part you’re not seeing too many dealers buy anything unless it’s just so dirt cheap. And some of our competitors don’t have the financial capability anymore.
“Cessna Finance basically said ‘We’re done; lock the door’. I don’t think GE is doing much of anything. And if you think about it, when GE runs out of money there’s a problem.
“A lot of the major financial institutions that lend money to dealer/brokers like ourselves aren’t doing it anymore. We’re fortunate because we still have most of our credit lines available. I think the dealers and brokers that have personal relationships with smaller banks that didn’t have all their money invested in real estate and houses, are still out there and providing money for people like us.”
Duckson says that whereas financing firms were backing up to 100 percent of the purchase price, today’s credit environment demands a significant down payment. And, aircraft have to be appraised, and good appraisals are harder to get in a rapidly changing marketplace.
Comments Duckson, “In the last five or six years it’s gotten to where there’s an older airplane now. A lot of banks today won’t finance an airplane that’s 20 or 25 years old anymore. That’s a problem.
“The OEMs [original equipment manufacturers] would rather shed some of their older equipment, I think. Then you’ve got the older Stage 3 aircraft, the old Hawkers, the G-2s and G-3s, when things come around this time those airplanes are going to be left behind.
“As the values come back up on business jets, those aircraft probably won’t. So I think the junk yard is going to get a little bit bigger with those airplanes.”
He foresees companies like aircraft salvage firm White Industries, Inc. of Bates City, MO, staying busy. “I spoke with Terry White of White Industries,” says Duckson, “and he says he gets requests for some 60 quotes a day for airplanes — old stuff. He can’t keep up with it.”