The Cutting Edge

Nothing Has Changed in the Past Two Years. Except Everything

Leading Edge Aviation Speaks with Tim Kern for Business Air

Joe Carfagna Jr., President of Leading Edge Aviation Solutions and son of the founder, says, “You can never stop learning. For instance, we learned rather quickly how to transact an aircraft purchase from start to finish during a pandemic:’

In May of 2020, he told this magazine, “We believe, net of an overall collapse of the entire world economy, that we will see a strong recovery this year, further improvements in 2021. People won’t take chances with airlines, and this bodes well for private transport.” Now, in 2022, “We realize that this is indeed true and the market had not collapsed; it had adjusted. Deals were still getting made. First, a few; then so many that the supply of aircraft near-totally dried up. So, nothing has changed in the past two years. Except everything.

“What I think we’re seeing – it started beginning in April – the previous problem was unavailability; that has increased, week by week. The supply is still far from normal, but it’s becoming more manageable. “The increase in availability seems to include everything from turboprops to wide-bodies; and pricing, which was skyrocketing, has plateaued. We’re see­ing some sellers come forward: if the airplane isn’t the most-important thing in the world to them, they may decide to part with it now. Maybe they’ve been thinking about selling and they’re not using it enough; they figure they’ll not see these prices again, and they’re not rising, so now’s a good time to sell.

“Fuel prices haven’t started affect­ing operations yet, but if we see supply numbers in turboprops start to go up, I’m going to say it’s largely a result of fuel prices, as it’s such a larger pro­portion of expenses for these smaller planes. Across the board, the market is still strong. Example: we have a King Air coming on market as we write this, with more than one customer inter­ested before it has even hit the market. [It has since sold and closed.] Has fuel affected the market yet? Not yet, but when it does, we’ll see it in then smaller aircraft first. “Among the newer aircraft- five years old or less – occasionally one becomes available, but the significant loosening is in the ten to twelve-year ­old airplane. That’s maybe a signal that we’re returning to some normalcy.

“Depending on the make, model, age – these can be commanding 30%-70% higher prices than pre-COVID, even though they’re now two years older! People who bought these aircraft then are looking like geniuses now and some are flipping them. If somebody can get $11.5 million dollars for an air­plane they bought for $10 million last year, they maybe can fly charter until the market goes down again.

“Personally, I don’t see the prices going up – or coming down, much. As prices adjust for inflation and fuel, there’s going to be some fallout. We’ve had an absolute disparity – way more buyers than sellers. That’s going to trend more toward normal in a few months. Fuel prices, interest rates -everything is adjusting. Brokers matter even more in a tight or changing market. In Q4 of 2021, nearly 30% of transactions completed by LEAS were on aircraft that never made it to market. Some of the power of the International Aircraft Dealers Association is their often hav­ing qualified buyers lined up. This gives their clients a three-four day jump on the market. IADA brokers are par­ticularly well-connected, close to the people with who we do most of our business.”

Joe is a former chair of IADA. “I termed out, but I’m still a firm believer and a member.” What’s going to happen next, and when? “If the mar­ket’s still chugging along at the end of summer, it’ll keep chugging along through year’s end.” After that? ”Ask me later.” As he said two years ago, Joe reminded us, “You can’t ‘wing it’ in circumstances like today’s; you need to know who’s reliable, and go only from there. Over 50+ years in the industry, we’ve learned things, and we know great people with who we can make reliable, beneficial deals, even when most feel they cannot.’