We used to joke that at least airplane values couldn’t go negative.  Unfortunately, that’s not really true anymore—at least with some models.

For example, we’ve recently had occasion to be involved in a few Global Express transactions. Like many aging, large-cabin aircraft, the price of a Global is heavily influenced by maintenance status and improvements. So influenced, in fact, that the sum value of its maintenance status and improvements alone can equal 100%—or more than 100%—of the “price” you pay for the “airplane”.

In the case of one recent deal, our client effectively paid the seller for two enrolled BR710 engines, upgraded cockpit displays, an upgraded cabin management system and the latest internet.

The seller, in turn, effectively paid our client several hundred thousand dollars. Plus a Global Express.

We say “effectively”, of course, because this is not how the transaction was written down on paper. But once you got through with all of the accounting necessary to construct the aircraft’s “balance sheet”, the result becomes fairly difficult to argue. The airplane itself had negative market value.

Important to note – this was not a “special circumstances” type deal, either – nor is this phenomenon unique to the Global. Many older aircraft models, especially the larger ones, trade based on similar fundamentals, although not always as extreme.

There is some great value available in these markets, but it’s crucial that buyers spend the time to understand all the cost drivers and liabilities as they relate to price.  A million here, a million there, and pretty soon you might be talking real money.

Have a great weekend.

TJW