There is good news and bad news when it comes to financing for pre-owned business aircraft. The good news is that financing is available for aircraft buyers; the bad news is that banks are primarily lending only to those with exceptionally good credit who are buying an aircraft that is less than 20, and even in some cases less than 10, years old, according to a panel of aircraft financiers at the recent NBAA Aircraft Registration, Finance and Legal Conference in St. Petersburg, Fla.
The private aircraft financing market in China has matured over the past several years with many sources of funding available for those wishing to purchase airplanes according to the experts here at ABACE. “I don’t think there is any lack of financing alternatives available,” said Jeffrey Lowe, general manager of aircraft ownership consultancy Asian Sky Group. “Pretty much all the international lenders are here and all the Chinese lender banks are involved in business aviation as well. A lot of them have set up leasing arms, so they are all diving in head first.”
Chicago-based Jet Support Services (JSSI) hosted its first private Management and Maintenance Business Aircraft Conference in China last month, with more than 60 in attendance. The invitation-only, three-day event involved industry professionals from aircraft management companies and aircraft leasing and finance businesses, as well as aircraft owners’ representatives. JSSI presented an analysis of how programs are structured to control maintenance costs and quality as well as enhance aircraft value.
Airlines will continue to enjoy ready access to financing for new aircraft acquisitions, as funding sources such as bonds grow in importance as options for financial support, according to Boeing’s seventh annual aircraft finance market forecast. The report, released in London on December 10, said that while export credit agency funding will decline in significance in the coming years, the industry will see a more even balance among carriers’ use of bonds, leases and loans from banks and capital markets.
Students of human psychology need look no further than the fable of the tortoise and the hare to understand the situation today in the region’s leasing sector. In the waning years of the boom, a number of new entrants made valiant plays, but some appear to have had to pause to reconsider. Despite the aviation boom in the Middle East, few new major regional entrants into this esoteric business have come into existence and, of those that have, the 2008 bust clearly had a major negative impact.
Airlines are benefitting from growing capital market support for new aircraft financing, with this source of funding expected to account for as much as 15 percent of all transactions this year, according to Boeing Capital. A few years ago, capital markets accounted for barely 2 to 3 percent of aircraft financing.
Given the depressed values of most pre-owned aircraft over the past several years, along with the sheer volume of aircraft available, buyers in the market might have a tough time searching out the best bargains among the many offerings. Virginia-based Asset Insight now promises to make that task simpler as it unveils a new tool.
A legal case that could hold serious ramifications for the aircraft financing and leasing industry met its end with a blow against the lenders when the U.S. Supreme Court refused to hear an appeal.
With financing for business aircraft still far from easy to secure, ExecuJet Aviation has stepped up its efforts to help get more people airborne through its SimplyFly Finance program. The plan is to offer fast-access, simplified nonrecourse financing in the shape of five-year loans or leases for up to 70 percent of the value of an aircraft worth at least $20 million and no more than five years old. An initial fund of $400 million provided by ExecuJet’s main shareholder Dermot Desmond is available to support the program.
Attendees at the National Aircraft Financing Association annual meeting late last week in Savannah, Ga., largely agreed that aircraft financing is “thawing,” but new international banking rules that will start to be phased in next year might make things worse.
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