Addison: Welcome back to the Truth About the Market. I'm your host, Jason Zilberbrand. I'm president of VREF I've appraised nearly every type of aircraft out there. My clients range from private owners to lenders to insurance companies, operators, Fortune 500 companies, law firms, government agencies, including the FAA. And I've owned aircraft, operated aircraft, bought them, sold them, financed them, and I spent decades watching how this market behaves. When the conditions change. So when I talk about the aircraft market, this is not theory, it's not social media commentary, and it's definitely not scraped internet data wrapped in a chart. But it is real world transactional experience. This podcast also has no sponsors, which means there's no advertisers or outside influence because nobody pays for opinions here. Nobody dictates conclusions, because aviation is a capital intensive market. And the market punishes misinformation every single time. And right now, there's a tremendous amount of misinformation floating around, especially from people who think charts are the market, because they're not. And that's what today's episode is about. Because everyone is looking at charts right now, and they're all missing the same thing. The market is moving, it's just not moving where they're looking. So, one of the biggest mistakes people make in aviation is Is assuming markets speak through price first, they don't. Markets speak through behavior long before they speak through valuation. The problem is that most people are trained to look for visible movement. They wait for dramatic price drops, panic headlines, or inventory spikes before concluding something has changed. But aviation rarely works that way, folks. In fact, Aviation is one of the most psychologically resistant markets in the world. Aircraft owners do not wake up one morning and decide to cut values by twenty five percent. Brokers, they don't suddenly abandon yesterday's sales comps. And trust me when I tell you banks do not immediately admit rising risk. But everyone involved in the transaction ecosystem attempts to preserve the prior market structure for as long as possible. That resistance creates the illusion of stability. Especially for outsiders who look only at listings and asking prices. But beneath the surface, behavior begins to change long before prices do, because the confidence changes, and then you see liquidity changes, and then you see how negotiations start to change. And right now, those signals are appearing across virtually every layer of aviation, whether it's small piston aircraft or large business jets. And if you look at the pressure surrounding spirit airlines, And the broader ultra-low cost carrier model, that segment matters far more than people realize because it sits closest to the consumer's pain threshold. When fuel rises, financing tightens, or economic uncertainty increases. The lowest cost travel segment feels at first. Those operators, they survive on utilization, efficiency, and as razor-thin a margin as you can get in aviation. They do not have enormous cushions financially. They're not protected from changing conditions. And when stress begins showing up there, it is usually signaling something larger about consumer sensitivity and weakening confidence. And now move completely away from commercial aviation and you look at the grassroots side of the industry. Experimental aircraft and entry level aviation have always represented accessibility. That is where flying remains emotional. It remains personal. Financially delicate all at one time. And guess what? Companies like Sonic's aircraft, they occupy an important position because they sit directly inside the affordability layer of our industry. Buyers in that segment are highly sensitive to operating costs, especially fuel prices, access to financing and interest rates, and broader economic confidence. So when conditions tighten there, It often reflects a subtle but important shift in how people perceive discretionary spending and long term ownership risk. Then you move all the way to the opposite end of the spectrum and examine something like Waco Aircraft Corporation. These are not practical transportation purchases. Nobody accidentally buys a Waco. These are passion driven aircraft. They're tied to nostalgia, identity, lifestyle, probably what your father flew. And emotional connection. The buyers are different. The motivations are different. The economics, they're very different. Yet, changes in behavior matter tremendously because discretionary luxury spending is often one of the clearest indicators that something's changing with buyer confidence. Now step back and look at what this really means. You have pressure appearing in ultra low cost commercial. You have shifting behavior and grassroots affordability, and you have caution beginning to emerge even in the highly discretionary passion-based segments. That's the bottom, that's the middle, and the top. Three entirely different buyer profiles, three entirely different motivations, and three entirely different economic structures. And yet, the same underlying signals beginning to appear across all of them. And don't tell me that this is random because it's not. This is not coincidence. This is structure shifting beneath the surface. This is where people get fooled by the charts. And of course by that scrapped data that they like to steal from controller and trade a plane. They look at asking prices and conclude, ⁓ the market's stable. Because prices haven't collapsed dramatically. But aviation markets almost never collapse instantly. I've told you this, they freeze first. That distinction matters enormously. A frozen market can appear healthy to someone staring at listings online. Aircraft remain advertised at yesterday's prices, and then the sellers they refuse to move, and the brokers continue quoting historical comps. I actually saw this yesterday on one of the social media outlets, a broker showing comps from 2025 in the Challenger 300 market, suggesting that it was still on fire. Because On paper, everything appears stable. But beneath the surface, transactions, they do begin to slow. Negotiations have stretched out, buyers have hesitated, financing has definitely become more selective, insurance becomes more restrictive, and that spread between what someone is asking and what they'll actually sell the aircraft for is widening. Trust me, I review more appraisals than anybody. I see just about Every purchase agreement out there, the spread is massive, folks, and deals are quietly dying during pre-buy inspections and underwriting, and nobody's talking about it. But that is how aviation markets actually weaken. Not through dramatic overnight price resets, but through the gradual deterioration of confidence and liquidity, and by the time visible asking prices finally reflect that public shift. The real market has usually been moving for months. I will say this about the next price update. Expect volatility. This episode is powered by VREF the standard and aircraft valuation. If you're buying, selling, financing, or you're just trying to understand what your aircraft is really worth, VREF it. VREF Online gives you the data that actually drives decisions, ⁓ opinions, ⁓ listings, ⁓ guesswork. Go to VREF.com and VREF it before you make the call. So let's shift now. Let's talk about the wannabe. Because all while this has been happening, you've got wannabe's publishing charts telling everyone the market is stable. This is what happens when people mistake scraped visibility for actual market intelligence people. You confuse visibility with understanding. Most of these people, they don't know what they're talking about. They simply scrape listings from the internet, they feed the information into a AI model, they generate some fancy charts, they even run a regression analysis in Excel, sprinkle in some AI terminology, and suddenly they've positioned themselves as experts on aviation, on business jets, on the charter market, on aircraft valuation. And to someone outside this industry, it looks sophisticated. The presentation feels, I don't know, maybe scientific. The visuals look convincing. And because modern audiences are conditioned to trust dashboards and analytics, the conclusions often go unquestioned. But let me tell you something. The aircraft market does not work the way these people think it does. Aircraft valuation has never been about public listings because aviation is not a transparent market. There's no aviation equivalent of an MLS system. There is no centralized database where every transaction is fully verified, disclosed, and then visible. And there is no place where the real terms of every deal are publicly available for a clean statistical analysis. And you know what? That matters far more than people realize because what appears online is not the market, it's marketing. Listings are positioning tools. They are negotiating anchors designed to shape perception and establish leverage. During uncertain periods, listings become even less reliable because sellers' psychology resist accepting changing market conditions. Owners anchor themselves to yesterday's values. Look, it's human nature. And brokers, they continue quoting that old data because the dealers attempt to preserve their margins. Everyone involved wants to believe that the prior market still exists so that they can make the same money. And that creates a dangerous illusion, especially for those who are first-time buyers or worse yet, inexperienced analysts. Staring at scraped data, see the public sees an asking price and assumes that it reflects value, but it doesn't go to any market, any hobby market. You'll see the same thing. You see these grandiose, delusional asking prices. Every once in a while something sells. But real buyers, the people who are inside, they're the ones that are laughing. Because the real story does lie beneath the listing, hidden within the transaction structure itself. What the public never sees, and I've told you this, they never see concessions, they never see any of the structure or negotiations that help keep that deal alive. They don't see the maintenance. They don't see what was uncovered during pre-buys. They do not see the deferred maintenance exposure, or maybe the lack of an engine maintenance program, or all the issues they had financing, or maybe even insurance limitations. Because those failed transactions, they matter. They matter enormously. And in many cases, and I tell you this all the time too, it's the failed deals that tell you more about where the market is than the successful ones. Because failed deals reveal where confidence disappears. They reveal the point where buyers stop believing the pricing structure makes sense. That is where true price discovery begins. It doesn't start online, it's not in a chart. And trust me when I tell you it's not inside some cockami regression model built around a scraped listening. Real aviation, the real value. Discovery happens in conversations that never become public. It happens during lender reviews, insurance underwriting meetings, maintenance evaluations, and difficult negotiations between buyers and sellers trying to bridge widening expectation gaps. That's where the truth lives. So when somebody builds a model entirely around an asking price and then claims they understand the market, what they're actually analyzing is a reflection of the market, not the market itself. And guess what reflections are? Super misleading and dangerous. Now, to be clear, data itself is not the problem because VRIF has a ton of it. We get, ⁓ I don't know, 30, 40% of the closings reported to us every month. We do more appraisal work than anybody. In fact, I'm pretty sure we do more appraisals than all the active appraisers combined. And you know what that means? That means we have the data and it's empirical. I can go in and show you the purchase agreement and prove that there's a massive spread occurring. So the problem it begins when incomplete information is mistaken for complete reality. And that's where all these wannabes fail. Because a model can only understand the world you feed into it. If you put bad information in or incomplete kakamami data, guess what gets spit out? A polished distortion. The presentation may look intelligent. Some idiot reading it might think you're intelligent, but intelligence is not the same thing as accuracy, and this becomes especially dangerous when people confuse sophistication with truth. They see statistical confidence and assume correctness. They hear AI terminology and assume authority. They see a clean chart and assume the market's been objectively explained, but confidence is not proof. Beautifully designed chart built on BS incomplete evidence is still incomplete evidence. And one of the biggest mistakes inexperienced analysts make, and those that are new to the industry, I'm talking to you, is assuming markets reveal themselves publicly in real time because they don't. You know, almost all of these transactions are private. And aviation, you gotta realize that being secret, that's part of the issue. Aviation remains one of the most opaque asset markets in the world, because every aircraft is different, every transaction is different, and every buyer carries a unique set of financial pressures or operating requirements, and certainly psychological motivations. That opacity is exactly why experience matters. That's why you trust someone that has 35 years of experience, not three. That's why you check it out and you see what they were selling before they entered the industry. Why you would listen to someone who's been doing this for three years is beyond me. It's just craziness. Because if your understanding of aviation begins and ends with visible public information, guess what? And I'm serious here, you are so far behind the market, it's not funny. So let's talk about how aviation markets actually behave. Because this is where the disconnect between the theory and the reality becomes super obvious. People love comparing aviation to financial markets because it makes analysis feel simpler. They assume aircraft value should react instantly to economic shocks the same way stocks react to headlines. But aviation does not behave like the stock market. And anyone expecting immediate pricing resets fundamentally misunderstands how this industry works. Aircraft markets move like this slowly, unevenly, and without Any reason at all because of the psychology behind it. You don't wake up in the morning and suddenly see values collapse, right? That makes for dramatic headlines. But it's not really how aviation functions. The process is far more subtle. You know, a couple months ago, we were at the beginning. And that's why a lot of inexperienced observers missed it. And the first thing isn't the pricing that breaks. It's activity. And we saw the slowdown. We saw it what, two and a half months ago now? The phone calls slow down, the buyers stop rushing, negotiations stretch out longer and longer and longer. You see the price reduction emails start coming in. You see aircraft start creeping over 200 days on the market. The sellers become less flexible while buyers become more cautious. And then they sit on the sideline. Because transactions that once move quickly suddenly require additional discussions and additional approvals, and then there's more reviews. And then you know what happens? Time kills deals, so the momentum disappears. And then the gap between buyers and sellers begins to widen. And that widening gap is one of the most important signals in any aviation market transition because buyers and sellers view the same aircraft through completely different lenses, completely different perspectives. Buyers begin pricing forward. They look ahead at rising operating costs, financing uncertainty, insurance escalation. Economic weakness, future maintenance exposure. And that that usually equates to residual value risk. They start evaluating what ownership might look like in six months or two years or five years. Is there an exit strategy? Sellers, they do the opposite. They remain anchored to what happened six months ago or two years ago when they bought the plane. Because the psychology is so much easier, right? Then accepting change. They continue referencing the historical comps, prior conversations. I had one just yesterday. Guy questioning our values. And I said, Well, when was the last time you were active in the industry? And he said, Well, I bought my plane in 2021. And there you have it, folks. He's bringing perspective from a post COVID market to today, and he thinks that it's still relevant. It's crazy. The disconnect creates paralysis. That's what you're seeing. Paralysis is where the aviation downturn actually begins. Not the panic. You don't see headlines, but you see the activity start to slow and then it freezes. The liquidity is gone. Because liquidity is not just really capital, it's confidence as well. And liquidity is confidence made visible. So when buyers believe that the conditions are stable, And it's kind of funny how they all start to have that feeling all at once, that gut check. The transactions start to flow again. When confidence weakens, buyers sit on the sidelines. The lenders tighten. Insurance becomes more selective. And the velocity of closings slows so dramatically like it has the past two months that we're down forty percent from this time last year. 40%, four zero. The problem. Is that most people cannot see liquidity deterioration in real time because they're staring at listings. They don't have the data like we have it. They see asking prices remaining relatively stable. You know, you have to think about it. They're relying on a bunch of third parties recognizing that there's something wrong in the market. It's craziness. Visible pricing often lags reality by months because sellers resist repricing for as long as possible. Why do you want to sell your house for less money? Why do you want to sell your car for less money? Why would you want to sell your airplane for less money? That lag creates one of the most misunderstood periods in aviation cycles. The frozen market phase. You know, to novices, to inexperienced observers, to those people I was telling you about that have only been doing this for a short time, a frozen market can appear stable because inventory is still advertised at strong levels. They're looking at the wrong stuff. Aircraft continue appearing online at pricing from Six months ago. Sellers refuse to move materially, and brokers continue talking confidently. And you see that all the time now, these confident broker speeches, and they keep going back and referring to data from six months ago, nine months ago. The market was totally different. It's not how it is today. You know, underneath the surface, transaction behavior is deteriorating really quick. The deal stopped closing months ago. Buyers have been walking away during pre-buy inspections left and right, and trust me, I talk to every lender under the sun. Financing is absolutely getting harder to secure. Negotiations have collapsed over maintenance exposure or future operating concerns. I see it daily. And aircraft begin sitting longer without offers. That's not sub stability. I think that's called resistance. And there's a major difference between the two. Inventory sitting unsold is not possible. Proof of strength. In many cases, it is proof that sellers have not accepted the new market environment yet. Markets often spend long periods suspended between what sellers want and what buyers are willing to pay, and that is under ever changing conditions, like what we have today. Eventually, you know, that gap does close. It always does. But the process is rarely immediate because aviation is deeply emotional. Owners become attached to these prior valuations, like a security blanket. Brokers want to protect that perception because, well, they're protecting their commission, let's be honest, folks. Everybody involved attempts to preserve confidence for as long as possible. That's why experienced lenders and guys like me, insurance companies, and institution institutional buyers focus so heavily on behavioral signals. Rather than simply staring at visible asking prices on controller. They understand transaction velocity matters far more than advertised pricing during transition periods. And this is exactly why people relying heavily on scraped data, on publicly scraped data. Think about that. Consistently misread every turning point. Because by the time those asking prices have adjusted, the real market's left you way behind. And this is exactly why people relying entirely on that scraped public data consistently misread the turning points. By the time public pricing visibility adjusts, the real market has usually been moving for months. The chart changes fast, people, the behavior changes first. So, where do we go? What happens next? That's the question everybody eventually asks once early behavioral signals become impossible to ignore, like the ones we've been seeing. And this is where things become far more important because the next phase is where hidden pressure begins turning visible. This is also the point at which aviation stops behaving like a single market and reveals itself for what it really is a collection of layered micro markets all reacting differently to stress. Not every aircraft gets hit equally. Not every category weakens at the same time, and not every aircraft survives changing economic conditions the same way. The first cracks, they almost always appear in the aircraft that were already vulnerable before the broader market shifted. And what are those? Well, I harp on it all the time. Older aircraft beginning to separate from the fleet, unsupported platforms becoming harder and harder to get work done on or find parts. The high maintenance hogs, those aircraft start creating larger buyer hesitation. Those with aging avionics, those that have uncertain parts support. Those that have extremely high rising operating costs, that suddenly matters far more than they did during strong market cycles. And this is where the conversation will shift from simple pricing to what I would like to call survivability. For years, aircraft values often discussed through relatively simple frameworks age, total time, engine time, cosmetics, maintenance status. Those factors still matter. But they no longer tell the entire story. Increasingly, values being determined by something much deeper, whether the aircraft can remain economically relevant in a changing environment. That is the foundation between what I've spent a tremendous amount of time studying through what I call the functional value index, or an FVI concept, because the market is no longer asking only what an aircraft is worth today. It's asking whether the aircraft remains viable tomorrow. Can I get financing? Will someone insure it? How am I gonna operate it? Who's gonna maintain it? Can owners continue supporting it economically without becoming trapped in escalating maintenance and operational exposure? Those questions matter enormously now because aviation is becoming more selective. Buyers are no longer evaluating aircraft solely based on acquisition cost. As I said, They're evaluating long-term survivability, and that creates separation within the fleet. Aircraft with strong support networks, modern avionics, and a broad operator familiarity with a healthy parts availability and lower operating complex complexity tend to remain relatively resilient. Not immune, but they do stay resilient because the buyer pools remain deep, and financing is accessible. And those aircraft continue functioning as liquid financial capital assets. And there's a lot of those. A lot fit into that category. The opposite becomes true for those that are vulnerable, because this is where another major shift quietly begins taking place. Insurance becomes the gatekeeper. It's not just financing anymore. Insurance is where people consistently underestimate how important in determining the marketability of an aircraft is. Because an aircraft can theoretically hold value on paper, but think about it, if there's no one willing to support it through an underwriting process, or if the premiums become so disproportionately high compared to the buyer pool, those buyers tend to immediately disappear. Word gets out. You can't get insurance. The aircraft may still technically exist within the market, but the universe of people willing and capable of owning it or operating it. Or willing to self-insure, even, we all know that shrinks dramatically. The same thing happens with financing. When lenders tighten standards, liquidity contracts. And financing is one of the primary mechanisms that supports transaction flow. Total common sense. But as liquidity contracts, the marketability deteriorates. And once that weakens, The vulnerable aircraft begin separating from the broader fleet much faster than what most owners expect. And this is why downturns in aviation are rarely uniform. And if you go back and you look at the numbers and you look at the statistics, you'll see what I'm saying is true. The strongest aircraft categories often remain surprisingly stable, while weaker segments experience disproportionate pressure, because that divergence creates confusion for casual observers. Who assume the market should move as a single block, right? Everything goes at once, up and down, up and down. But aviation has never behaved that way. And you hear people using fancy words like bifurcation, right? That's what we're saying. It's separating. A modern, highly supportable aircraft with broad financing acceptance and predictable operating economics. It behaves very differently from an old airplane that needs a ton of avionics and a ton of maintenance. And you go and you sit down, you start putting a pen to paper trying to figure out what you're going to buy and how you're going to do it, and you find out you can't get any parts. See, those differences become amplified during uncertain periods. Right now, no one's going to put a bunch of money into an aging aircraft that may not be viable in five years. And this is exactly where simplistic chart-driven analysis not only does it fall short, it's embarrassing. Because broad averages hide the most important story. Aviation's not one market. It is a network of interconnected by highly segmented markets reacting differently to changing conditions.