In today's blog post we are talking about a somewhat sensitive and at the same time strategically important topic for many commercial aviation market participants. We investigate the importance of a transparent market environment as well as the phenomenon of off-market deals in the commercial engine business, giving some pros and cons. And finally, we'll share some insights with you about what we offer our users in this regard, and how you can handle the different use cases on the Aeroji platform. What has been your experience with off-market transactions, and how important is transparency to you?
The benefits of market transparency are often discussed and widely recognized. Transparency helps reduce uncertainty and price fluctuations because all market participants can base decisions of value on the same data. If demand and supply are known, a fair market price for sellers and buyers can be determined, and no one will be disadvantaged. Sellers gain the largest possible reach by offering their assets to the broad market and thus reaching all potential buyers. For the buyers, all offers are known, and they can choose the best one from among many.
A transparent market environment also allows for cost-effective comparisons of one's own company's economic performance to the industry average, as well as the analysis of structural changes in demand patterns or overall market growth trends.
In practice, we often see a lack of market transparency, which indicates a common issue in the commercial aftermarket. Market participants' protective behavior often limits their given network and strengthens the lack of transparency, which can result in financial and strategic problems. If you want to learn more about how a lack of transparency affects the aero-engine business, check out our white paper "Transparency - The missing link for success in the engine business".
With all of the benefits of a transparent market environment, off-market transactions have become an integral part of the professional aviation market today and in certain situations this is reasonable. Particulary in a period of uncertain market conditions, a company's sales performance is especially important.
In the last two years, this has become even more apparent. Off-market deals have been strengthened as a result of distressed sales during the pandemic and related market volatility. Therefore it's not always about getting the best price for sellers. At the very least, processing security and strategic considerations are as critical as the purchase price itself.
The success rate of off-market transactions is often higher due to known, reliable business partners. Off-market networking groups are also typically made up of qualified agents, sellers and/or buyers, which builds trust between the parties. In this context some customers also appreciate the discretion and confidentiality, for example, because they are concerned that their business partners might think they had run into financial difficulties and would have to sell their assets.
Off-market assets, according to some real estate experts, are more likely to be purchased than sold. Do you think this also applies to aviation, or do you have a different opinion?
We've got your way
As we can see there are various reasons to pursue an off-market transaction or offer an asset to the broad market. At first glance, serving the different use cases in one marketplace appears to be a balancing act. However, we recognize the importance of both scenarios in today's business and have developed a feature that allows you to choose your own path while enabling more efficient trading on the platform.
Whether you want to offer your assets to a broad network or off-market, structured and targeted communication contributes to everyone's corporate success while saving time. Therefore organization of business contacts forms the basis for this. Our upcoming "groups feature" will allow you to organize your contacts into custom groups, send targeted messages, and offer your assets not only to the entire network but also to specific groups of users. If your company is part of a larger group, for example, you will be able to make dedicated assets visible only to the specific group. Stay tuned for the new "groups feature"!
What's your philosophy about transparency and off-market business? Let us know what you think by leaving a comment or submitting your personal feedback.
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Your Aeroji Team