May 1, 2003
Aircraft sales firm, wading through the current cycle, sees a turnaround coming

LAKE ZURICH, IL — For professionals in aircraft sales, it has been far from the best of times. After the boom of the ‘90s, aircraft sales have been plummeting along with resale values. But officials at General Aviation Services, L.L.C. see an uptick coming, and their candid analysis of the market tells a lot about why they’ve again managed through a significant down cycle — the fourth they’ve seen in 34 years.

G.A.S. relocated off-airport in Lake Zurich in 1996, after having been located at the Palwaukee Municipal Airport near Chicago for most of its history. It still conducts any airport operations at Palwaukee, as well as at nearby Waukegan Airport. The company handles a scope of transactions that includes the purchase, sale, and lease of aircraft, as well as aircraft components, in the business, commuter, and commercial segments. In addition, the company has agents and partners around the world, and international business accounts for about 50 percent of G.A.S. activity. In 2003, officials expect to move some $50 million in product, a return to normal company levels after a two-year drop.

Both Dan Dickinson, chairman and CEO, and Greg Duckson, COO and president, emphasize that a key to getting through the recent downturn has been the ability to recognize that economic swings do occur and to plan accordingly.

Explains Dickinson, “Some of the things that people in this industry did on the upturn weren’t sustainable for the long term. You saw it with the OEMs; you saw it with the fractionals; you saw it with some of the people in our business.

“We had ten years of an up market, and a lot of the people in this business [aircraft sales] never saw a down market. In our company’s history, this is our fourth downturn, so we know how to manage things in a downturn. Quite a few of these guys don’t; even some that are 55 years old forgot about the last downturn.”

G.A.S. representatives say that over the past three years, corporate aircraft values have dropped as much as 40 to 50 percent. “For example,” says Duckson, “four years ago we were selling a 1980 Lear 35A for $3 million; that airplane right now is probably worth $1.5 million, maybe a little more.”

Recently, a significant event has been the movement of buyers and sellers toward actual transactions, both men point out. This is occurring because sellers are finally recognizing that it does little good to keep holding onto inventory hoping for a quick recovery of values; and, buyers are recognizing that this may be the optimum time to purchase a used aircraft.

Says Dickinson, “Buyers and sellers are getting together now, and they weren’t for the past two years. In particular in the commercial market, you are seeing people getting out of the market and taking the loss. It’s moving that direction in the corporate market, too. We bought a Challenger 600 from a broker who had bought it for stock and held onto it for two years, and they lost $3 million- plus on it. And that’s an expert. It went down pretty quickly.

“Now, saying that, I can’t think of a better time to buy. There’s a very strong argument that now is as good a time to buy as any.”


While G.A.S. officials recognize the war in Iraq is affecting the marketplace, they point more toward the economy as the critical element affecting the industry. As such, they say the economic turnaround will be the leading indicator for an aircraft sales turnaround, and there will be a significant shift resulting in the phaseout of older business jets.

“If you take the war out of the equation,” explains Dickinson, “you still have the other things that affect the economy and it brings you back to earnings. What drives the stock market is earnings. That’s going to take more time to recover.

“Direction and momentum is what you’re looking for. If things what you’re looking for. If things are going along and you have a slow increase, then you can navigate in that market pretty effectively.”

Aircraft that have taken the largest value hit, says Duckson, are the older Stage 2s, and their position in the market will significantly change when the next upswing occurs. “This when the next upswing occurs. “This time around, when things get better there are going to be some airplanes that are going to be left behind — the G-IIs, G-IIIs, the older Learjets, Hawkers, and Falcon 20s,” he says. “They’re going to be so expensive, not only because of ongoing maintenance but also because of noise and the RVSM (Reduced Vertical Separation Minimum) issues. On a G-II, it’s going to cost you $2 million to huskkit it; it’s going to cost at least $250,000 to RVSM it; and so you’ll have $2.25 million in an airplane that’s probably selling for, at best, $3 million.”


What cannot be understated, say G.A.S. officials, is the impact of the growth in fractionals on today’s corporate market. Not only have fractionals brought more units into the resale marketplace, but they are high time units, affecting their value. And, as OEMs made new unit sales to fractionals their cornerstone approach in the 1990s, it affected their businesses. At the same time, says Dickinson, At the same time, says Dickinson, manufacturers took many used units in trade to sell new aircraft, only to wind up with a backlog of used inven- wind up with a backlog of used inventory they then had to dump into the marketplace.

Regarding used fractionals, says Dickinson, “That’s going to create its own market because of the high time of the aircraft.”

Dickinson points out that a key aspect of what fractionals brought to the market is they attracted new users who subsequently had a good experience, making them prospects for today’s resale market. “Some of our competitors think fractionals are working against us. We think they working against us. We think they have brought a whole lot of new peo- have brought a whole lot of new people who are buying [aircraft] as well, so it’s probably been even. We’ve sold airplanes to these people.”