Online Auctions for Business Aviation Assets

Tony Kioussis (00:33):
Welcome to another Asset Insight podcast covering the aircraft ownership life cycle. I am Tony Kioussis, president of Asset Insight and your host. Global Aviation Exchange Limited or Global AVX is an online auction platform offering aircraft brokers as well as direct sellers, a mechanism for purchasing, selling and leasing aviation assets. The company’s stated mission is to provide the aviation industry with a transparent and accountable platform that they can trust. Joining me today from the company’s headquarters in Ireland is Stephen Kelly, global sales director for Global AVX.

Tony Kioussis (01:09):
I should think that given the new normal we’re experiencing, you’re finding that the market is willing to consider completing aircraft transactions online. Is that the case?

Stephen Kelly (01:20):
Absolutely Tony. The new normal or the new different, as they said recently, people are desirous of doing deals online, but what has happened since the pandemic hit has been an added motivation and desire to mitigate the chances of getting this horrific virus or transmitting this horrific virus. What we are seeing is that people, if they need to travel, and need to use business aviation they are using business aviation like never before. What we are seeing is former business and first class commercial travelers are upgrading to charter, to fractional ownership and ultimately full ownership.

Stephen Kelly (02:07):
The second thing is the untapped global market, and here’s where we see, according to estimates there are over 513,000 ultra high net worth individuals. However, out of this segment, only 3.5% own their own jets. Coupled with a wall of cash that has been printed since the start of this pandemic, there is a huge desire to transact deals online. And why online? Well, let’s look at that as well. There are huge restrictions in traveling, and that means that business is being conducted online with deals and transactions and people are using technology. Indeed people are comfortable to do deals online and even sign documents electronically.

Stephen Kelly (02:54):
So what we’re seeing is people are viewing planes online and they’re looking to transact with planes online. I look at the proof in another industry and that’s the big auction houses selling high ticket items throughout the pandemic. They’d been achieving prices over and above what they expected to achieve due to the fact that their marketplace is global and the global marketplace is determining the price of these assets. They’re also, and here’s another thing that we’re seeing from another industry, is that there doing more deals than ever. So the point of the matter, and here’s something that I think is really exciting going forward in the business aviation community, is it’s more about doing the deal than necessarily being worried about where the particular asset is currently parked. We see exciting times ahead for transacting deals online via our platform.

Tony Kioussis (03:51):
Describe the capability that Global AVX provides to those within the business aviation community, willing to trade assets via an auction platform.

Stephen Kelly (04:02):
Let me go back to what the original reason for Global AVX and why it was conceived. It was conceived as a technology business tool to allow bankruptcy professionals determine the price of distressed aviation assets via an auction platform. And the platform allowed these professionals to discharge their professional obligations and in the process through our transparency report, deliver full accountability to stakeholders involved in the transaction.

Stephen Kelly (04:33):
So this platform has been built many months prior to the pandemic, i.e. over the last 27 months under the eagle eye of our CEO, Robert Burke. What we want to say here is that the platform has evolved. This is what we’re really excited about. And again, there’s a proof of concept within the real estate business. In 2011, we had the worst real estate crash in Ireland and what managed to get the market moving again was actually auctions of 144 lots in one particular location. And one piece of land three years previous had transacted at 3.5 million, went under the hammer at 80,000 so you can imagine this was crazy.

Stephen Kelly (05:24):
People had to finally realize their losses, but what it really did was it put a floor on the price of the assets and ultimately allowed transactions to start again. And that is what we see. These are real estate assets, which are physical assets that can’t move. The wonderful thing about business aviation assets is they’re globally traded assets. That’s really what we’re excited about doing. We are, in a nutshell, bringing motivated buyers and sellers together to allow transactions to take place. At the basic level, our platform’s a listing platform and our clients are the brokers. We also want to bring together the bidders and we ask the bidders to utilize the services of an acquisition consultant. So we’re here as a piece of technology to fit seamlessly in to the business aviation community to take full advantage of this new normal, this new different.

Tony Kioussis (06:27):
Considering that most business aircraft have historically been acquired and sold utilizing the services of a broker, how does your offering and technology fit into a broker’s or acquisition consultant’s toolbox?

Stephen Kelly (06:41):
Our platform is a piece of technology that fits seamlessly into our clients, the brokers, but also if a bidder comes through an acquisition consultant, they can use our platform to represent that bidder on their behalf. We’re really excited to reach out to this global marketplace, these new buyers. And also where we fit into their system is we act as an elimination tool and we are asking the market to buy, sell, and lease very high valued assets online. And we need to eliminate at all times the tire kickers that are wasting everybody’s time.

Stephen Kelly (07:26):
The DNA of this company is all about transparency and we have a phrase in this country, put your money where your mouth is. The best possible way to deliver that and to show the seriousness of a potential buyer is to ask them to place a certain percentage of the minimum reserve price of the asset in escrow prior to accessing our data rooms. We are reaching out to a global audience and we’re satisfying their desires. That’s really, really exciting. That is what we bring to the table for our clients, the brokers.

Tony Kioussis (08:05):
As I understand it, a great value offered by your platform is its process for filtering genuine buyers, such that the sellers are only dealing with financially qualified bidders. Explain how that works.

Stephen Kelly (08:20):
From the outset we are asking the new market to buy, sell and lease the assets online. Therefore it is vital that the potential bidders that we have are fully vetted. This is where an acquisition consultant comes into its own because they can represent the bidders and act as the direct contact with our platform and deliver that ideal asset that is up for auction. But if we’re dealing directly with bidders and the acquisition consultants, we go through a strict process of knowing your customer, KYC. And that is very, very strict. Also AML, anti money laundering interrogation, and proof of funds upfront prior to becoming a qualified bidder.

Stephen Kelly (09:07):
Our whole platform from the outset is an elimination device. We want to eliminate the tire kickers and bad actors off the pitch as soon as we can. Our platform takes this and locks the buyer and the seller in from the outset. One party cannot sell to the other party off market. Once committed, this must be concluded via auction process, and this gives certainty, credibility and confidence that everything shall be above board.

Stephen Kelly (09:41):
I also want to mention how we handle the data on our platform, because this is key. As the only English speaking country in the EU, we have to abide by the strictest privacy laws in the world. They’re called GDPR, and on top of this, our platform is designed like Fort Knox. Our data rooms are secure, each bidder is anonymous and cannot be seen by another. They’re only assigned a digital number. We take privacy, security and ownership of all data with absolute and complete seriousness. It does help having our CEO as a corporate lawyer. All the documents are drafted with this in mind.

Tony Kioussis (10:25):
Once a bidder or bidders have been qualified, how quickly can they acquire or lease an asset? In other words, how long does it take to complete the actual auction process?

Stephen Kelly (10:37):
We’re reaching out to the complete global marketplace of bidders, so we want to give them two working days to complete and place as many bids as they might want to. And depending on what our clients require, we can lengthen the time of auction, we can add time at the end of auction if there are bids within say the last hour. But here is the key, the minimum time to reach a sale agreement is two days. 48 hours. So conceivably a buyer or an acquisition consultant representing a buyer can purchase a plane off our platform in two days. 48 hours.

Tony Kioussis (11:14):
I should think that, in your eyes at least, the platform allows the global market to determine the asset’s transaction price by virtue of an open and transparent auction. How does a seller secure against the final bid that does not meet the minimum sales figure they have in mind?

Stephen Kelly (11:31):
Once our auction is initiated, we place a minimum reserve price on the asset in consultation with our client, the broker. But what we want to do is we want to place that below the expected price that is currently presented to the market. And this is obviously designed to bring as many potential bidders in the room as possible. As they go through the process, only the genuine bidders survive. The seller achieves the most transparent price, our broker client delivers a transparency report that proves and shows how this price was achieved and hence is the ultimate accountability tool to deliver to the seller.

Stephen Kelly (12:18):
Our client, the broker sold a plane and achieved a commission consonant to the final price delivered. The winning bidder wins because the price paid is determined by the bids delivered via a marketplace of their peers.

Tony Kioussis (12:33):
As an online service platform, how does Global AVX generate its revenue? Are their subscription fees? Per transaction fees? What kinds of fees are interested parties required to pay to buy or sell on your platform?

Stephen Kelly (12:46):
We are charging subscription fees based on access to and services required. From the base level you list your planes and to a more advanced level of providing a complete suite of services, including marketing and sales electives. It’s exactly a monthly subscription fee based on the access you require to use the platform. So for an auction itself the price delivered via our platform, we shall in some ways, take a set percentage fee for that to reflect the fact that our platform has delivered its price determined by the global marketplace.

Tony Kioussis (13:28):
Is there anything specific that you would want people to know about your team, company capabilities and future services the business aviation community should expect based on Global AVX expertise and services?

Stephen Kelly (13:41):
As stated from the outset Tony, we are a software as a service platform. We are independent and being placed in Dublin, take full advantage of the network of technology companies that call Dublin their second home after Silicon Valley. It was a brainchild of our CEO, Robert Burke, who is a very, very old, good friend of mine and I’m delighted to be on board. We built a serious global team of experts. It’s a cliche, but I’ll say it again, the sum of the parts is far greater than the individual capabilities and competencies. We might be a piece of technology, however the goal going forward is to push business aviation to the top of the consciousness of the market. We’re really excited about the future.

Stephen Kelly (14:28):
One word on where we see the future. We should be rolling out a listing for leases of planes that can potentially be auctioned as a lease item. I’ve been talking mainly about buying and selling, but ultimately people might want to lease these business aviation assets. We also see a big potential incurrent of market transactions that require that full transparency, accountability and market determined prices delivered through our platform.

Stephen Kelly (15:00):
We are working with the best people in the business to streamline the process even further and are driving the whole point of bringing the time it takes to transact, buy and sell and lease aircraft. Because the more transactions completed, the better it is for our industry. We will get out of this pandemic in a much stronger place and Global AVX will be there at the forefront to delivering deals and getting more people into business aviation than ever before.

Tony Kioussis (15:35):
This has been another Asset Insight podcast covering the aircraft ownership life cycle. Please visit our ever-growing podcast library at assetinsightpodcast.com and select from any number of topics discussed with business aviation industry experts. This is Tony Kioussis and as always, thank you for listening.