Latest / VREF | The Truth About the Aviation Market / The $535 Million Deal Every Piston Owner Needs to Know About | EP 63
Transcript
- Addison: If you fly a bonanza, a 210, a Cirrus, a Seneca, a Baron, a 206, a Mooney with a big bore engine, listen to this episode. The company that built the engine in front of you is getting a new owner. Continental used to be based in Mobile, Alabama, building aircraft engines since the 1920s. And for the last 15 years, it belonged to AVIC, which is the Chinese state aviation conglomerate. In June, a U.S. private equity firm agreed to buy it for about $535 million. And by the time you hear this, the Hong Kong holding company that owned it has probably paid out the money to its shareholders and taken itself off the exchange. Nobody has said why AVIC sold, not Avic, not Continental, and I want you to remember that. Now, what does an aircraft appraiser care? Who owns Aircraft? An engine factory. Well, let me tell you. Because in a piston airplane, the engine is the single biggest swing in value. It's not the paint guys, it's not the panel, it's the engine. And whoever sets the price of an overhaul is going to set the floor under your aircraft. And that's going to be the first half of the show. The second half is the question I get from piston owners more than any other. So it's time I tackle it. And it is: do I need a broker to sell my aircraft? And I'm gonna tell you the honest answer, which is that it's the wrong question. Because the thing that decides whether your aircraft sells isn't who's selling it, it's the number on the listing, and the engine is where that number goes wrong most often, because it's two stories with the same ending. Welcome back to the truth about the aviation market. I'm Jason Zilberbrand, I'm president of VREF, the aircraft valuation reference for the banks, insurance companies, and the courts. And we publish the values. We do about 3,000 appraisals a year. I'm also an accredited senior appraiser with the American Society of Appraisers. And before that, I was a dealer. I bought and sold airplanes with my own money and with the banks in good markets and in the worst one in this industry has ever seen. Last episode, I promised the piston crowd I wasn't gonna leave you out again. So, guys, this one's yours. Part 91, Piston Singles and Like Twins. The Bonanzas, the 210s, the Ciruses, Seneca's, Barons. Guys, if it has a Continental on the front of it, the first half of this show is about your aircraft. If it has a Lycoming, stay with me anyway, because the second half is about every piston owner who's ever tried to sell one. The standing statement VREF doesn't broker airplanes, we don't take referral fees from brokers, and nobody mentioned today paid for the mention. And here are the facts and only the facts because there aren't many yet. Arcline Investment Management is a private equity firm that buys industrial and aerospace companies. In June of 2026, it signed a deal to buy Continental Aerospace Technologies from subsidiaries of AVIC for roughly $535 million. Continental Guys is the piston engine company. It was founded in 1905. It's headquartered in mobile. Avgas engines, Jet A diesel engines, cylinders parts, the factory overhaul and exchange business. The seller side is worth a minute because it tells you this wasn't a merger, it was an absolute exit. The listed holding company in Hong Kong agreed to sell the entire engine business, pay out almost all of the proceeds to its shareholders as a special dividend, then delist from the exchange and wind itself up. Shareholders voted in September The delisting was scheduled for mid-October, so the parent didn't sell Continental to buy something else. It sold Continental and went home. Here's the part that should get your attention. Arcline, they already own Hartzell Propeller through a platform it calls Signia Aerospace. So I want you to think about what that means. One owner now controls the engine and the prop on tens of thousands of GA aircraft. In their own words, Continental is a mission critical propulsion platform. Hold on to that phrase, mission critical. We're going to come back to it. One more thing, as I'm recording this, the deal has been announced and approved by the seller shareholders, but I haven't seen a closing announcement. If it closes before this airs, nothing I'm about to say changes that. And if it doesn't close, well, that's a different episode. I'm gonna play this straight, guys, because there's a good version of this story and there's a bad version of this story, and I don't know yet which one we're going to get. So let's do what we always do, what they said, and what tends to happen. So they said Continental is coming home after 15 years of Chinese state ownership and American owner. The press release talks about investing in product development and manufacturing, supporting the installed base, and the next chapter of growth. And what actually happened so far, nothing. It's just a press release. But I'll give them this much. A strategic owner that already lives in GA, that already owns the prop company, is a better owner than a parent that was looking for the door, and I think that part is very real. They said we're going to grow the business, but what actually happened every other time is that private equity buys a company to grow earnings and sell it again, usually in three to seven years. That's the model. It's not a secret. And it's not evil, but ask yourself how you're going to grow earnings in an engine company with a hundred-year-old product line. You don't do it by selling a lot more new engines. The piston market doesn't work that way. You do it with price. You do it with factory overhauls, exchange engines, cylinders, parts, the things that an owner with a continental on the front of his airplane cannot buy from anybody else. That's what mission critical means from the other side of the counter. It means you need them. They said this is good for owners, but what happened? Well, we're gonna know in about 18 months. And here's how you'll know. Because I want you to watch five things. Factory overhaul and exchange pricing. And this is the one that moves values the most. And then you got parts pricing and availability. You got cylinders, magnetos, the stuff that grounds an airplane on a Tuesday. And then you got product support. How fast a factory answers the phone. How warranty claims get handled, whether the service boltons keep coming. And then you got new product investment. See, under AVIC, Continental pushed into Jet A diesels. Does that continue? Or does it get cut out because the payback inside the holding period doesn't exist? And then you got engine plus prop building. One owner on both sides of the firewall can package pricing. That could cut your cost. It could also leave you with nowhere else to go. VREF is going to track all five, and when the overhaul numbers moves, you're going to hear it here first with the effect on values attached. So here's why I care and why you should too. When VREF values a piston airplane, engine time is one of the biggest adjustments we make. Bigger than avionics on most aircraft, bigger than paint and on terrier, and all of them. And that adjustment is anchored to one thing what it costs to overhaul or exchange that engine. Let me do round numbers because this is not arithmetic. Take a bonanza with an IO550, a factory overhaul or a meme reman runs over $100,000 installed today. Now put those put two of those on airplanes side by side. Same year, same panel, same paint. One's got a brand new fresh engine. One is at midtime, but they're identical in every way, except one of them has about half of the overhaul check already spent. So a buyer whips out his calculator and he's gonna pay roughly half the overhaul cost less for the midtime airplane. That's not a V ref opinion, that's what every buyer does on the way to the airport. Now, raise the overhaul price by 10%. The gap between the fresh engine and the midtime engine gets wider by the same 10%. The midtime airplane just lost value, and nothing happened to it. Not a single hour went by. The only thing that changed is Is who owns the factory in Alabama? That's the whole story in one paragraph. Every midtime, every high time Continental in the fleet now is exposed to pricing and a decision that will be made by people you're never gonna meet for reasons that have nothing to do with your aircraft. And if you're a buyer, know what your overhaul costs today, not what it costs when the seller bought the aircraft. Today. If you're a seller with a high time engine, understand that the market is going to price your engine at tomorrow's overhaul cost, not yesterday's. And if you're a lycoming owner feeling smug right now, don't. There are two piston engine companies in this country. When one of them moves, trust me guys, the other one's gonna notice. Let me stop here for a minute. Because the second half of this show is about selling, and I want you to have your own number before we get there. Here's what I do this week if I own one of these airplanes. Whether or not you're selling one is irrelevant. Go to VREF, go to vref.com, pull the value on your aircraft, your airplane, your serial number, your actual engine time, the actual equipment you have installed in it. Not a free widget on a listing site that averages what other people are asking because asking prices aren't values. They're wishes. See, VREF works from closings with real airplanes, with real money. With real logbooks and actual serial numbers. Every number we publish is one I'd sign in front of a judge because I do that for a living. And when you pull it, I want you to look at the engine adjustment. That's the line that moves if Alabama moves. If you know that number today, nothing that happens under the new ownership is going to surprise you later. You'll know your floor. And if you own more than one of these aircraft or you lend against them. Or you insure them, call me. The affected fleet is enormous, and we can show you exactly where your exposure sits by model and by engine. VREF.com or go to the link in the show notes. Okay, let's flip the switch. Let's talk about selling. A few weeks ago we did an episode called The Six Brokers You Meet. The most common reply from piston owners was some version of this. Great Jason. But I'm selling a hundred and eighty thousand dollar airplane. Why would I give anybody a commission? And I think that's a fair question. So let's do the math because almost everybody I think does it wrong. See, there's the visible cost. Say a broker charges you around 5% on a $180,000 airplane. That's about $9,000, guys. That's the number everybody fixates on. You can see it. It's on the agreement. And it feels like money walking out the door. Now let's look at the invisible cost. Now take the owner who skips the broker and lists the airplane himself at $199,000. Where did he get that number? Some widget on a listing site that cost him nothing, or a buddy at the airport who says his sold for more. Neither one of those is a closing. And here's what happens it sits. Every month it sits. He's paying hangar, he's paying insurance. Maybe he has a loan on it. The annual gets closer. The engine keeps aging on the calendar, whether it flies or not. Add it up, and it's easily four figures a month on an airplane like that. Six months later, he cuts the price. Then he cuts it again. And he ends up selling it at market anyway, which is where the airplane was worth on day one. Only now it's a stale listing. Every buyer can see how long it's been sitting. And you know what happens to stale listings? They get lowballed all the time, every day. And that's not a theory. That's what actual buyers do. So if you're smart, you run the two columns. Priced on the right side with a broker, you got a $9,000 fee. Probably a sale inside 90 days if it's priced right. Three months of carrying costs. And then on the left side, you got overpriced without a broker. Of course, you're not paying any fees. You got six months or more on the market, six months of carrying costs, and a final price at market or below it once the listing goes stale. See, the broker fee isn't the expensive part of selling an airplane. I think mispricing it is. And here's the part nobody says out loud. A broker who takes your listing at your number just to win the listing is the most expensive broker there is. You pay the fee and the carry cost. It works the other way too, guys. An owner who prices it right on day one can absolutely beat the broker on net proceeds. The broker isn't the variable. The price is the variable. So, so when does a broker actually earn the money? And let's be specific. None of this is a statistic. It's what we see across the listings we track. And it's also what I saw for years with my own inventory. A good broker earns the fee when the airplane is complicated. It's turbocharged, pressurized, a twin, heavily modified, or a type with a thin buyer pool. See, finding the right buyer is the job, and it's the real job. And a good broker, they have the list. They know the buyers. They specialize in your equipment. Then you got the history needs explaining. And guys, not all aircraft are easy to sell. Some have damage history. Sometimes it's just a prop strike. Sometimes it's a big deal, like there's gaps in the logbooks. An engine with the story. And see a broker who knows how to present that honestly is going to protect your price better than you will. An owner who hides it loses the deal at the pre-buy. It's just that simple. And I've always told you to be transparent and to be out front. And to list everything. But sometimes if it's that complicated, see, telling the story takes a lot of time. And it's something that a lot of people don't want to explain to you. And I'm going to get to it in a few minutes. But honestly, you need to make a decision if you've got a complicated aircraft, if you want to invest even more time in trying to sell it. And speaking of time, you know, you have to do showings, guys. There's so many tire kickers, and I think anybody who's tried selling their own airplane gets very frustrated very quick. Not only do you have to weed through the tire kickers, you gotta do pre-buy coordination. Then you gotta negotiate your own squawks. And if you're not gonna answer the phone within the hour, I think somebody else should. That is, if you're serious about selling your airplane. And then let's talk about if it's an estate or a partnership or a divorce. Maybe there's multiple sellers. Maybe you have a real deadline. Maybe there's real emotions. A neutral professional is worth the fee just to keep the deal from blowing up. And then the buyer is far away, or maybe the buyer is overseas, and you got to export the aircraft, or you got to deal with the ferry flight or deregistration. I know everybody says don't do the deal, but sometimes it's the only deal you got, which means paperwork. And I'm telling you right now, that's not a weekend project for anybody. Now, that's when I think you need a broker, right? So let's say you want to sell it yourself. And I think you can do it. But let's talk about the things that I think work when you do. And it's a common type of airplane, like a 172 or a Cherokee or an Archer, because they've got very deep buyer pools. And it's a super easy airplane to understand and even easier to present. And let's say the logbooks are super clean and everything's organized and scanned and there's no gaps. See, buyers judge the seller by the logbooks before they ever see the airplane. You can also list it local and be available to meet the buyer local. And you can run the aircraft and be there for the pre-buy. See, you price it right from day one, and this is the one that isn't optional. And if you hire a broker, here's how to pick one. Ask one question. What do you think it's worth? And how did you get to your number? And if the answer is whatever you told him. Or they just go in and look at the highest asking price he could find. My advice is walk away. Because you want the broker who tells you something you don't want to hear and backs it up with what aircraft actually sold for. Which is really the whole episode, guys. So let's talk about price. Every airplane that sits too long has the same problem. The asking price was set by hope instead of by closings. Where does the hope come from? Mostly the listing sites. Those free valuation tools look at what everybody else is asking and feed it back to you as to what your aircraft is worth. And then everybody prices off of everybody else's ask, and the whole market drifts away from what buyers actually pay. And to make things worse, the airplanes sit. See, the listing pages become a museum of mispriced aircraft because the correctly priced ones actually sell and are already closed. And I think you need to know that V V ref works the other way because we price off of what airplanes actually close for. We adjust for engine time, avionics, damage history, equipment lists. And we see the same pattern over and over and over. The airplanes that list at or near V ref value, they get offers and they close. The airplanes that list well above it sit, get a price cut, sit some more, and eventually sell at market anyway. The only thing the seller bought with the high number was months of carry costs and a stale listing. That's why I keep saying it, price it at VREF and it sells in 90 days or less without a broker or with one. And here's where today's two stories meet. The single most commonplace piston seller's overprices at the engine. An owner with a midtime engine prices the airplane like the engine is free. The buyer prices it like he's going to write the overhaul check, because eventually he is. If overhaul costs move under Continental's new owner, that gap gets wider, not narrower. So know your engine's real number before you list it, not the number from 2022. Get the number today. One more thing before I give you the list. And this one's going to be a trade. If you're on the fence about a broker or no broker, send me your airplane. Give me the year, the model, the engine type, where it's based, what you're thinking of asking. No names, no tail numbers, just the airplane. Email it to info@vref.com or put it in the comments and we'll run it against what the type actually closed for this year, and I'll tell you on a future episode which column it falls in, whether your number is a market number or a hope number. Free of charge. You're the reason this episode exists. So let's keep it going. And while you're there, I want you to follow the show, subscribe, leave us a review. We're doing more piston episodes this fall. I don't want you to miss the one that's about your airplane. If you know somebody with a continental on the front of his aircraft who hasn't heard the news yet, I'd ask you to take two seconds and forward him this episode. You'll make him happy and you'll earn friendship for life. Okay. If you own a piston airplane, here's the list. Get your pencil out. I want you to do these things and I want you to do them in order. You need to get a current overhaul or exchange quote for your engine, and you gotta do it today. You need today's number and you gotta write it down because that's your floor. Then two, I want you to pull your V ref value with your real engine time, the time since overhaul, look at the engine adjustment. That's what moves if the factory moves the pricing. Three, if you're selling, decide broker or no broker using the list from segment five, not your gut. Then price it at V ref on day one. And if you hire a broker, make him show you his number and where it came from. Closings, not asking prices. And if you're going to sell it by yourself, have the log scanned and ready before the first phone call. Agree on the pre-buy terms in writing. And close through a type a real title and a real escrow company. We did a whole episode on who you're sending your money to. Guys, don't skip that step to save a few hundred dollars. And if you're buying, Know the overhaul number before you make the offer and price the engine at tomorrow's cost, not yesterday's. And whichever side you're on, watch mobile Alabama. The first factory price list under new ownership is going to tell you everything. And if you need a referral for a broker, guys, every broker in the world that's worth doing business with is a V ref client. If I can make a personal introduction to someone who's a specialist in your aircraft type, I am happy to. Send me an email and I will introduce you to a bunch of different brokers. All of those guys that I introduce you to, I think are honest and ethical and will look out for you. Okay, let me leave you with the thing I keep coming back to. For a hundred years, nobody who bought a bonanza or a 210 thought about who owned the damn engine company. You didn't have to. The engine was just there like a runway. That's what it means to be mission critical. People stop noticing you. Private equity notices though, because that's the business. They bought a company that tens of thousands of airplane owners cannot live without, and they're gonna make decisions about it on a timeline that has nothing to do with your airplane. Maybe those decisions are good for you. Maybe they aren't. Either way, you're gonna find out through the price of an overhaul, and you're gonna find out through what your airplane is actually worth. And that brings it back to the only thing you control, which is the number, guys. Broker or no broker is the real question. I gave you a real answer, but it's the second question. The first question, the only one that decides whether your airplane sells, is whether the number on the listing is a closing number or an aspirational wish. The engine is where that goes wrong most often in the piston market. And starting now, the engine has a new owner. Get your number, price it at VREF, it sells in 90 days or less. Guys, that's the episode. Everybody who wrote in asking for more piston content and you got it. I heard you loud and clear. And there's more coming, guys. Trust me, you're going to love what we have coming. Send me your airplane. Send me your stories. Take the broker names off. Take the tail numbers off. Just a sequence. I'll read the best ones on the air. This has been the truth about the aviation market. I'm Jason Zilberbrand. We'll see you next week. Until then, fly safe and stay smart.