NAFA Administrator posted an articleNAFA member, Adam Meredith, discusses the hidden or unexpected costs of aircraft ownership. see more
NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, discusses the hidden or unexpected costs of aircraft ownership.
Major hidden costs, for example, can result when a previous owner has deferred maintenance. You’re better off buying an airplane that’s been regularly used because the owner will typically address issues as they arise in order to continue using the plane regularly.
It’s a myth that it’s smart to look for an aircraft that’s had low flying time. Less wear and tear on the engine and the airframe? While those are important considerations, they should not be the only ones. After all, these are machines and machines are made to be run. When an aircraft sits, its problems remain hidden.
Low flying time could mean high maintenance when it’s your time to own the airplane. That’s one reason the first annual inspection can be unusually expensive — another hidden cost. So be prepared.
Here is a list of other hidden costs associated with aircraft ownership:
- Expenses incurred when an airplane is tied down outside (as opposed to protected in a hangar), including repainting and reskinning the exterior and replacing or repairing instrument panels, aircraft seats, interiors or even sun-crazed windows.
- Contaminated fuel, or more likely, a lineman who accidentally fills your gas tanks with the wrong fuel.
- Unforeseen mechanical failures or mishaps, such as a blown tire, a gear door jamming, a baggage door opening in flight and ejecting an object that damages an elevator or tail surface, etc.
- Compliance with unforeseen airworthiness directives (ADs).
- Animal strikes, bird strikes, lightning strikes, prop strikes, strikes by another aircraft taxiing into you.
- Mud daubers corrupting your pitot-static system or rodents chewing through electrical cables or nesting in your push-pull tubes.
- Sudden failure of one or more instruments, navigation radios or engine monitors.
- Even a pandemic.
The list is extensive but not exhaustive. Hence our advice to add 10% to 15% on top of your projected operations budget, so when those hidden costs reveal themselves, you aren’t surprised.
This article was originally published by AOPA Aviation Finance Company on June 10, 2020.
NAFA Administrator posted an articleHow is the Coronavirus Affecting the Closing Process for Aircraft? see more
NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, discusses the challenges of aircraft closings during the Coronavirus pandemic.
Unlike real estate, where the exchanged property does not move, the challenge with closing on an aircraft is that eventually it must be flown to its new home. It’s a rare transaction where buyers purchase an airplane from their home airfield. Therefore, how to legally move the aircraft is one major concern for buyers during the coronavirus pandemic. Another is how to get a pre-buy inspection done.
First, there is the sticky problem of getting an aircraft inspected. It’s not clear whether maintenance and repair shops are currently open to perform pre-buy inspections, or whether their employees can even report to work. Some states have not deemed aviation techs “essential.” What jobs are deemed “essential,” how, and by whom such job designations will be enforced remains up in the air. Even if aviation techs are, parts suppliers might not be. That means needed parts may not get delivered. In normal times, a closing might take 30 days. In these abnormal times, plan on the process stretching to 45 days or more.
Beyond that, is it legal for a ferry pilot or the new owner to fly an airplane from the airport where it is hangared to its new home base? State laws vary on the subject. How complicated it will be to transport the aircraft may depend on factors like the route of flight and the number of states involved. Is the airplane going from California to Maine? Or from Wisconsin to Indiana? One has to ask oneself, “Am I going to have a challenge from this state?” Other questions follow, including, “Which governing body would enforce such a challenge — state or federal?” “Is it within FAA or state jurisdiction?” None of that is easy to navigate.
If you can imagine the difficulty of flying from one European country to another and having to deal with the balkanized ATC system there, then you have some idea of the current complexity surrounding moving an aircraft across state lines during this pandemic. At AOPA Aviation Finance, (“AAF”), our advice is to call AOPA’s Legal Services to get better clarity on your specific situation.
That is a great benefit of AOPA, having multiple resources all in one place. This complex situation is the perfect time to tap into them.
Great advice. Great rates. From helpful and responsive reps you can trust. Three good reasons to turn to AOPA Aviation Finance when you are buying an airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (800.627.5263), or click here to request a quote.
This article was originally published by AOPA Aviation Finance Company on April 30, 2020.
The Realities of the Pilot Shortage see more
NAFA member, Rene Banglesdorf, CEO of Charlie Bravo Aviation, discusses how good pilots are hard to find and how the realities of the pilot shortage are starting to affect the aviation industry.
Gone are the days when aviation departments sort through a huge stack of resumes for pilots – though a few still do. Nowadays, good pilots seem to be hard to find. And the realities of a pilot shortage are finally starting to affect the aviation industry.
High pilot training costs, several years of earlier hiring freezes in top markets, and the threat of technology replacing pilots in the not-too-distant future has deterred the next generation of talent.
By my math, the number of pilots retiring exceeds the number of new entrants by more than 100-percent – with an increasing demand from commercial, cargo and private operators. To us that signals a critical shortage – and if the airlines are feeling it sharply, general aviation will be too.
Already we hear about American or Canadian pilots being recruited to the Middle East and Asia at salaries double or greater the averages in North America. Larger carriers are offering signing bonuses, 20-percent-plus pay increases and better benefits to attract and retain experienced pilots.
Boeing’s job forecast
In its most recent jobs forecast, Boeing indicated an unprecedented 20-year demand for pilots at 790,000 – double the current workforce. And according to their report, 80,000 pilots in the US alone will age out in that same timeframe.
“Despite strong global air traffic growth, the aviation industry continues to face a pilot labour supply challenge, raising concern about the existence of a global pilot shortage in the near-term,” said Keith Cooper, Vice President of Training & Professional Services, Boeing Global Services. “An emphasis on developing the next generation of pilots is key to help mitigate this. With a network of training campuses and relationships with flight schools around the globe, Boeing partners with customers, governments and educational institutions to help ensure the market is ready to meet this significant pilot demand.”
To this end, Boeing touts its Pilot Development Program – an accelerated training program that guides future pilots from early stage ab-initio training through type rating as a first officer – to help operators meet their growing pilot needs.
That’s great for companies or people operating Boeing’s aircraft, but it may not factor down into providing a pipeline of pilots for general aviation, especially piston or turboprop operators.
The competition is on
Regional airlines have doubled starting salaries and bonuses in recent years, which heralds stiff competition for lower-time pilots, as regional airlines typically serve as time and tenure builders for younger pilots.
Private aviation flight departments are getting more competitive as well. Recent news of airline compensation increases has encouraged some firms to bump salaries by 30 or 50 per cent to avoid pilot turnover.
The pilot shortage that’s affecting commercial and private aviation is affecting the military, as well, as fighter pilots are leaving the military in droves for cushier, better-paying jobs in commercial and private aviation.
“Despite strong global air traffic growth, the aviation industry continues to face a pilot labour supply challenge, raising concern about the existence of a global pilot shortage in the near-term.” ~Keith Cooper
In order to compete with the airlines and private flight departments, the military is taking steps to improve benefits to their pilots in addition to increasing pay, including more cockpit time, increased flexibility in assignments, more career options, and shorter deployments.
Many flight departments and airlines are doing the same.
While I’m all for more competition among operators – especially with my daughter in expensive flight training – the bigger question here is how can we make training less cumbersome or costly?
Flight schools, like Flight Safety International, where my daughter is in training for her airline transport pilot (ATP) license, are competing for certified flight instructors to keep up with demand for training. When there aren’t enough instructors, training is delayed, pilot trainees are discouraged, and expenses increase – all deterrents to increasing the numbers of pilots entering the workforce.
According to a 2017 study conducted by CAE, a civil aviation training provider, the global airline industry will require 255,000 new pilots in order to meet the demand of airline growth and pilot attrition over the next 10 years. “The largest requirement will come from the Asia-Pacific region which alone will need 90,000 new pilots, followed by the Americas which will need 85,000,” said Kinda Sarrage, Regional Sales Manager for the Middle East, Northern Africa and South Asia.
“The largest requirement will come from the Asia-Pacific region which alone will need 90,000 new pilots, followed by the Americas which will need 85,000.” ~Kinda Sarrage
“Many regions have been experiencing a higher than usual turnover of experienced pilots or captains leaving them for the Asian carriers as they offer more competitive packages, tax benefits, and flexible work rotations. To compensate for this loss, airlines should establish second officer recruitment schemes. Though some airlines have begun implementing programs to attract lower hour pilots, it is at a much slower rate than that which is required. If airlines established such programs several years ago, they would have a steady pipeline of first officers coming through that would be upgradable to captains today. The reality is that the pool of available captains is shrinking, and this is becoming apparent as airlines struggle to recruit and train pilots to meet their demands,” Sarrage said.
In the US, Senators James Inhofe and Tammy Duckworth are co-sponsoring bipartisan legislation aimed at helping the general aviation community.
The Securing and Revitalizing Aviation (SARA) Act of 2018 (S.3270) calls for the creation of an Aircraft Pilot Education Program that would allow high school students to get a head start on their flying careers by taking aviation-related courses for credit, according to a press release from the National Business Aircraft Association (NBAA).
The bill also includes reforms to existing Federal Aviation Administration (FAA) regulations to ease the shortage of qualified designated pilot examiners (DPE) needed for initial and recurrent pilot training.
Additional provisions would enhance existing due process protections for pilots; extend limited liability coverage for FAA designees performing agency duties, but who are not covered under immunities for government employees, as well as for pilots performing volunteer missions; and grant the National Transportation Safety Board (NTSB) the authority to review denials of airman certificates by the FAA.
The Aircraft Owners and Pilots Association (AOPA) has worked diligently for years for medical requirements reform, facilitating the renewal of licenses for more than 5,000 “rusty” pilots.
The AOPA You Can Fly High School Initiative ninth-grade STEM curriculum was tested in 29 high schools during the 2017-2018 school year. It has proved popular with teachers and students alike because it engages youth with hands-on activities and exposes them to the world of aviation and potential careers. The program, created in partnership with educators, curriculum developers, and aviation experts, offers four-year study options in aviation career pathways and is aligned with rigorous math and science educational standards already in use.
Each of us should be working toward attracting as many pilots and mechanics as possible to aviation –and then working to keep them here!
General aviation flight departments are beginning to awaken to a reality that pilot salaries, bonuses and flexibility are changing. What are you doing to adapt?
Rene Banglesdorf is the CEO of Charlie Bravo Aviation, a worldwide aircraft brokerage based in Austin, Texas. She is an author, speaker and podcast host.
This article was originally published in Altitudes Magazine on October 14, 2018.
Is it possible to prepay my aircraft loan? Adam answers. see more
NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, answers questions about prepaying your aircraft loan.
Question: I have been looking at several Bonanzas, but every time I start negotiations with the seller, they opt for cash buyers. Is there something I can do to get the financing in place before I negotiate the sale?
Answer: If you have an age range and purchase price in mind, it would be recommended to get pre-approved. The pre-approval will take care of the credit underwriting so that when you find an aircraft you can confidently make an offer. Closing can be completed within a few days upon signing a purchase agreement if a pre-approval is already in place. Approvals are typically valid for 90 days with the rates locked for the first 30 days.
If you are ready to get pre-approved, please call us at 800.627.5263 and we can send you an online application to get started.
Question: Is it possible to prepay my loan?
Answer: Some lenders do have pre-payment penalties but still allow additional principal payments to be made. Typically, the pre-payment penalty is only for the first 24 months of the loan and runs about 1-1.25% of the original loan balance. Additional principal payments can be made during the time that the pre-payment penalty is in place as long as the payments are within the specific lenders’ guidelines.
Don’t feel shy about having aircraft financing questions. It is a complicated process, and asking questions is the first step towards understanding it better. Call us if you ever have questions about the financing process, 800.627.5263.
Have questions for Adam? He is happy to answer them. Submit your questions here. Great rates. Great terms. Helpful and responsive reps. Three good reasons to turn to AOPA Aviation Finance when you are buying an airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (75263) or click here to request a quote.
This article was originally published in AOPA Finance's August edition of "Adam Answers" on August 22, 2018.
Have specific aviation finance questions, ask Adam! see more
NAFA member, Adam Meredith, president of AOPA Aviation Finance Company, is an aircraft finance professional with more than 15 years lending, small business management and customer service experience. Adam is a commercial pilot with multi-engine and instrument ratings. Ask Adam!
KARL: I have a loan with Bank of America at over 6%. This originated in 2008. Is the interest rate better now & what are my chances of getting a lower rate & would it be feasible (worthwhile)? It is a 20 year loan.
ADAM: Rates are going to be dependent on the loan amount and term of the refinance you are considering. We have a number of options that could potentially lower your rate below 6% and keeping it financed over 15-20 years. For example, a loan balance between $50,000 and $75,000, typical structures are 5.5% amortized over 15 years. If your current balance is over $75,000 then we can fix the rate over a 20 year amortization. Currently we are seeing fixed rates as low as 4.65%. The specific age and type of aircraft may also factor in to the final loan structure. Our regional account executives would be happy to discuss the best course of action to refinance your aircraft.
Example: Assuming you financed $125k in 2008 (20 yr term and 6%), your current payment should be $895/mth and you should still owe approximately $91k. If you were to refinance that loan today, your interest rate would be 1.2% less and your payment would drop to $595/mth!
KAREN: When I am ready to take the plunge, what documentation would I need to provide in order to apply for an aircraft loan from AOPA? I assume the usual stuff like bank docs?
ADAM: Aircraft lending is a bit different than most other loan products you are likely used to. The process and documentation is similar to that of a mortgage. Along with our signed credit application, our lenders require two years of personal tax returns and W2s. A current paystub would also be required. If you are self-employed or a business owner, additional business financials will be needed. A comprehensive list of required documentation based on your income situation can be found on our website.
Have questions for Adam? He is happy to answer them. Submit your questions here.
Great rates. Great terms. Helpful and responsive reps. Three good reasons to turn to AOPA Aviation Finance when you are buying an airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (75263) or click here to request a quote.
Have a specific aviation finance question you would like to see in future articles? Submit it here, and it may be highlighted in an upcoming content piece.