LBC Capital Joins National Aircraft Finance Association see more
FOR IMMEDIATE RELEASE
EDGEWATER, Md. - 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.
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.
Shift to Sellers Market Expected as Business Aircraft Demand and Ask Prices Increasing see more
NAFA member, Asset Insight, releases third quarter 2018 market report.
October 31, 2018 – According to Asset Insight’s quarterly Market Report (AI2 Market Report), the third quarter of 2018 saw strong demand for younger models of for-sale aircraft, contribute to the increased value for that group of inventory. Conversely, older models spend considerably more time on the market and is impacting the average pricing data.
The 3Q 2018 AI2 Market Report analyzes values for every production year of every modern make and model Business Class aircraft, while the Report’s maintenance analytics cover 93 fixed-wing models and 1,553 aircraft listed for sale.
Other trends detailed in the 3Q 2018 Market Report include:
Younger jet aircraft demand, and low availability, is raising their values; older models continue to linger and negatively impact average pricing figures;
Ask versus final Transaction Value gap narrowed substantively during 3Q;
Demand strong for younger models; overall down slightly due to Small Jets;
For sale fleet attains "Excellent" Asset Quality Rating posts a 12-month best;
Excellent Asset Quality improves inventory fleet's Maintenance Exposure;
Maintenance Exposure to Ask Price Ratio ("ETP Ratio") continues to hinder sales of older aircraft.
“With a low number of young aircraft for sale on the market, and a very high demand for those limited aircraft, the value for those excellent quality aircraft increased in Q3” said Tony Kioussis, president of Asset Insight, LLC. “The seller's market in the recent model aircraft category does not translate to older for-sale inventory, however. In fact, we saw older, aircraft with higher Maintenance Exposure to Ask Price ratios spend 58% longer on the market than their younger counterparts. We forecast that average prices for lower-time aircraft will continue to increase over the next 90-days, and the price of higher-time units will continue to decline, albeit more slowly, through the end of 2018.”
Note to editors, managers and owners: Please see the bottom right corner of each category page for a concise summary of the results and conditions in that specific market segment.
Exclusively available from Asset Insight, the AI2 Market Report includes eTrendTM, a 90-day forecast for aircraft value by make and model. This tool is especially helpful to sellers who are evaluating offers on their aircraft while concurrently considering if their prospects are likely to improve.
Statistically, Asset Insight's eTrendTM forecasts are based on some of the most robust data analytics in the industry and have been thoroughly back-tested to confirm a significant degree of accuracy.
This press release was originally published Asset Insight on October 31, 2018.
What You Should Know Before Purchasing a New Aircraft see more
NAFA member, Essex Aviation Group shares what you should know before purchasing a new aircraft.
Whether it’s for business or personal use, there are many benefits to private aviation. However, there are several factors to take into consideration as you evaluate your options.
New vs. pre-owned
There are benefits to purchasing both a new or pre-owned aircraft. A pre-owned aircraft can be more affordable while offering you the option of refurbishing, upgrading or customizing certain parts to fit your needs. If you’re acquiring a new aircraft, it can also be fully customized but the delivery could take anywhere from 12 to 18 months longer than if you purchased a pre-owned aircraft.
Start the financing process early
If you choose to finance your aircraft, beginning the process early will leave yourself enough time to compare rates and request proposals from potential lenders. It’s important to understand that getting a loan or lease for an aircraft is a complex process, so researching your financing options sooner rather than later is advised.
How will you be using the aircraft?
Are you going to be using the aircraft for business or pleasure? If it’s for business, you may be able to receive certain tax benefits. An aviation advisor will be able to recommend a legal or tax advisor who can work with you to maximize any possible benefits.
Determine which features are important to you
It’s easy to say, “I want it all” but this isn’t always feasible. Most aircraft can meet many needs and desires of the purchaser but some may not be able to meet all of your necessities. An aviation advisor can help you evaluate your aircraft model options and assist you in finding one that meets your requirements. They will also be available to help you navigate all of the available information so that you can fully understand the pros and cons of each option.
The 80/20 rule
Overbuying can be tempting when shopping for an aircraft. It’s important to consider exactly how you will be using the aircraft to avoid purchasing one that includes more than you need. Will you only be traveling for meetings a few states away? Or will you need the aircraft for international, monthly trips? Your aircraft should meet your requirements 80 percent of the time. If you will only be traveling overseas occasionally but will have monthly business trips, an aircraft for business trips will be most ideal.
Bring your aviation advisor on demo flights
There are often many opportunities for demo flights on different types of aircraft to help you make a purchase decision. Bringing your aviation advisor along for the flight can help you make a decision, as long as they are professional and unbiased.
The process of acquiring a new aircraft
When purchasing a new aircraft, the process typically involves:
The initial evaluation
When purchasing a new aircraft, you’ll have many decisions to make. These can include selecting the floorplan and any specifications or materials that are also needed. You can also choose a “white-tale” aircraft, which is one that has already been produced but gives you very limited opportunities to change things.
When you’ve selected an aircraft for purchase, you will enter the layout and design phase. An aviation advisor can help you through the series of specification meetings.
Aircraft production begins once there is a final and approved design in place. Production can take up to a year or longer, depending on several variables.
Once the aircraft is ready for final delivery, your aviation advisor and the existing flight crew will work through a formal delivery and acceptance process.
Acquiring an aircraft can become complicated since there are several parties involved. Working with an unbiased aviation advisor will offer value and comfort throughout the process, and will help you find the aircraft that’s right for you.
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 by Essex Aviation Group.
Who pays for what? Splitting aircraft sales costs is about fairness. see more
NAFA board member and President of AOPA Aviation Finance Company, Adam Meredith writes about how to fairly split the costs of buying an aircraft.
You finally found it—that first turboprop. The aircraft looks good, but there are inspections, demonstration flights, and paperwork prior to any sale. Who pays for what as the purchase proceeds? The answer is all about fairness.
Know in advance
Have a consensus gathering meeting with the seller before the pre-buy inspection about how you are going to handle any problems found with the aircraft. What will happen if there are so many squawks that you no longer want to continue with the purchase? When you agree, put that information in the purchase-and-sale agreement. It’s much better than getting halfway through the purchase and discovering problems without a plan for addressing them.
If the pre-purchase inspection is also an annual inspection, include that in the purchase-and-sale agreement, adding who is responsible for the costs in the event the sale falls through.
Who pays what?
Obviously, the buyer pays for a pre-purchase inspection. Any airworthiness directives that need to be complied with are almost always the responsibility of the seller. Nice-to-have items that don’t affect the aircraft’s airworthiness—especially those that are expensive—usually end up getting negotiated. However, if there’s a service bulletin item, those too are generally the seller’s responsibility. In general, if something needs to be done, the seller pays. If it would be nice to repair or replace something, the buyer pays.
Here’s an example. Maybe the emergency quick-donning oxygen masks for the pilot and copilot could use an upgrade, the old ones work but are looking a bit tattered. The buyer may pay for that. But if the aircraft is approaching a limit for a landing gear overhaul, the seller will likely reduce the price to reflect the future cost. Alternatively, the buyer could just request the landing gear be overhauled as part of the inspection. In the end, negotiations tend to ebb and flow based on not only the personalities of the buyer and seller but also the supply and demand of the particular make and model aircraft.
Title and escrow costs
Not everyone recognizes the benefits to both the seller and buyer of closing a transaction with a title and escrow company. Both parties have a vested interest in making sure the documents are properly filed and thus should split that cost. Here’s a scenario that should give pause to the value from a seller’s perspective: Your buyer flies off on a “pink slip,” nothing is filed with the FAA and there’s an incident with the aircraft. Who do you think the attorneys are going to come after? Whoever has the deepest pockets! Even if it’s meritless, you may have to defend yourself and it’s going to come out of your pocket.
If the buyer is going to the seller’s location for a demonstration flight, generally the seller won’t charge the buyer for the fuel, but may limit the flight time. However, if the buyer is requesting to meet the seller away from the aircraft’s home airport, the buyer should expect to pay fuel costs. If the buyer wants to use his or her own shop for the pre-purchase inspection, same thing, the buyer should expect to pay for the fuel to get it there, and to get it home if the buyer declines the purchase. These are a few of the issues facing buyer and seller expenses, but the answer in all cases comes from asking, “Does it seem fair?”
NAFA member David Mayer gives tips on buying a jet outside the US. see more
NAFA member David Mayer gives tips on buying a jet outside the US.
The recent buyer’s market for preowned business aircraft has become a seller’s market. U.S. buyers recognize this phenomenal change and, consequently, search the globe to buy the right preowned aircraft among an estimated 900 saleable units left for purchase.
New aircraft sales aside, there are several points to consider when buying an aircraft outside the U.S. primarily for return and registration of the aircraft in the U.S.:
- Select the right aircraft with the support of experienced broker-advisors.
Not long ago, a client traded aircraft twice in a year; and, while the third time was the charm in that case, today’s global market might not offer such choices. To improve the chances initially to make the right purchase, a buyer should hire a quality aircraft broker or independent consultant with global market experience. This professional can support a buyer in all aspects of the purchase process and guide negotiations with sellers, including sellers emboldened by a strong market in their favor.
- Inspect the aircraft thoroughly using well-qualified, technical experts.
These experts should develop a list of delivery conditions and oversee repairs needed to fulfill them. U.S.registrants should focus on obtaining a U.S. Standard Airworthiness Certificate (SAC). A private aircraft inspector authorized by the FAA—called a Designated Airworthiness Representative (DAR)—determines whether to issue the SAC. This approval is an indispensable precondition to U.S. registration.
Sellers typically pay for airworthiness repairs found in pre-buy inspections as determined by the inspection facility. The DAR and the inspection facility should confer and reach the same conclusion as to repairs needed to issue the SAC. In the seller’s market, sellers might insist on a narrow definition of “airworthiness” repairs as those specified by the DAR or inspection facility.
If delivery conditions in the aircraft purchase agreement specify more repairs than the DAR’s items, it seems plausible that sellers might make extra repairs to meet the aircraft delivery conditions, but only if the buyer pays for them. In other words, sellers might try to reallocate inspection costs to buyers more often than in the recent past.
- Negotiate the timing of deregistration from the seller’s country’s registry and registration in the U.S.
The timing of the DAR inspection deserves close attention as a pacing item in the transaction. It plays into tricky timing of deregistering the aircraft as a condition of registering it in the U.S. The Chicago Convention allows only one registration at a time per aircraft.
The technical expert and the broker-advisor together can assist the buyer in finding and arranging an aircraft inspection by the DAR in a timely manner. They can coordinate with the DAR to deregister the aircraft at the seller’s national aviation authority (NAA) and register in the U.S. Buyers should be alert to sellers who try to shift deregistration timing risk to the buyers, though joint solutions exist that should minimize this negotiation.
- Conduct extensive diligence to avoid disputes.
Absent credit support, the limited liability companies-sellers (LLCs) or the equivalent entities worldwide, generally have zero financial ability to defend the titles they transfer to buyers against anyone who has filed a lien or makes other claims against the aircraft being sold. Seeking such title defense outside the U.S. against an LLC or a creditworthy seller might be even more problematic in a dispute, depending on, among other factors, which laws govern the deal.
To help evaluate and mitigate these risks, the seller and the buyer should each engage lawyers in the NAAcountry. Diligence starts with typical searches of the NAA registry. For signatory countries to the Cape Town Convention, called “Contracting States,” the buyer should also search the “International Registry” for outstanding “international interests” of financiers such as security interests or leases, any “non-consensual right or interest,” where permitted, such as repair liens, and a clean title history that shows no gaps in the chain of title.
In addition, the lawyers should search filing offices and other NAA registries in countries frequented by the seller for filings by tax authorities, operators, and repair facilities. Ideally, at or before closing, the seller will pay all bills, discharge any adverse claim or interest and deliver documents that the buyer’s and seller’s lawyers concur will protect their respective clients from future disputes.
- Export with assistance.
Aircraft operations, sales, and re-registration attract customs, tax, NAA, and other governmental authorities. Neither the seller nor buyer should tangle with any of these authorities as they have broad authority that can disrupt an aircraft purchase. Timing is important. A buyer can and should seek export guidance from an export specialist before signing the purchase agreement and making errors that result in paying avoidable taxes, duties, and penalties.
Plan ahead for state and federal taxes in the U.S. U.S. buyers (and others) might think that, when the buyer flies away from the delivery location exempt from value added tax (VAT) or other sales-type taxes, the buyer will likewise be exempt from sales tax in the state of the permanent U.S. base of the aircraft. This assumption may be wrong and, in certain states, expose a buyer to substantial use taxes such as in Texas where use taxes may amount to 8.25 percent of the purchase price.
One of the most frequently asked questions by clients since the inception of the new tax law in September 2017 has been: Can I use 100 percent “bonus depreciation” despite my anticipated personal use of the aircraft? That question requires in-depth analysis. The results have directly affected the choice of aircraft. Accordingly, federal income tax, as well as state tax planning should begin before, not after, an aircraft purchase generally without delay to complete international transactions.
- Structure your flight operations documents before your flight to the U.S.
Purchasing an aircraft outside the U.S. does not change the buyer’s obligations to comply with the FARs in the U.S. For example, an owner should designate qualified “operators” to exercise “operational control” of the aircraft typically under FARs Part 91 or Part 135. Also, the buyer should avoid falling into the “flight department company” trap by letting an LLC or other owner with no other business activity illegally act as the “operator.” Buyers should, therefore, carefully structure and execute appropriate agreements that comply with the FARs before their first flight to the U.S.
Cross-border purchases of preowned aircraft produce complex issues for buyers and sellers. Although buyers might accept some increase in their risks or costs compared to long-standing norms, taking prudent risks differs from making avoidable mistakes. Still, buyers can purchase quality preowned aircraft outside the U.S. with confidence and success by hiring experienced, competent, and objective brokers or independent consultants, technical experts, export specialists, and lawyers to help them navigate through the international seller’s market.
This article was originally published in AIN on July 13, 2018.