aircraft acquisition

  • Tracey Cheek posted an article
    LBC Capital Joins National Aircraft Finance Association see more

    FOR IMMEDIATE RELEASE

    FORT LAUDERDALE, Fla. - March 1st, 2019 - National Aircraft Finance Association (NAFA) is pleased to announce that LBC Capital, Inc., a subsidiary of Laurentian Bank of Canada, has recently joined its professional network of aviation lenders. "NAFA members proudly finance - support or enable the financing of - general and business aviation aircraft throughout the world, and we're happy to add LBC Capital to our association," said Ford von Weise, President of NAFA.

    LBC Capital's Aviation Finance team aims to facilitate business productivity by providing capital for the acquisition, sale and refinancing of corporate aircrafts including turbojets, turboprops and helicopters. The group serves corporations, high net worth individuals and aircraft operators within the general aviation market across Canada and the United States. They partner with manufacturers, brokers, aircraft owners, and various industry players by providing creative financing solutions.

    "LBC Capital is delighted to join NAFA as we expand our aviation financing offering not only to Canadian business aircraft and helicopter buyers but now also to the US market," said Eric Provost, President of LBC Capital.

    Much like NAFA, LBC Capital fosters a network of highly talented and dedicated professionals in the finance and aviation industries. LBC Capital and NAFA are committted to providing the highest level of service through their many partnerships, promotion of education and support of local communities.

    About Laurentian Bank Financial Group

    Founded in 1846, Laurentian Bank Financial Group is a diversified financial services provider whose mission is to help its customers improve their financial health. The Laurentian Bank of Canada and its entities are collectively referred to as Laurentian Bank Financial Group (the "Group" or the "Bank"). With more than 3500 employees guided by the values of proximity, simplicity and honesty, the Group provides a broad range of advice-based solutions and services to its retail, business and institutional customers. With pan-Canadian activities and a presence in the U.S., the Group is an important player in numerous market segments.

    The Group has $CAD 45 billion in balance sheet assets and $CAD 29 billion in assets under administration.

    About NAFA:

    The National Aircraft Finance Association (NAFA) is a non-profit corporation dedicated to promoting the general welfare of individuals and organizations providing aircraft financing and loans secured by aircraft; to improving the industry's service to the public; and to providing our members with a forum for education and the sharing of information and knowldge to encourage the financing, leasing and insuring of general aviation aircraft. For more information about NAFA, visit www.NAFA.aero.

  • Tracey Cheek posted an article
    Scaling the Heights see more

    NAFA member, Brian Proctor, President and CEO of Mente Group, reflects on a record 2018.  

    Q: It seems that 2018 is turning out to be a year when a lot of aircraft get bought and sold, how has it been for you and Mente Group? 

    BP: We are having a record year, both as far as buying and selling aircraft are concerned. We are already up on the whole year 2017, and we still have the fourth quarter in front of us. At this rate, and with the transactions already in the pipeline for the fourth quarter, I would expect 2018 to be around 40 percent better than last year, for us.  

    At the same time, our appraisals business is up around 200 percent on last year. We started this business two years ago and it is growing rapidly. That is a good sign because it means that the banks and finance companies are seeing a lot of demand from people who want to finance aircraft transactions. 

    Q: Is it mostly the banks and insurance companies that you are doing appraisal work for? And is that mostly for pre-owned?

    BP: It is the banks and leasing houses that are keeping us busy. We do a lot of new aircraft appraisals as well. You have to remember that every negotiation with an OEM over a new aircraft purchase is different, and every aircraft is optioned differently. So, lenders want to make sure that what they are financing has the value that they have been led to believe it has. 

    Much of what we do is document driven rather than going out on site and actually examining the aircraft. The banks use our appraisal to work out the loan-to-value structure for the deal that they feel comfortable with.

    We started the appraisal business around two years ago and we have made significant investments in the business since then. We have added another experienced aircraft appraiser to the team, plus a data scientist who manages our online database. We have put a lot of money into this and it allows people to go online and manage their portfolio of aircraft. Last year our database quoted 700 aircraft transaction datapoints and it is up almost as much again so far this year. 

    Q: What are you using to drive data in this database?

    BP: We have a number of sources for the data, but most of it is driven organically by our own researchers and sales folk, plus the business development people. We qualify the database by the quality of the data source and we prioritize our own data, and that of our contacts, since we know this data is going to be good. 

    Q: How important to you is the appraisal business?

    BP: It has been very good for us and we are working at extending the reputation and reach of our appraisal service in the market. What is really good for us is that it touches a different clientele and is also more stable in terms of cash flow, so it is a very useful additional revenue stream for us. 

    Q: How much do you think Trump’s 100 percent expensing of new and pre-owned aircraft is driving the current deal flow?

    BP: It has been very significant. Remembering back, the Bill was signed off on the 18th of December 2017 and by the end of the year, or inside of two weeks, we had two clients come forward and buy aircraft. Moreover, those transactions were not even on our radar on December 18th. So that shows the kind of catalyst the Bill was for deals. 

    Right now, we have a number of clients working to get closure on deals before the end of calendar year 2018 so that they can claim the 100 percent depreciation against the current year’s profits. It is a huge incentive.

    However, we have two headwinds in the market right now. The first is that it has become increasingly more difficult to find good quality aircraft. The second is that when you do get them it is getting very hard to get them into an MRO to get pre-appraisal delivery work done on the aircraft. The MROs are all struggling with maximum capacity. Where it used to be possible to phone them up and get a plane booked within a week, now you are lucky if they can fit the job in next month or the month after. 

    Q: Playing Devil’s advocate for a moment, do you worry that sales are perhaps bunching up and you could be looking at a long at spell a bit further down the track as far as transactions are concerned?

    BP: What I say is bring on the sales. I never worry about sales bunching up. But there is certainly price pressure out there now. I have seen several clients who were looking for pre-owned aircraft, shift to considering new aircraft because the price differential between the two is no longer as attractive as it was.

    Clearly, it is becoming a very good time to be a seller, though finding a good replacement aircraft when their existing aircraft goes away, is likely to be a problem. We are not back yet to the crazy days of 2007, but I would liken the current period to what we saw in, say, 2004 or 2005. 

    Q: What are you seeing with respect to the slimming down of pre-owned inventory?

    BP: We have done six G550 transactions in the last two months. When we started the search for suitable G550s for a particular client back in February this year, there were about 30 of them on the market. We began to whittle the choices down and the numbers kept shrinking as we were evaluating them. We ended up with just three aircraft that we could show the 
    client. The point is that you cannot even say that there is, say, 3.2% of the fleet of a particular model available in the pre-owned market. If you have a discerning client  with  reasonable  constraints  on  what  they  are looking for, you could end up with just two or three aircraft to pick from, even if there was 10 percent of the fleet available. 

    Q: An impossible question, admittedly, but how long do you think the present upturn can last for?

    BP: North America is booming, and we are starting to see a lot more interest in aircraft acquisitions out of Western and Eastern Europe and Africa. The Middle East is still quiet and has yet to turn up. So, I would say there is at least a year of strong demand out there that has yet to make its way to the market. 

    Another point is that if you see the US dollar turning down, that will really stimulate demand for aircraft from Europe and Asia, since it will be tantamount to a big price discount on US manufactured aircraft.

    This article was originally published in Business Aviation Magazine, August 2018, p. 26. 

  • Tracey Cheek posted an article
    Top Considerations When Purchasing a New Aircraft see more

    NAFA member, Essex Aviation, shares top considerations when purchasing a new aircraft.

    Private aviation offers several benefits, including comfort and convenience. If you or your client is considering private aviation for business or personal use, there are several considerations to take into account as you evaluate your options.

    Advice for buyers when purchasing a new aircraft

    Follow the 80/20 rule

    When shopping for an aircraft it can be tempting to “over buy.” To avoid purchasing an aircraft that delivers more than you need, consider how you will be using the aircraft, a majority of the time. Will it just be you and perhaps a business partner traveling to meetings a couple states away? Or will you be traveling internationally with your entire family monthly? The aircraft you choose should meet your mission requirements roughly 80 percent of the time. So, if you will only be traveling internationally once in a while but will be using your aircraft primarily for short business trips, consider purchasing an aircraft that best supports the business trips and consider utilizing charter or purchasing a fractional share to meet your international travel needs.

    Weigh your options: New vs. Pre-Owned

    Spend some time determining whether a new or pre-owned aircraft is the right option for you. Depending on your needs, a pre-owned aircraft may be a more affordable choice and will offer you the option of doing various types of refurbishments, upgrades or customization to the aircraft to meet your needs.  A new aircraft can be fully designed but the lead time for delivery will be anywhere from 12 – 18 months or longer.

    Bring an unbiased aviation advisor on demo flights

    Before deciding on an aircraft, often you can do demo flights on different planes to assist with your evaluation of the various options. It can be extremely beneficial to bring a professional and unbiased aviation advisor along with you on the flight to assist with your review of the aircraft and the various options each aircraft type provides.  Each demo flight will provide an opportunity for you and your aviation advisor to work together to determine which aircraft type best meets your needs and requirements.

    Decide what’s important to you — speed / range / cabin size?

    While every aircraft owner would like to say I want it all, the reality is that most aircraft can meet many, but perhaps not every desire of the purchaser. Your aviation advisor can assist you with the evaluation of how each aircraft model can meet your defined requirements.  An aviation advisor can also assist you with navigating all of the available information so that you can truly understand each option, including the pros and cons of each and ultimately make as informed a decision as possible.

    If you’re financing, start the process early

    Since a loan or lease for an aircraft purchase is an involved process, the financial institution you choose to work with will need time to perform their due diligence. So, if you are going to compare rates and request proposals from multiple lenders it’s important to leave yourself time. The initial review and due diligence process to receive a formal proposal typically takes about a month and sometimes longer.

    Determine how you will be using the aircraft

    If you are primarily using your aircraft for business purposes you may be able to benefit from certain tax benefits.  Your aviation advisor can recommend an aviation specific legal and/or tax advisor to work with your internal advisors on properly structuring your aircraft ownership and utilization to maximize the use of any tax benefits.

     

    The new aircraft acquisition process

    The process of acquiring a new aircraft typically includes:

    The initial evaluation and aircraft identification

    There are many choices when it comes to purchasing a newly produced aircraft — starting with the decision to purchase an aircraft that allows you to choose the floorplan and all the specifications and materials or a “white-tail” aircraft, which has already been produced and gives you very limited opportunities to make changes. Your aviation advisor can work with you to evaluate different aircraft options based on your specific needs and desires.

    The design phase

    Once you have identified an aircraft for purchase you enter the layout and design phase.  Your aviation advisor can assist you throughout the series of specification meetings to assist with any questions.

    The production phase

    With a final and approved design in place the aircraft production process is launched. The production process for a new aircraft can take up to a year or longer depending on several variables.  Your aviation advisor can provide regular on-site representation to review and monitor the on-going production process.

    Final delivery and acceptance

    When your aircraft is ready for final delivery your aviation advisor along with the owner’s existing flight crew will work through the formal delivery and acceptance process with the manufacturer.  Once the aircraft has been accepted the final delivery and transfer of title will be completed.

    The aircraft acquisition process can get complicated and has several parties involved. Retaining an unbiased aviation advisor to represent you and manage the complete process will provide you with both value and comfort throughout the acquisition process.

    If you would like to speak with an experienced aviation advisor who can provide unbiased advice and help you through the aircraft acquisition process, contact Essex Aviation.

    Essex Aviation Group, Inc. was founded in 2013 with the primary goal of providing clients with the most current industry knowledge and experience, a vital component in evaluating business and private aviation transportation needs.

    Representing clients in a wide range of services, Essex builds client relationships through dedication to trust, integrity and a level of responsiveness not found anywhere else. Services include new or pre-owned aircraft acquisitions, new aircraft completion management, pre-owned aircraft refurbishment and upgrade management, block and ad hoc charter services, and much more.

    This article was originally published on Essex Aviation's blog.