Aircraft Sales in a Down Market

GEORGETOWN, TX — Some 30 miles north of the state capital of Austin lies Georgetown Municipal Airport, home of Gantt Aviation, a firm that has specialized in the aircraft resale market since 1971. Much has changed in the general aviation marketplace since Johnny Gantt formed the company, in particular the growing role of brokers and the impact that the Internet has had on the availability of information on used aircraft, explains Jay Gantt, son and current president. The volatility in the market today is a stark contrast to the vibrancy of the past 15 years in business aviation, but Gantt Aviation has weathered tough times in the past, says Gantt, and he remains optimistic that time will settle the market. “People still need the airplane for their business; they’re still going to buy it,” he says.

Founder Johnny Gantt, 72, started in aviation as a crop duster in North Texas. Explains 40-year old son Jay, “When he was 17 years old he bought his first J-3 Cub for $300 and got into crop dusting with Miller Flying Service in Plainview. When he was 22 or 23, James Miller asked him to be a partner. Nearly ten years into it, he sold his half and moved to the Austin area.

“He actually came to Georgetown around 1973. He had been at Austin Executive Airport, which is now gone and where Dell is now headquartered. At that time the airport runway was 3,800 feet. Sometime in the late ‘80s they extended it to 5,000 feet. And today we have a contract tower.

“My father is still current in the Citations and King Airs and still flies for us, whatever we do.”

Johnny Gantt was also one of the original five founders of the National Aircraft Resale Association, formed in 1991 to bring ethical standards to the resale community (see sidebar).

Jay Gantt says that the focus of the company has changed through the years. The initial focus was on Cessna 300/400 series aircraft. “We really got into the turbines in the early ‘80s and got out of the pistons — mostly King Air 200s. In fact, we probably overhauled some of the first engines at Dallas Airmotive.

“We still do turboprops — pretty much the King Air line. Citation is the pure jet side. We’re an inventory dealer. We try to buy them, fix them up, and resell them.”

The company handles most of its own maintenance requirements with two full-time technicians, employed by sister company Georgetown Turbine Services, Inc.

Dropping values, increased competition
Gantt admits that the past year has presented an array of challenges for aircraft resellers, but says the segment should settle down because of the underlying need to use aircraft in business today.

“The first half of 2008 was fairly good,” says Gantt, “the second half has been slow, although we’ve seen an uptick in recent weeks. I’m not saying they’re jumping out of the woodwork, but there’s still more activity than you might imagine. Prices have adjusted; some markets 20 percent, some a little more than that; some markets only ten percent.
“In the last year we sold 40 airplanes; in the early 90s, I think our high mark was 65 airplanes. We average now around 30 airplanes.

“In the past we would own 70 percent of the airplanes; today, we’re owning about 30 percent of our inventory, and we broker 70 percent.

“That’s the nature of the business now. It’s more competitive; there are a lot more people in the business. There are a lot more educated players; they have Internet access. They can look at a lot of stuff they couldn’t before.

“Our goal is to know the market better than anyone else. That’s why we inventory.”

Gantt Aviation continues to maintain its floor plan, he says, and the company had a Citation V and XLS on display at this writing. “We’ve bought airplanes; bought one two weeks ago and will buy another one in the next week or two. It’s a matter of we’re not trying to fill up our hangar right now, we have plenty of inventory. We’re not actively looking to just add aircraft.

“A lot of the people are on the sidelines, on the defensive. We’ve seen this same story in the past, in 1990, 2000, 2001.

“That airplane is nothing more than a commodity, when it comes down to it. There’s a supply and a certain amount of demand.”

Regarding aircraft values, Gantt says there’s a downward trend across the resale spectrum. “We’ve always said, if there’s 20 percent of inventory on the market, that’s a sluggish market,” explains Gantt. “Ten percent has always been the goal. Anything less than that is very, very bullish — 10 percent of any given model.”

For aircraft resale companies which inventory, a significant factor in today’s market is the low interest rates, says Gantt. He recalls the high interest rates of the late ’70s and early ’80s which his company weathered but which brought many others down.

Says Gantt, “The 2000-2001 recession was probably the first time when we had a recession when interest rates stayed relatively low and it kept dealers from going under. They could carry a plane for six or nine months at those rates and still get out of it reasonably well. But if you’re carrying 15 percent interest rates or 20 percent, you can’t hold it.
“Our holding times go from three months, which is what we hope to have, to six to nine months; sometimes a year — that’s when it gets dangerous.

“The averages change real quickly. Some of these markets only have 5 percent of the inventory on the market, so if one plane is sold the market changes drastically. If that same market has 15 percent on the market, it drops the prices, obviously.”

No downturn is the same, says Gantt. The 2008 slowdown came along slowly, until the spigot was turned off in September, he explains. “That was a big shock, similar to what happened after 9/11,” he says. “That took three to four months before people were buying again. We had an underlying market that was at least stable, even though it was in recession.”