Now is the time to buy passenger jets, according to Vincent A. Kolber, president of Residual Based Finance Corp., New York.
Is he crazy? U.S. Airways and United Airlines are in Chapter 11. American Airlines, Continental Airlines and Northwest Airlines have reportedly been talking to bankruptcy lawyers. And they have been parking aircraft in the desert as they cut capacity to meet slower demand. In fact, about 2,000 airliners are parked in the desert at present.
But Mr. Kolber might be crazy like a fox. His idea: The time to buy any asset is when the price is low, when no one else wants it. And no one seems to want used jetliners now. But jet airliners are unique capital assets for a number of reasons, he said. First, jet airliners are long-lived assets. Their useful lives are 25 to 30 years, sometimes even longer. Mr. Kolber recently sold a Boeing 727 Model 200, a plane that virtually every domestic airline has parked, to a small foreign airline that was upgrading from an older 727 Model 100.
Second, owners can repossess airliners more readily than almost any other capital asset.
Third, airliners can be quickly redeployed anywhere in the world where there is demand.
Finally, the secondary market is very active.
The 2,000 aircraft in the desert are not static, Mr. Kolber said last month. Some are moving into storage and others, different models, are moving out at the same time.
Residco, as Mr. Kolber's firm is known, has been using its own money to deal in used jet airliners since 1982. Now he's establishing a private investment fund to do so on a larger scale by opening it up to institutional investors.
"Air travel will come back," he said. "Typically revenue passenger miles have grown at twice the GDP growth rate. If GDP grows by 2% to 3% next year, revenue passenger miles should grow by 4% to 6%."