CJI Podcast #52 | Patrick Hosman Jr | Southern Cross Aircraft | "We have lost millions on single airplanes"

Southern Cross Aircraft is one of the most active large business jet dealers in the world. In this CJI Podcast Pat Hosmann Jr. explains how they look for aircraft with “good bones” and the risks involved in inventory (especially when three brothers are making investment decisions).

 The company specialises in complex international deals and Hosmann explains how to deal with different cultures. He also says how tight-knit the community is: “In business aviation there is probably three degrees of separation, it’s all about personal relationships.”

Transcript

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Alasdair Whyte, CJI [00:00:06] Hello, and welcome to the Corporate Jet Investor podcast. This week, we're excited to be joined by Pat Hosman, Jr. Of Southern Cross Aircraft. Pat, how are you? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:00:20] Not bad, Alasdair. Thanks for having me join. 

Alasdair Whyte, CJI [00:00:23] It's great having you. Okay, I was looking at your LinkedIn profile earlier. You've worked for I'm trying to get this right. You've worked for two companies, Southern Cross Aviation and Southern Cross Aircraft. Did you never have a choice? Were you always going to go into the family businesses? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:00:47] Good question. The choice was there, but the decision was made pretty early on. I got into the business early. My father started a parts company, and I grew up as your typical airport rat. Always visiting the airport, visiting the hangers. When I was in high school, I swept hangers, I washed airplanes. I took flying lessons, I just, I always knew that was the direction I wanted to head in. The sound of a turbine engine just was attractive. 

Alasdair Whyte, CJI [00:01:28] And watching your dad work, at the time, did you realize how hard he was working? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:01:37] I had an idea, I had and like most of us experience in aviation there's stressful moments, there's wonderful moments, less wonderful moments but there's a lot of variety and at the end of the day it's fulfilling. 

Alasdair Whyte, CJI [00:01:59] And you've got, you've now got, take us through the different companies you have in the Southern Cross Group. 

Pat Hosmann Jr. , Southern Cross Aircraft [00:02:08] The Southern Cross Group started with Southern Cross Aviation, which is a aircraft parts distributor, and that expanded into rotable support, AOG support. It started with a Fort Lauderdale warehouse, which then expanded to include Phoenix, Sao Paulo, Brazil, Anchorage, Alaska. Now we have a new one coming to Indiana. And as as a result of meeting clients in aviation the said "Hey we need an airplane can you help with an airplane." So being based in the US that might got my father's leg in the door with selling airplanes and I grew up around the airport and I remember going to wash airplanes and I would always see in the corner of the airport where the Well now they're old, but at the time they were beautiful G4s and G5s and the guys in the suits that were there showing the airplanes and I kind of I wanted to go into that direction, The sales and the the whole airplane put together rather than the pieces so we morphed or expanded into aircraft sales. That's the second part that's southern cross aircraft and then doing more aircraft sales came the next question "Well can you help manage the airplane after I buy it and can we operate it" so we delved into charter started the charter company and that is now in the process of being sold And then the fourth leg is out of Masanudu, Hawaii, and we do some freight and charter down in South America. So that's the Southern Cross family today. 

Alasdair Whyte, CJI [00:04:05] And where do you spend most of your time with Southern Cross Aircraft? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:04:10] I'm focused on sales, aircraft and helicopters, and the time gets split between North Carolina and Fort Lauderdale, which is where our hangar is. And then the rest of it is just crisscrossing the world, looking at either airplanes or meeting with clients. 

Alasdair Whyte, CJI [00:04:35] Is it fair to say that your core strength has always been international deals? Or you're core differentiator. 

Pat Hosmann Jr. , Southern Cross Aircraft [00:04:44] Yeah, 100%. Our focus, our client base has traditionally come out of South America, our, the Haasman family is from Argentina. And that base expanded into Hawaii and Brazil and the rest of the Southern American continent. But 100%, our focus is typically international deals, the complicated ones, the, a lot of times the opportunity. Exists to acquire an airplane outside of the US, bring it back, register it, do all the upgrades it needs. So being an inventory and dealer, that's kind of been our hunting grounds traditionally is complex international deals. 

Alasdair Whyte, CJI [00:05:34] And do you think your background in parts makes buying inventory easier? Because not everyone wants the stress and the headaches of owning an aircraft and trying to sell it. 

Pat Hosmann Jr. , Southern Cross Aircraft [00:05:48] The background in parts helped a lot, especially when we do these inventory refurbishment projects or when an airplane stumbles. Nowadays a lot of airplanes are stumbling in the pre-buy inspection and there's a lot of delays going on with parts that cannot be sourced. It seems every other airplane is stuck at an MRO somewhere waiting on parts. So absolutely a prime example. We just bought a G550 in Asia a few weeks ago and in more than several occasions the MRO was not able to find the parts that we needed and we were and we're able to supply them and get the project moving and back on track and the airplane is now here in the states so yeah the parts background helps getting sticky situations unstuck sometimes. 

Alasdair Whyte, CJI [00:06:43] What are you looking for when you buy an aircraft for inventory? Do you have a seller lined up? Have you just sold one in that class? Or is it just, it's a good opportunity. 

Pat Hosmann Jr. , Southern Cross Aircraft [00:06:56] It's a little bit of all of them Alasdair. We do have a formula in which we like buying aircraft with good bones. The stuff that you absolutely cannot change such as later model fabrication, low total time, you can't change total time, no damage history, clean pedigree. That's what we focus on, because anything else... Maintenance can always be done, paint can be done. Interior can be upgraded. Your CMS systems can be updated. You can install Wi-Fi. So we typically look for airplanes with very good bones that maybe are coming up on a major inspection that the seller does not particularly want to deal with or wait for. And we take advantage of that. 

Alasdair Whyte, CJI [00:07:51] And you are you happy to to take an aircraft and make it beautiful? Are you are happy to have it during that time as a fixer-upper and you know, you happy to install the in the Wi-Fi? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:08:05] Absolutely. Yeah, we get. It's kind of our bread and butter and we always try to have two or three of these airplanes in the pipeline at some stage of the process. But we do, how we make a living is try to make airplanes more liquid and how do you make an airplane more liquid is have it ready to go, updated with the latest wifi, perhaps a fresh maintenance inspection just out of the way here sitting in the United States, US registered. And then we always can offer the complete package we can offer to re-export it to other countries as necessary we can operate them we can deliver them we can assist with entry to service so yeah we do we enjoy the process from the beginning to the end 

Alasdair Whyte, CJI [00:09:00] 10, 20 years ago, very few US brokers would be going around Latin America looking for clients. Now, it's getting more competitive now, isn't it? You're seeing companies like Guardian Jet hiring people in Brazil or, you know, Jetaviva and others. 

Pat Hosmann Jr. , Southern Cross Aircraft [00:09:23] For sure, and actually, Guardian's had their good colleagues, I was just on a call with them. This is one of the funny businesses or industries where a lot of times, sometimes you're both colleagues and competitors, often at the same time but on different deals, so you learn to get along with everybody, but the fact that there are other dealers exploring South America is just a sign of a growing market. I mean 10 or 20 years ago people thought of South America as the dumping ground for the older airplanes that came out of the United States your older Learjets your older Citations. Absolutely that's not the case anymore it's uh... Now they want new they want bigger they want long-range large cabin so the fact that there are other people they're palnting their flag is just a sign of a growing market. And there is crtainly room for everybody and a lot of times it helps to collaborate to be able to collaborate with a colleague rather than walking through a new buyer through steps one through sixty four of the process. It's lovely when the new buyer has representation and you can just get along with a colleagues and move the process forward three times as fast. 

Alasdair Whyte, CJI [00:10:52] You have moved into Asia a. Are there any other regions you're looking at now? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:11:02] We see a lot of activity in the Middle East right now. Not necessarily that Southern Cross has a lot of clients there. It's more we source a lot airplanes out of there. But the Middle East, Dubai in particular, is very busy with business aviation. A lot of jets coming in and out and being re-registered. China has slowed down over the past few years, but Southeast Asia is another part of the world right now that seems to be, if not booming, growing very nicely. And then Europe hasn't changed much over the last few years. And the U.S., of course, is 90% of the fleet right there. 

Alasdair Whyte, CJI [00:11:54] What do you say to a seller when they go, "Why don't I just put this on the open market? Why should I sell it to you as inventory? "

Pat Hosmann Jr. , Southern Cross Aircraft [00:12:05] Most do. Most sellers will end up going onto the open market and sourcing a buyer through their own network. What we can offer, and some people like to take advantage, is speed and agility. Typically when we buy airplanes, we do as-is type inspections. We'll send our own crew over, we'll look it over for a few days, and we can very quickly say yes or no. So we offer agility and increased liquidity. A lot of times, for example, if a seller has an upcoming 1C inspection on a Falcon 7X, they know that they're staring at probably four to six months downtime, at least a million dollars, plus all their recurring holding costs for that entire process. 

[00:12:59] So they will often sit down with their in-house accountants and say, okay, what's the cost of owning this for another six months. And what can we expect to gain by keeping it? And a lot of times, especially corporations, they'll do the math and say, look, it makes sense to just divest ourselves of this right now and free up that capital for another project. So we offer, we're a liquidity bridge at times. We're a time saver, headache saver. It's not for everyone, but oftentimes, people say, yes, I like that approach. 

Alasdair Whyte, CJI [00:13:39]  You've been doing it a long time. Do you worry about the market turning? You know, there were horrific stories in 2008 where you had dealers who had lots of inventory just plummeting every day. 

Pat Hosmann Jr. , Southern Cross Aircraft [00:13:53] I know all too well that I cut my teeth in this business in 2007 and 2008 and we were one of the dealers that got quote unquote "stuck" with a few of these airplanes. So yeah, that's always a concern in the back of everyone's head, especially in the back of an inventory and dealer. But by the same token, I think we're in a different world. Than we were back then. Ever since COVID, it seems the tendency is for governments to not let the economy crash as much as it did. There's a lot of tools that they're using. We have, at least in the very short term, until elections come up, I don't see much changing. And then the mood, I mean, the amount of wealth that has been created in this world since COVID. A, you have a vastly increased amount of potential buyers out there. And B, the stereotype of the aircraft owner has changed and it's no longer, I mean airplanes are now seen as a tool and almost as necessary. You get to a certain income level in the United States and it is along with the house in the second home and the second car. It's now, okay, the family office and the airplane. So, culturally we're shifting. The market is growing. May there be a crash coming? Yeah, always potentially, but will it be what we had in 2007? I do not, I do think so. I tend to think that was more of a Black Swan. 

Alasdair Whyte, CJI [00:15:53] I hope you're right. Five years ago, or pre-COVID, if I'd said to you, you know, how quickly can you sell my aircraft? What would you have said? Six weeks, if i'm really lucky, from offer to close. 

Pat Hosmann Jr. , Southern Cross Aircraft [00:16:12] Yeah, we always tend to say that the time to sale is more or less a linear function of the price that one allocates to the airplane. One needs to sell an airplane immediately, there is always a number that will move it immediately, and then if you have a little bit more patience, There's a scale if you have a little bit more patience, you'll ultimately get a little better price for the airplane, but there's always There's always a number. It's just a question of how how liquid do you need it to be at that moment? 

Alasdair Whyte, CJI [00:16:52]  If I've got an offer, someone signed an LOI with me, you know, and they go, Pat, you know. And I'm not selling to you. And I go, I've gotten LOI signed. How quickly are we gonna close this? What would you tell them? What would have you told them 10 years ago? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:17:09] I said this is the biggest problem in our business right now you hit the nail on the head ten And we may be reverting back in the right direction, but when I was a kid, 20 years ago, it used to be pre-buys were much simpler. You go look at the airplane, do systems function checks, maybe do borescopes, test flight and close. Deals would typically be closed within the month. And gradually since 2007, we as an entire industry started migrating more towards a defined pre-buy scope and an expanded pre-buy-scope. And then every side is now hiring their maintenance consultants. And we've gotten into this loop of continuous inspection and re-inspection and almost a never-ending inspection loop where each side is afraid to do anything until they've looked at every little panel. So. Deals now, over the past three, four years in particular, are taking a very long time. We have Challenger 300s that are going on six month pre-buys. We've had several, several instances of eight month pre buys. The inspection gets done, then everyone's waiting on approvals, then they're waiting on parts, then the parts show up and something else gets discovered. And if there's any light To this story, light at the end of the tunnel, I think we're starting gradually to migrate back towards simpler inspections. I think both sides have finally gotten fed up. Nobody benefits when an airplane gets pulled out of service in March and doesn't get returned to service to November for a pre-buy. The owner is paying all his holding costs. The buyer has already prayed for a pre-buy inspection. He can't use the airplane. He just realized he missed the entire summer season of flying. Nobody is benefiting from these six, eight-month inspections. So I think the pendulum may be starting to swing back in the other direction towards a simpler, quicker transaction process. We don't need four weeks to firm up an APA. We don't need six months to inspect an airplane that's perfectly fine and in service. So, hopefully we're trending back to the right direction. 

Alasdair Whyte, CJI [00:19:43] Do you really think that? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:19:46] I'm seeing signs of that yeah and that may be partially because we're more in a seller's market right now but we're seeing a lot of transactions over the past pretty much this whole year where the seller receives an offer and says this is great but you're not going to take my airplane out of service for four months so find a way to either shorten what you want to do to the airplane, bring your crew over to our hangar. Or maybe go buy another airplane but this deal is not for me and we're seeing that more and more so yes I do think we're gonna hopefully move towards simpler transactions I mean I look at Elon Musk when he bought Twitter the whole transaction happened in four weeks I mean this guy bought a $50 billion dollar company in weeks and we are taking months for a $10 million dollar airplane It's becoming a problem in the business, so I think we're going to find the solution. 

Alasdair Whyte, CJI [00:20:58] The other trend we're seeing is for aircraft broker dealers to get bigger and bigger. Some 10 years, 20 years ago, you'd have laughed if you said one day there's gonna be an aircraft broker with more than a hundred people working for it. We're now getting a couple getting close, one over that and a couple of getting close. How big do you want Southern Cross to be? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:21:24] Another great question and we may be the last part of this industry to go through consolidations and mergers. We saw it with the FBO business, we have seen it with MROs, we saw it the operators, we saw with the fractionals, aircraft sales may be one of the last ones to go to some sort of consolidation and growth. I absolutely, I do believe that we're heading that way. There's probably a limit to how large a company can get. But I think the trend is more towards a handful of dealers in the world that can floor plan multiple large cabin assets at the same time. And that's another one of the reasons why I think this market is gradually getting more stable and you're gonna have less extreme highs or extreme lows because at some point an airplane price drops and one of these inventory and dealers is gonna step in and take control of the asset. You may have not had that 10, 15 years ago, but there's a tendency, there's probably half a dozen, maybe a dozen inventory and dealers in the world that do have the fire power to foreplay on airplanes and spot opportunities in a market and add balance to that market. And same with the brokerage firms. But yeah, there's a trend away from the... Pilot broker and it seems to be more consolidation to the established brick and mortar trading houses that have errors in emissions insurance that have a physical presence that can guarantee deals that can take trades. So it may be the last frontier of consolidation in our business. We'll see. That's up in the air. 

Alasdair Whyte, CJI [00:23:31] Are you a buyer or a seller? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:23:36] In what sense? 

Alasdair Whyte, CJI [00:23:37] When the industry consolidates, are you going to buy a brokerage  or is it just purely about price? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:23:47] That's a good question. And it's hard to value an aircraft sales firm. I don't know. It's been done with similar businesses. It's being done with the management companies, for example, that don't have a lot of assets under roof. It's just a client book. So if you look at our business, it's very similar to the management companies that have gone through mergers and growth. So are we a buyer or a seller? We may be both. Maybe a buyer. That's a great question, Alistair, and I can't read the tea leaves just yet on it. 

Alasdair Whyte, CJI [00:24:26] You're more than a client book, though, aren't you? It's not it's not just the, you know, as soon as you get a client, or as soon as someone buys an aircraft, it takes well, a few minutes for everyone else to realize who they are in the industry. And as soon As you've advised them, they start getting calls from every other brokerage going, Oh, you're looking to sell now. It's Not just that it's the value is not the client, I suppose it's The relationship with the client. 

Pat Hosmann Jr. , Southern Cross Aircraft [00:24:55] That's a part of it. You're right. The value and relationship with retail clients, it's a part of, it I would not say it's all of it, the other part of an aircraft brokerage firm is, is in-house know-how. I mean, how to walk a deal from A to Z successfully over and over and over again, consistently, when no two deals in our business are the same. No two deals are the same, but there are enough similarities where we are very comfortable exporting airplanes, importing airplanes, clearing customs, supervising shop visits. Every aspect of the transaction process requires a detailed know-how and how to structure purchase agreements, how to clear liens, how there's multiple areas and having the know how. And the team behind you that can assist with every step of the way is probably just as important as just a book of clients. 

Alasdair Whyte, CJI [00:26:07] Especially for international deals. 

Pat Hosmann Jr. , Southern Cross Aircraft [00:26:10] Especially. 

Alasdair Whyte, CJI [00:26:13] Yeah, you're not worried about importing an aircraft into Brazil from Mexico. 

Pat Hosmann Jr. , Southern Cross Aircraft [00:26:20] Nope, no, and that's that's kind of Again, that's been our specialty for years, but this year we have done a lot of airplanes that don't even touch the United States We purchased an aircraft in Malaysia delivered it to Germany. We've done airplanes from the UK delivered to Mexico and on and on It requires more know-how but that's why Customers seek us out often times they say hey, I have a great airplane in mind I have no idea how to get this airplane from Kazakhstan into service in Colombia Could you give us a hand and that's that's what we do day in and day out 

Alasdair Whyte, CJI [00:27:03] Do you personally get much more excited about inventory deals rather than broking?

Pat Hosmann Jr. , Southern Cross Aircraft [00:27:11] They're both exciting, they're both different. I would say inventory deals can often keep you up at night a little bit more. Problems tend to get magnified and brokerage deals, I do enjoy the clients that we work with. I'm at a point in my life now where if I don't, we don't necessarily need to do that deal, but the The clients that we have and that we work with are typically repeat clients. They're folks that we've developed a relationship with over the years, I consider them friends. So yeah, I do very much enjoy working with clients on brokerage. It poses challenges, it's challenges that need to get resolved, it's a little bit of a puzzle, but it's always, it' fun, it still fun. 

Alasdair Whyte, CJI [00:28:12] You're a family business. There's quite a few people with husband as a surname, working for the Southern Cross aircraft. How'd you get on? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:28:26] Amazing, Alastair. I don't know how, because I've seen a lot of scenarios where there's not the best of relationships with families and companies. You see it a lot with even the public companies. Louis Vuitton comes to example. But in our case, we never have an argument. And on the contrary, it's three brothers. I have two younger brothers. And for every deal that we do, we usually take a vote. We say, hey, do we want to look at this, yes or no? Or do we wanna fund this airplane, yes, or no. And its majority wins. If I say, yeah, I wanna do it, and both of my brothers are in disagreement, then we don't do it. But we never have fights, we never argue. I consider it a blessing. 

Alasdair Whyte, CJI [00:29:22] How often do you disagree on an air club? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:29:28] The, I would say we're analogous to the red light, green light, yellow light, where I'm probably the biggest risk taker in the family, so I would be the green light. I will rarely say no to a deal or opportunity, and the more out of the box, the more exciting. Then you have my brother Paul, who's the youngest, and he's probably the yellow light. He will, uh, he will. Analyze it a little bit more but typically go along and then you have Peter who's the red light. He will bring up all the ways that we could get stung or hurt on the transaction and each company absolutely needs these personalities because if you have somebody that's gun-ho on every single deal, you will get stung multiple times. And if you have someone that says no to everything, you're never gonna do anything. So in a beautiful way, we are perfectly balanced and there's the conservative side and the negative Nancy that keeps us in check. But if it wasn't for that, we would have other problems. So in our case, it works perfectly. 

Alasdair Whyte, CJI [00:30:48] Okay, really personal question. What's the most you've ever lost on an inventory deal? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:30:55] Many millions, many multiples of millions on a single airplane and unfortunately that has happened to us many times. We tend to go for the law of averages where if we do 10 or 15 inventory deals a year, if a few of them don't work out, it's the law averages. Because we just hope that in the long term. We did better than worse. 

Alasdair Whyte, CJI [00:31:26] What hurts more? Is it the millions of dollars gone from the company? Or is it Peter going? I did tell you not to go for that one. The latter 

Pat Hosmann Jr. , Southern Cross Aircraft [00:31:39] A hundred percent, the ego pain may be worse. Every one of these requires a tremendous amount of time in addition to capital. Mental energy, time, but it's a part of the business and if you can't handle it, there's other things to do other than buy and sell airplanes. That that probably allow one to sleep better at night 

Alasdair Whyte, CJI [00:32:14] Is it much more stressful when you're, you know, you've got an inventory aircraft, and it's you know it's causing you nightmares? Or is it just as stressful when your, you know, your brokering between a buyer and the seller and you've got problems? You know, the headaches worse when it's inventory? Or Is it better because you can go, look, at least I'm a rational seller in this case. 

Pat Hosmann Jr. , Southern Cross Aircraft [00:32:36] I'd say the headaches are different. The benefit of an inventory deal is that you typically, well you will always control one side of the equation, right? You have the asset, you're the seller. Or on the opposite end, you are the buyer of the asset. So you're only dealing with one party. We're dealing with the buyer, the seller, it simplifies the transaction because you're going back and forth between multiple parties. What may keep one up at night or give a headache is unexpected surprises. You know, we were flying an airplane back from Europe. We crack a windshield on the way and we're stuck in Greenland for a week, trying to replace a windshield out in the negative 20 degree weather. Those unexpected surprises, that can tend to give a head ache. But the brokerage world... Has its separate headaches that the peace of mind broker in airplanes is that there's not much risk from a dealer perspective you're simply facilitated one part of the process for the parties so the risk is minimal but there's more headache you're dealing with two different parties all the time the buyer has a message we need to buyer. And a lot of times the commercial aviation world is at least it's not emotional, it's numbers and spreadsheets and everybody can look at deals with a cool head. Business aviation tends to be a lot more emotional and subjective and one guy's interpretation of an interior job is drastically different from another guy's. And then there's egos and every seller feels that he has the best airplane in the world and every buyer feels like he's getting ripped off. So you're managing egos a lot. You're juggling multiple parties. You're playing messenger. I feel like I end up playing psychologist, psychiatrist a lot of the times. I need to talk clients off the edge over and over and over. So headaches, yes, but also good problems to solve. 

Alasdair Whyte, CJI [00:35:00] I think you've done deals in 70 countries. Is that right? More than 70. 72, according to your website, which is probably out of date. If I'm in a country where you haven't done a deal, like say Botswana, will you do it for free just to tick off another one? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:35:22] Good question, probably not, probably probably not but I tell you what it would probably excite us just to give another element to the transaction. 

Alasdair Whyte, CJI [00:35:41] You must have done every South American country that you're allowed to. So I'm guessing you haven't done Cuba or, you know, but you must have done every South American country. 

Pat Hosmann Jr. , Southern Cross Aircraft [00:35:50] I think so. We have not done Cuba and Suriname and French Guyana. We have done to my recollection, but the rest, yeah, for sure. 

Alasdair Whyte, CJI [00:36:07] When a lot of people look at cultures, they assume that, you know, the French are very different to the English, the Germans are very difference to the Americans. Do you agree with that? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:36:19] I agree that the general stereotypes often come out in transactions, absolutely. Not all the time. There's always your deviations, but ... We can be pretty certain that if we're buying or selling or dealing with a German party or a Swiss party, they're going to be very serious. They're going have minimal deviations from the purchase agreement. When a deal reaches a stumbling block, they are going to say, well, we're going follow exactly what was agreed to. Whereas, South Americans, for example, or Spaniards... They live with uncertainty in their business lives, their personal lives. They can adapt a little bit quicker to transactions. On the flip side, everybody has the stereotype about a Mexican buyer being slow. And I will say 80% of the Mexican buyers live up to the reputation that they perform, but at their own pace. We're going through a case right now, actually, with a British seller and a Mexican And I said Guys from day one I told you they're going to be a little bit slower than what you're expected to. So they don't always play out, but we do see parties meeting the stereotypes and it's just something else to prepare for in advance. 

Alasdair Whyte, CJI [00:37:51] You don't want to give the secrets away, but are there any markets you're particularly excited about? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:37:58] Um, Africa is showing a lot of growth right now. India always has, there's a lot paperwork. That's another stereotype that we do see play out. India is, they do perform after you fill out about 800 forms. So 

Alasdair Whyte, CJI [00:38:19] And that's just to get to see the aircraft at the airport. 

Pat Hosmann Jr. , Southern Cross Aircraft [00:38:22] Oh yeah, yeah, that's just the beginning. I do, Alistair, I will say it. I look forward to seeing what happens when, I don't say if, I say when, because at some point it will happen if Russian sanctions get lifted, because that is a market that has been neglected for half a decade now, and at some point that is going to change. That's one part of the world right now that can... Cannot technically participate in the world market. 

Alasdair Whyte, CJI [00:38:57] Although I don't think the Russian market stopped buying aircraft particularly, I think there's a lot going in from neighboring countries in the Middle East. 

Pat Hosmann Jr. , Southern Cross Aircraft [00:39:08] You're 100% correct, there's always a way and there's always a gray area and there is always an avenue, so you're 100 percent correct and we have been able to bring airplanes out of Russia. We as an American party don't have so much luck being able to sell them into Russia but you are absolutely correct there. 

Alasdair Whyte, CJI [00:39:37] You have a network, don't you? So when someone comes to you going, I've got the perfect inventory deal, you tend to have a know someone who knows them, don't you? Is that how it works? It's rare for someone you've never met to call you? Or is it? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:39:51] Very rare, yes. I think this business, everyone in business aviation, there's probably maybe three degrees of separation. If I don't know the guy, I know somebody who knows somebody. So 100%, this business is very small. All you have is your name and your reputation. And even on the broker's side, if a client calls us and says, hey, I want a Falcon 2000LX. I may not be a Falcon 2,000LX specialist, but I can make six phone calls. And with those six phone call, I will have touched probably every single 2,00LX, either on the market or off the market. But I will know who is a specialist. So yeah, this business, it's all personal relationships. And that's a blessing because I don't see AI replacing us for some time. 

Alasdair Whyte, CJI [00:40:57] I should have asked this. When it comes to inventory deal, how often are you competing with another inventory buyer? It's not usually an auction, is it? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:41:07] It it it's not usually an auction we have participate in a few of those auctions but uh I feel like by the time an airplane gets to an auction, it's no longer the opportunity that we as a company are seeking. And how often do we stumble into colleagues? It does happen. It does happened for sure. But we try to find scenarios where maybe we're the first to the table or we're the easiest solution to the tables. A lot of times, speed and agility helps. Helps turn the table on our side. 

Alasdair Whyte, CJI [00:41:53] Right pat you travel how many nights a year are you away from home roughly or in a month?

Pat Hosmann Jr. , Southern Cross Aircraft [00:42:00] Too many. I think it's at least a hundred nights a year, probably more that I'm out of the home. You might always have the record for that actually. There's a few maintenance directors that probably have us beat, but we're known for spending a lot of time on the road and nothing beats a face-to-face, especially doing international deals. I mean, Zooms are helpful, Teams meetings are helpful but face- to-face and having a meal with somebody, I found that nothing can beat that. 

Alasdair Whyte, CJI [00:42:45] Yep, and it's having a meal. It's not sitting pitching five aircraft slides a pitch but 

Pat Hosmann Jr. , Southern Cross Aircraft [00:42:53] It could be either one, and then you go back to the almost the stereotypes, because if it's a South American or an Asian, it's going to be done over a meal. It's absolutely not going to done through a slideshow or a PowerPoint discussion. That has never happened to me, never. But... You know, if you're in Europe or even with a large corporation in the U.S., that fits the other stereotype where they say, yeah, come into the office at 10 a.m. And we'll sit down and go over your data. So it depends where in the world you are. I tend to adapt to where I am and who I'm dealing with. 

Alasdair Whyte, CJI [00:43:42] Do you have any travel tips or how do you just live with Jack Lagan work as if you're in the office? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:43:50] Yeah. Yeah in fact I stopped I used to have an away out of office message on my email but that would just lead to more questions rather than helping out that would lead to where are you what time is it how's it going over there so I just got rid of that and we just work normal hours but yeah travel tip pack light be prepared for the unexpected and marry a very accommodating wife. 

Alasdair Whyte, CJI [00:44:24] The last tip, the last one of those is good for anything, any advice on anything, not just travel. How do you relax? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:44:36] How do I relax? When I'm on the road I do a lot of I end up doing a lot a hotel gym workouts I go for runs When I met home, it's a lot. I just recently picked up on tennis or a lot tennis Hiking going to the mountains going to be Anything that could be outdoors and not in front of a computer 

Alasdair Whyte, CJI [00:45:05] So you've gone back to tennis. 

Pat Hosmann Jr. , Southern Cross Aircraft [00:45:08] Um, I just started tennis actually at about two years ago. I, I got injured a few times doing CrossFit and then as I was getting older, I said, I need, I needed to try something different. So I just got into that. 

Alasdair Whyte, CJI [00:45:24] You should have gone for pickleball. That's much better as you're getting older. 

Pat Hosmann Jr. , Southern Cross Aircraft [00:45:27] Well Alastair, that I will do when I hit 70. We still got some time.

Alasdair Whyte, CJI [00:45:32] We've got a pickleball tournament at CGI Miami this year, you don't want to miss that. 

Pat Hosmann Jr. , Southern Cross Aircraft [00:45:37] I do not. No. I will be there and I may bring on one of my brothers as a teammate. We look forward to that. 

Alasdair Whyte, CJI [00:45:50] I'm just gonna go back to the start. You went, I want to you decided to go not work on the aircraft part side, the probably much more profitable, much more reliable business. You wanted to go into aircraft sales because of the guys wearing suits showing aircraft. But for those who can't see you at the moment, you're not wearing a suit. 

Pat Hosmann Jr. , Southern Cross Aircraft [00:46:12] Heh, absolutely not. 

Alasdair Whyte, CJI [00:46:16] When did you? How often do you wear a suit? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:46:20] Ah Well, since COVID, I don't think I have ever worn a suit. I was not big on it beforehand. And you're very observant because yes, I am the exact opposite of the suit. And maybe there's been a shift in the world post-COVID, but absolutely you will not catch me in a suit ever, not even at CJI. I will, maybe a jacket, maybe. But yeah, I probably don't fit the stereotypical broker. But then again, our world is changing. And we meet clients. We meet them either out on their boat or at the racetrack or at a beach. And they show up in flip flops and jeans. And they're usually my client, my age range. I don't know. Maybe I changed the head of the world, but no, you will not find this in suits. No, sir. 

Alasdair Whyte, CJI [00:47:27] Do you think dealers, this is a news theory, hadn't planned this one, do you think dealers on the whole are less showy than brokers? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:47:37] Huh I don't know that I could answer that question. Without offending someone. Yeah, without potentially offending. The business needs both. Dealers play a certain function in this business, they perhaps bring back a little bit of stability, they help facilitate deals. But without brokers. We would be hard pressed to sell what we end up acquiring, so it needs both and somebody that can wear both hats and say, I know what it's like to be a dealer, I know what is like to the broker, that may be a little bit of an advantage. 

Alasdair Whyte, CJI [00:48:27] What advice would you give to someone buying their first aircraft? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:48:31] Hire a broker. You're going to do it sooner or later especially on international deals but we get to this day countless calls from somebody that says hey I was given your number, I just bought this hawker in California, I want to bring it to Miami and put it on a 135 certificate, I need help finding crew and they're completely stuck. They don't even have a way to get the airplane from California to Florida. So we ended up quoting and charging them the same as if they would have hired a broker to buy the airplane. Only difference is they paid more than they should have for the airplane, so hire professional help from the beginning. Hire a good attorney, hire a broker, and hire a management company. 

Alasdair Whyte, CJI [00:49:26] How quickly do you know if you're going to work with a customer, not be picked, but culturally the two of you are going to get out? 

Pat Hosmann Jr. , Southern Cross Aircraft [00:49:38] 95% of the time is the first meeting or the first phone call. And that comes with a little bit of experience in the business. If you get 10 or 15 calls a day, you need to be able to pick and choose which transaction has the best chance for success and that often depends on who's involved. But yeah, usually by the first meeting we know if we're going to be a good fit for other or not. 

Alasdair Whyte, CJI [00:50:14] Pat Haslund, junior of Southern Cross Aircraft, or Southern Cross Aviation. Thanks so much for joining us. 

Pat Hosmann Jr. , Southern Cross Aircraft [00:50:25] Alistair, it's been a huge pleasure and I look forward to seeing you at the next CJI. 

Alasdair Whyte, CJI [00:50:32] Look forward to it. Thanks so much.