When it comes to buying and selling corporate aircraft, there is simply no substitute for experience, skill, integrity and judgement. With over three decades of experience between them and quite simply the right stuff, Intercontinental Aircraft Group’s (IAG’s) Cass Anderson and Jeff Habib are among the very best in the business.
We recently sat down with Cass and Jeff to discuss what makes them tick, as well as what they think about the state of corporate aircraft sales.
McDermott & Bull (MB): Please share with us some insights on a mentor, or two, that made a real difference in your life and career.
Jeff Habib (JH): Well, my parents of course. Somehow they instilled in me a sense of hard work and ethics. Second, I’d have to say my Navy experience. What an honor and a privilege it was to be trained and serve as a Navy pilot. And I will never forget one specific Commanding Officer (my “CO” or “Skipper”). He was from Pittsburgh (I cannot share his name) and had it all. Great athlete in his younger days (baseball), Naval Academy grad – a natural leader. All the JOs (Junior Officers) just wanted to be around him, fly with him, and hang out with him after hours. He was personable, charismatic, and a very good “stick.” He was also an exceptional, detail-oriented procedures guy. After he left the squadron, we all watched him continue to rise through the ranks and eventually move on to serve a major airline as a senior flight instructor. He taught, inspired and motivated many.
Cass Anderson (CA): Perhaps the best part about selling corporate aircraft is the unique opportunity to meet and get to know some truly extraordinary people. The opportunity to get some “golden nuggets” from them is priceless. For example, one client in particular (I cannot share his name) talked about his thesis that one should quit as many things as possible and focus on what one does best. He described himself as a serial quitter who had stopped doing many things over the years and became a billionaire along the way. He gave me the confidence to quit a very good job and eventually to start IAG with Jeff.
MB: Can you share with us a crux moment in your life and career that, looking back, clearly helped determined the course of your career?
JH: In Naval Aviation, every squadron has a NATOPS (Naval Air Training and Operating Procedures Standardization) Officer. It is a high-profile, demanding and critical billet. A check airman designated me to this role when I was flying in the fleet. I now see that assignment as one that built confidence, gave me the opportunity to teach and designate others, and as an experience that has served me well ever since.
CA: Again, I have to point to the advice of an extraordinary client whose perspective inspired me to quit my job and start IAG.
MB: The various sub-segments of the aviation market each go through their own unique business cycles. Can you share your thoughts on the current cycle in the market you serve?
CA: It really depends on your perspective. We function in a transactional space, sometimes working with buyers and other times with owners working to sell an aircraft. We interface with vendors, sales people, owners, buyers, sellers, lawyers, everyone in the transactional ecosystem. Nobody feels very good right now. We are not anywhere near pre-2008 sales levels. The balloon popped and it is still leaking. Eight years into the “recovery,” and the decline continues. We simply built far too many aircraft in the 10 to 15 years prior to 2008, particularly in the large cabin space. The international markets kept buying aggressively for quite a while but now even they have backed off. Don’t forget, these planes fly for 30 plus years. So, as a result, we are now left with way too many airplanes. And new technological improvements are helpful but not dramatically so.
JH: In any transaction, one side’s issue is another side’s opportunity. There are still buyers out there, but with significantly more activity in the pre-owned space than new. There has also been a particularly sharp decline in aircraft values in the last 12 to 24 months which is great for those looking to enter business aviation for the first time, move out of fractional to full ownership or to replace an aging asset, etc. Yes, sellers are selling into weak markets but if they are also looking to buy, there are many opportunities to be found.
MB: Where do you see growth coming from in the private jet segment in the years to come?
CA: Unless there is a major unforeseen change, the market won’t improve for another 5 or 10 years.
JH: I concur. And some OEMs are simply unable to continue unless they keep their assembly lines going, which in turn leaves us with too many planes. The nimble OEMs, who can pivot and scale production quickly, will fare much better.
MB: Can you talk a bit more about technology developments that are driving business in the marketplace today?
CA: Again, it depends on your perspective – as an aircraft owner, OEM or an operation-focused organization? As an owner, connectivity and technology in the cabin is helping a bit for OEMs and the retrofit work is helping as well.
On the OEM side, there is a constant arms race, but the improvements are all just incremental. We used to see bigger changes. Today, we see a slightly wider tube, or a slightly longer tube, or maybe a bit better range. But we are not seeing the huge changes that once moved the market.
On the operations side, most of the opportunity is for aspiring entrepreneurs to create new programs and methods to offer access. Optimization is the key – fractional, block charter, pure charter – there is lots of movement in these segments. Optimizing utilization is the big opportunity.
Of course, we also have to mention airspace mandates. We hate to call this new technology, as mandates are just part of the business. But they do provide a bit of stimulus to new sales and to the MROs. At the same time, they can also be a drain in terms of cost of ownership.
JH: And from a corporate perspective, owners are using aircraft in a much more efficient manner. I agree, cabin connectivity is important, but I don’t necessarily see it driving new aircraft sales.
MB: Is the developing pilot shortage impacting the private jet market today? Does it appear to be an issue in the near future? What about further out into the future?
JH: The issue is building, but not here yet in full force. Of course, it is hard to find good people in any field, any industry. With pilots, one must also factor in the experience, training and technology layers. This is certainly a looming issue. Finding qualified, experienced pilots who fit an employer’s requirements and culture, as well as having the right character traits, remains a challenge for many. The military candidate pool continues to shrink, and we all read that there will soon be a large group of pilots retiring. On the input end, there remain challenging issues such as the cost of learning how to fly, building hours and the lower compensation in a pilot’s early career. To me, this will only continue to grow as an issue over the next 10 years.
CA: Right now, there seems to be enough pilots out there but what about managers, VP’s of flight operations, etc., qualified people with the ability to manage, to lead? It takes special people with the right background and “fit” for the role in question. Many companies that own aircraft are generally not in the aircraft business. Some leaders at the top are not always fully aware of the cost and complexity involved in aircraft operation and ownership. The good operational leaders that we have seen (and there are many) have the ability to communicate upstream effectively and help guide their owners in making good decisions.
MB: Anything else on your mind that you would like to share?
CA: We have been at this for 35 years collectively and have seen that for some, buying or selling an aircraft has not always been as fun and exciting as they thought it would be. We hear stories from people who thought they wanted to buy an aircraft in the past, but then got cold feet because the process was just too hard. As an industry, we need to figure out how to make it simpler, more transparent, not so scary. At IAG, we work hard in our business to achieve these objectives, guiding all parties to make good decisions. We bring judgement and experience that our clients can trust. There remain lots of opportunities out there to get burned. As an industry, we must work to do better. Making the process easier and more transparent could also help stimulate demand. We have worked hard in the first 5 years of our business to make the process easier for our clients, including developing a proprietary aircraft valuation tool we call theJetWatch.
JH: Aircraft transactions are like a puzzle. To an outsider, the process can seem fraught with complexities. The asset itself is a complex machine, and then try to fit together other pieces such as OEMs, models, specific serial numbers, the transaction, the transaction team, tax, insurance, import/export, crew, etc. We work very hard to help our clients navigate this process, but not to the detriment of anyone involved. Good guidance is key – and lots of questions should be asked and lots of answers must be provided. We are a team that has participated in hundreds of these transactions. Remember, we are only compensated by clients we have under contract, so the quality of their experience is paramount. As such, we are fortunate to get lots of kudos and feedback, sometimes in a very simple way, like a text message from a very senior person at the end of a transaction thanking us for our management and help.
And, we all shouldn’t lose site of the fact that the process, and the industry at large, employs a lot of people and supports a great deal of commerce – I think NBAA reports 1.2 million people and $150 billion.
In a fair industry, and when working a fair deal, all stakeholders deserve to leave the transaction with a good experience.