By Rod Douglas 

There is something unique, almost empowering, about the smell of new leather. Matters little whether the leather is inside a new car, a new aircraft or a new boat. It’s that evocative and intense sensation of brand new. It is clearly and deeply connected to the ego but ego is rarely economically rational.

I have a great mate whose name is Jim. This guy runs an absolutely superb business. He’s grown it 20 fold over the past 10 years. It’s a tight ship, always profitable and it does great work. Jim loves cars. I mean with a passion. He used to race them. Every 12 months Jim buys himself a new car. Because he can. Simple as that. At the end of every 12 months someone gets an absolute bargain. He’s just bought himself a beautiful new Jaguar XF bi-turbo diesel. It’s gold and it’s beautiful and it drives superbly and Jim reckons it’s the best car he’s ever had. (For Jim to say that it’s got to be good).

And I’ve got dibbs on it. Jim’s only had it a couple of months and already I’ve put my hand up and said to him that I’d love to buy it from him. No commitment on either side you understand. In fact Jim, who always has a weather eye to the economy, did say he might keep it. That thought lasted for about a millisecond before he turned to me and said, “then again, I might just buy a new one”.

His previous car was a beautiful 335i BMW. Now Jim will tell you with pride that his car buying is a function of his love of cars and his ego. He purchased both of these cars sight unseen and they were both one of the first of their respective models to land on our fine shores.

When Jim bought the BMW he paid about $125,000. Twelve months and 12,000 kms later he sold it for $80,000. That’s the sort of saving that excites me. I’m far more economically rational than I am driven by ego. Do I think what Jim does is silly? Hell no. Jim can afford it: cars are his passion and good on him for stimulating the economy. Different people are motivated by different things. Jim probably thinks the money I spend flying is silly.

The last time I needed a car I took exactly that approach. I was moving out of a big Mercedes and decided, as I had taken a senior board role at Greening Australia that it would be good if I demonstrated some environmental leadership and moved into an ‘A Class’. Cheap to run and relatively inexpensive, I could simply have hit the dealership and picked one up. Instead I watched the papers and, once ready, waded into the market to buy a car with, wait for it, 300 kilometres on the clock. I saved 25% of the new price and it took me a Saturday. Best of all it was fun.

So what’s the point here? Well put simply, if you’re willing to discount your ego and become economically rational there’s great savings to be had by buying ‘near new’ rather than new. It’s true in all markets, and could even be more true in the aircraft market, where many of the new buyers simply want to have the best. This motivation is bolstered by the rafts of new safety technologies coming through in the avionics world, causing much churn in the market.

In many ways Cirrus has led the way in this area. They have imported many of their executives from the automotive sector and have worked hard to ensure that, within the parameters of the certification process, they have been able to develop a very distinct layering of the introduction of features. This has driven loyal owners to upgrade lock step with the release of each new generation of aircraft, as well as driving layers of innovation within each generation. This has been well proven with the introduction of the ‘Perspective’ avionics suite, when many almost new aircraft with the well proven and more than competent Avidyne glass suite were pushed on to the market as people rushed orders on aircraft with the USD$45,000 ‘Perspective’ option.

 To discover more about how all this theoretical knowledge could be put into practice, I spoke to Simon Matthews from SM Aviation. Simon has spent his life around aviation and eight years ago realised that there was a significant market in facilitating Australian private companies and individuals to take advantage of what is really a global market.

When you contrast the sort of opportunity that exists in the Australian motor vehicle with that in the global aviation market, it is depth of market that drives opportunity. A really bad year in the car market will see 800,000 new cars sold. A great year will see the 1,000,000 mark broken. Contrast that with the global aircraft market where last year was a great year and sales of general aviation jets, turbines and piston aircraft almost reached 4,000 units. This needs to be contrasted with the industry peaks in the late ‘50s and early '60s where deliveries of five times that number were regularly achieved.

In a global market the great opportunities of ‘near new’ clearly exists but require a whole lot more work.  The Australian market lacks depth. That has pluses and minuses. It will often take a very long time to sell an aircraft in the Australian market because there simply aren’t many buyers. I’ve seen aircraft languishing on the market for years. Obviously these are usually obscure aircraft rather than the more highly regarded staples.

So, in my mind, you need to find someone who knows how to do the job properly because, to be frank, the risk of trying to purchase an aircraft over the internet from overseas I would regard as being a fool’s task. Many people have done it, some quite successfully. But it is a path fraught with risk.

Simon is a professional. He deals in evidence, expects to be paid for a professional service and has put in place the processes, systems and relationships necessary to deliver outcomes for professional fees.

Many aircraft buyers, simply due to the size of the transaction, are willing to pay professional fees for a professional service, because they know that they can maximise their chance of getting the best deal while minimising the risks. As many of you will know, I spend much time looking for islands of professional service amongst the amateurish way much of GA operates and in Simon I was delighted to find a well educated, professionally structured approach to dealing with finding just the right aircraft for the clients’ need.

Interestingly, Simon pointed out that the aviation market is a highly stratified market place where the absolute popularity of particular models drive very differentiated market outcomes. One example that he cited was the King Air. His view was that every year for the past five to seven, anyone with a King Air that was post 1990 would have seen an 8 to 10% increase in the value they could yield over what they paid for it. That would not be true for many other aircraft which have languished. He cited the example of a Piper Mirage, a six place pressurised piston. A new example is worth around $1 million while a good low time five year old example can be picked up for around $650,000. In that market, prices have been static or falling.

 I asked Simon to help me understand his process. As he predominately deals with private companies and private owners he takes an interesting position. “I always start with the family. How will you use the aircraft for your private use? Once I understand that I go on to delineate the business mission of the aircraft. How many people? How far? How often? I always explore their current ownership and try to get evidence of the routes and usages as they stand today. Then we are resolving their actual need as distinct from what they might imagine themselves to do. Next it’s on to the budget. It’s important to consider both the capital purchase and operating cost of the aircraft. Finally I look to discover if the buyer has any deeply rooted prejudices. There is little point putting up an aircraft that they simply won’t buy.”

Simon also made the point that deeply understanding the clients real needs and their capacity to make good decisions around aircraft ownership is critical to a smooth and professional outcome. “Oftentimes, if I’m dealing with a first time aircraft owner they simply won’t have an understanding of how to get the best possible outcomes from aircraft ownership and, in that case, part of the service is to help them understand how to use the aircraft so a proper selection can be made.”

As I talked to Simon I began to see the distinction between what a broker does, fundamentally working for the seller, and Simon’s role as a buyer’s advocate.  It was a distinction that became even clearer as he described the lengths that he had gone to in building functional and professional partnerships through his US office and even down to ensuring the availability and quality of the right maintenance for your aircraft.

Simon has a very practical side to understanding aircraft and their uses. A commercial pilot and instructor, he has been flying since 1976 and has worked in many flying operations as well as holding senior management roles in transport and logistics businesses throughout Australia. He’s worked representing Cessna and as the demonstration pilot for the TBM700, as well as having flown PC12’s for the Royal Flying Doctor Service.

The best part of all this experience is that Simon will ensure, for the owner pilot, that you get a couple of full days of aircraft familiarisation and will suggest a training plan should you need further support to make the transition absolutely successful.

My next question was the hard one. “So what’s it cost?”

As a director of an accounting firm I know that wherever you ask a professional that question you can expect one of two answers – either the dry and boring, “Well…. It depends” or the more flamboyant, “How long does a bottle of scotch last?”

Simon was more forthcoming. Naturally it does depend on just how much you want done but he was able to give me a pretty good understanding of the range. It starts around $15,000 for managing the sourcing, importing, C of A, delivery and familiarisation of a four seat piston and tops out around $50-60,000 for the same sort of service for a jet.

While this might sound like a fair bit of money, my back of the business card calculation suggested that it would probably cost me twice that in time, airfares and expenses to do the same thing as an amateur. To be honest I’d rather pay a professional. The older I get the more the old saying ‘pay peanuts, get monkeys’ rings true and the greatest value that a professional usually brings is the relationships and hard won wisdom of whom you can trust to do the job properly.

Simon has also entered into a partnership to bring near new Eclipse 500 VLJ’s into Australia. VLJ’s have been touted as having the potential to revolutionise general aviation. They may well do. I asked Simon his perspective. “Australia is the perfect country for the Eclipse. Huge distances with lots of available airports and the capacity to save enormous time going point to point. The biggest challenge is the tall poppy syndrome. Many people will spend far more on a turbo prop than they have to for a faster and less costly to run VLJ because they don’t want to be seen to have a jet. This is the only country in the world that has that sort of attitude.”

My own view is that only time will overcome the cultural cringe. The reality is that for 50% more money than a new Baron costs you can travel almost twice as fast, 50% further and in pressurised comfort above the weather. Time, that is the saving of time, by owners of private businesses who don’t have the public scrutiny of the listed businesses, will eventually win out over the ridiculous thought that general aviation is a luxury rather than a very practical business tool.

And just to prove it, consider this. If you’ve been silly enough to try and find a seat in the Qantas Club anytime lately you get to see the extraordinary amount of wasted executive talent in Australia. Drop that on top of the abysmal cancellation and degradation of on time performance and it should drive everyone to their local GA airport.

Every business owner with multiple locations throughout Australia should have an aircraft in my opinion. If they did, we would have a structurally more efficient economy and Australia’s ‘business mind’ would be far more focused on the possibilities and efficiencies of driving growth. It won’t happen for a while, but when it does it will be expertly guided by people like Simon Matthews, combined with the economic rationalism that comes from buying ‘near new’ that will give you the edge.

So, next time you’re dreaming about buying that new aircraft, put your ego aside, drag out your economic rationalism and call a professional.

Good buying. Good flying.