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Meeting Oliver Stone, aviation broker

Look beyond the headlines and you’ll find that the aviation sector is flourishing, with prices on the up and limited stock availability. To find out more about this – and many others things besides – we spent a few hours with Oliver Stone, managing director of Colibri Aircraft

Tell me about yourself and Colibri

I founded Colibri in April 2011 here in London. We advise clients on buying and selling private aircraft and typically deal in turbine airplanes only, which are turbo props and jets.

I’ve been in the UK for just over a decade – the eight years prior to that I was in the United States doing the same work. While I was there, London and Europe really started buying a lot of planes and I was coming over here a great deal to help clients buy and sell planes.

When I started Colibri, I felt it was time to base myself in London where we had an existing client base, start a new adventure and get a different outlook on life in Europe versus Texas, where I was born.

I really enjoy travelling – it provides you with very different perspectives, but the one unifying element is a passion for planes and flying, which is what we do and what we know.

How did you get into it?

I love aeroplanes and have done since I was really young. I originally wanted to be a pilot, but during pilot training I watched a programme about North West Airlines 747 pilots, which stated that during the average 35 year career, an airline pilot is away from home for 17 years, and I thought ‘it’s a little more than I want to do’.

That didn’t dim my passion for aeroplanes, so I decided to look at the business side of the sector instead – someone told me a terrible, terrible lie that there’s a lot of money to be made in broking aeroplanes and that’s how I got started!

Did you end up getting your pilot’s licence?

Yes, I have my licence and instrument ratings with about 500 hours of flying time.

When I go back Stateside a lot my friends own aeroplanes and we’ll go out together, giving me time to indulge my passion for flying.

Was it a risk coming to the UK and starting from scratch?

Definitely – as with any new business there’s a big chance it won’t succeed and for the first 18 months you pretty much wake up every morning and think ‘was this a wise decision’? But eventually the stress dissipates and you focus on running the business.

It’s easy to overlook how much money it takes to even be in business, even as a broker. For example, the costs of having a marketing presence and a functioning IT infrastructure is a significant outlay every month.

What’s the most challenging part of your role?

The hardest part of our business is finding clientele – in our sector they are by nature very private and don’t always want to be discovered. Finding them and then introducing yourself takes a lot of work.

It was a risk for a long while but it feels less so now – one of the downsides of the brokerage business is you’re only as good as your last deal; there is no residual income.

For us, if we sign up a new contract, and - if we’re really good at what we do - after we’ve sold or bought an aeroplane for our client we’re effectively unemployed and have to go find a new job.

People typically own aeroplanes for four to five years so you’re always having to find people coming to the end of their ownership cycle.

Take me through a typical deal please  

It depends if we’re helping someone buy or sell.

If we’re advising clients on buying aeroplanes, we usually spend around 12 months helping them sort through the different planes – last time we checked there were around 220 different jet types in the world, with around 35 still in production today.

There’s a huge amount of choice – a client might say ‘I want to buy a plane, but what do I do now?’.

They come to see us and we walk them through every available aeroplane’s pros and cons – we tell all our clients there is no perfect plane – every one has a compromise somewhere and together you figure out what they can live with and what they can’t.

A first-time buyer will look at a plane and think ‘it’s going to be a ton of fun, it’s really glamorous, it’s a big reward for lots of hard work’. We look at everything from a CJ-1, which is a small four-seat jet to a G-550, which is an international 14-seat aeroplane.

Once we’ve helped find the right type of aeroplane, we look at the market and find the best value we can find for our customers and make offers on two to three different planes within that type and wait to see who’s going to come back with the best terms and numbers.

When they’ve settled on one, we conduct due diligence, take a look at it and ensure it is what we think it is. We then progress to signing more formal, binding contracts after which the plane goes to a pre-purchase inspection, which is usually a three to four-week process – this is where they open the plane up and look for problems.

Once that’s done and any issues are rectified, we then close.

How long does this all take?

Usually, we tell clients from the moment they’ve agreed a letter of intent, it’s usually anywhere from two to three months, accounting for the usual delays.

  

How many deals do you typically have on at any one time?

It depends on the state of the market, but right now we have five planes in pre-purchase inspection and are trying to buy three others.

This is a busy time for us right now - the market is as busy as I’ve ever seen it.

What happened during Covid?

We saw almost no planes come up for sale during Covid. No-one panicked and the banks didn’t repossess any planes meaning nothing came up for sale – it was just a big pause.

The moment the pause button was unclicked, we hit fast forward and it’s been incredibly busy ever since.

To put this in perspective, since October last year the number of planes for sale has dropped by 57% with prices of some models going up by as much as 30% in the last six months on certain models.

In many models there are zero planes for sale – you literally cannot find one.

Has Brexit had an impact?

For us, Brexit has largely been a non-event but for operators, it’s been very, very different.

In the brokerage business, the only difference now that the UK is outside EASA (the European aviation regulator), is that to sell a plane into Europe you need something called an ‘export certificate of airworthiness’, which takes 8 – 10 weeks to obtain. It’s a really simple process, but there’s a backlog in the system.

On the upside, we are no longer in the EU’s VAT regime – previously, where you ‘closed’ the deal mattered and now we, along with other people, are bringing planes to the UK to be maintained. Servicing facilities are seeing business they wouldn’t have been before because we are now a very friendly place for VAT purposes.

Gulfstream, for example, opened an enormous maintenance base in Farnborough two years ago – it can hold around a dozen very large G-650s, while Bombardier recently opened a similar facility in Biggin Hill to hold 14 of their largest planes.

Both of these are employing hundreds of specialist engineers and there’s a big push to hire suitably qualified engineers.

The UK’s very well respected for maintenance and has a great reputation and history; people are very comfortable buying them and they’re willing to put up with any extra government regulations.

What determines aeroplane values?  

The age, the hours and the upcoming maintenance. The two things you can’t change with planes is the year it was built and the hours it’s flown - the records are the single most important set of documentation.

From a regulatory standpoint, when you import a plane there is a lot of scrutiny on the records and the history of the plane, which makes the records invaluable.

If a plane is missing four to five years of records, there’s a good chance you won’t be able to import it into the UK or France and so on.

Woodwork is the most expensive part of a plane, but we’re less ‘bothered’ about the interior because the cosmetics can be repaired or replaced for relatively small amounts of money.

The bones are more important than the clothing, so to speak.

What constitutes good value?    

From a functional basis, a plane built in 1993 provides exactly the same utility as one built in 2021 - new planes aren’t much faster, don’t go much higher and aren’t that much cheaper to operate.

So, what it comes down to is what the client wants to buy; many want a really big plane that goes from A to B but they aren’t too bothered about how old it is because, in reality, the one built in 1996 will get them from London to Nice only three minutes slower than the one built in 2021.

Planes, by law, are built to a specific design and it’s very expensive to change that design, which means manufacturers don’t like to make changes.

What is the typical lifespan of an aeroplane?

It’s not about age, it comes down to ‘when does the repair of the plane exceed the value of the repair being done’. For example, if you have two engines that need overhauled and the cost exceeds the value of the plane after the repair has been completed, then it’s more or less end of life decisions that need to be made.

These costs will be different for every plane type but with larger planes – that have bigger parts and maintenance costs – that point will come sooner than smaller planes with lesser associated costs.

During normal times, planes depreciate by about 10% per year and depreciation is the biggest ‘cost’ any owner will face – more than crew, fuel and maintenance so we always walk them through the trade-off between new and pre-owned.

Typically, ‘new’ has lower maintenance costs because the parts are all new but you have higher depreciation costs, and we generally advise clients that if you only buy new, then get new. But, if you’re looking at a purchase from a dollars and cents perspective, the higher cost of depreciation is always higher than the cost of maintenance.

What is your client profile?

Every client we have is a very wealthy and successful individual who owns and operates a very successful private company, typically in an industry you didn’t know existed.

We very rarely – especially in Europe – deal with large public corporations.

Why would you buy a plane instead of a helicopter?

Very different market – helicopters are spectacularly good at doing small point-to-point journeys -you can go from your back garden in London to your back garden in Chester, for example.

They are, however, limited by speed because of physics, typically less than 160 knots, while jet planes cruise at around 400 to 450 knots.

Helicopters are also far more complicated and maintenance is significantly larger and you really have to know what you’re looking at.

Tell me about your relationship with Close Brothers Aviation and Marine

Close Brothers is a very active aviation funder here in the UK and we work with you to finance planes for individuals.

You look at the asset itself and the upcoming maintenance as opposed to just the price. Other lenders refuse to look at planes worth less than $10m – their view is it’s the same amount of work to fund a $22m aircraft as it is one worth $2m.

While this is true, there are so many more aircraft worth less than $10m - and it’s also about long-term relationships. For example, someone buying an $8m Challenger 605 is a very wealthy individual with a net worth of somewhere between $500m to $1bn. While they have the capacity to buy anything they want, they choose to purchase something less expensive, which is something some of the big banks overlook.

Their view is they’re not a great source of revenue while Close Brothers is very good at funding the older, lower value aircraft.  A lot of banks also have a strict age limit, stating the plane cannot be older than 15 years at the end of the finance agreement. Close Brothers, on the other hand, work on the basis there is still a lot of value in a 21-year-old plane if it’s been well maintained.

This approach has been very helpful, especially when planes were depreciating and there was a huge amount of very reasonable, very nice machines for less than $5m and Close Brothers provides a lot of value to clients interested in financing these aircraft.

Why would a wealthy individual take out finance rather than pay cash?

There are many factors, but it ultimately comes down to the client’s specific business at the time – their cash may be better utilised elsewhere while others prefer to take out funding instead at a relatively low interest rate.

What about sustainability in your sector

There are a lot of attempts to promote sustainable aviation fuel, although it’s still early days right now. Hydrogen may also be a long-term solution, but that’s also some way out.

According to a study by IATA, it is estimated that by 2050, using sustainable aviation fuels (SAF) in the aviation industry will reach 65% of the total fuel requirement and a production of 449 billion litres.

New engine designs are also providing efficiencies in terms of fuel burn.