aviation

  • Tracey Cheek posted an article
    Why 'Pre-Owned' Private Jets Can Be Surprisingly New see more

    NAFA member, Chad Anderson, President of Jetcraft, discusses why you should buy a pre-owned aircraft and where to find them.

    Pre-owned, vintage, used…from sports cars to designer clothes and beyond, these words don’t usually indicate ‘new’.

    But, according to Jetcraft, the world’s leading aircraft sales specialist, pre-owned private jets don’t have to be ‘old’ – in fact, the savviest buyers are now picking up these airplanes after less than a year of use.

    So how do buyers find an almost-new aircraft? And what’s bringing these jets to the market in the first place? We asked Chad Anderson, president of Jetcraft.

    Why should I buy a pre-owned jet?

    Pre-owned aircraft allow buyers to find the long-range or large-cabin model they need at the best possible price. Private jets are valuable but expensive assets, so it’s important you invest in an aircraft that suits your needs and will retain value. With the sophistication of upgrades and renovations available today, pre-owned planes are every bit as attractive as new ones.

    Why are these almost-new aircraft available?

    As many businesses ‘go global’, and more and more private jet owners fly greater distances for work or leisure, demand is growing for spacious, fast jets that can span half the world without stopping. The top jet manufacturers are responding to this need by releasing new large-cabin aircraft. This influx is driving some buyers to sell their airplane after only one or two years of ownership, so they can upgrade to an even newer model. 

    Indeed, this summer Jetcraft sold the world’s first pre-owned Gulfstream G500 – an aircraft that only came onto the market in 2018. The speed of this sale shows how demand for almost-new long-range models is at an unprecedented high.

    How do I find a pre-owned jet to buy?

    There’s a lot of competition for young, pre-owned jets. In fact, our recent market forecast anticipates four times more pre-owned transactions a year than new deliveries by 2023 and we’re seeing many aircraft that are correctly priced, marketed and positioned are sold before they even hit the market. If you’re planning to purchase a pre-owned aircraft, it’s important to work with a consultant you trust and who has a pulse on the market and the latest available inventory. 

    Which jet should I choose?

    Today, most buyers are looking for an aircraft that can fly direct from London to cities such as Seoul and Singapore. If you’re regularly travelling long distances, you want a fast jet that allows you to be in the office or at home with your family as much as possible. Choosing between types at the very top of the market, such as the Gulfstream G500 and G600, the Bombardier Global 7500 and the Dassault Falcon 7X and 8X, can be difficult. Speaking with an experienced professional is invaluable in finding an aircraft that perfectly fits your needs.

    This article was originally published in Luxury Lifestyle Magazine on September 24, 2019.

  • Tracey Cheek posted an article
    Why Does An Aircraft Loan Take Longer Than A Car Loan? see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, explains the differences between aircraft loans and car loans.

    Most of us have gone through the car buying process and may think buying an aircraft would or should be similar. So, when it takes a day or two to approve a loan we may wonder why it's not as simple as a car loan. AOPA Aviation Finance President Adam Meredith explains the differences including differences in collateral and lifespan.

    Many of us have sat in car dealerships while the salesperson typed our facts and figures into a computer and within 10 to 20 minutes, there it is: We’re approved for a car loan. So why can’t a $45,000 airplane loan be that simple? Airplane loans take a day or two to approve, and sometimes longer depending on the financial complexity and number of borrowers.

    That’s because the underwriting process for an airplane loan is more like that for a house than it is for a car. With both a house and an airplane, lots of documentation needs to be collected and presented.  You need to supply photos, logbook entries, personal financial statements, tax returns, IDs, and more, and that’s in addition to signing a promissory note, security agreement, and other legal documents. However, one of the most time-consuming issues can be verifying a clean title to the airplane. 

    Consider that it would be rare to finance a 30-year-old car, but it’s an everyday occurrence to finance a 30-year-old airplane. Airplanes are designed and built to have a long life, so the average aircraft is far older than the average car. With that age, can come a very colorful history, which needs to be thoroughly examined. To make matters more complicated, it can sometimes take weeks to clear up issues arising from an improperly executed lien release. 

    On a positive note, because the registration process is centralized in Oklahoma City, Oklahoma, where all U.S. aircraft are registered, there’s only one place to check. Further, now that the FAA is willing to accept electronically executed documents, the process is going to become easier. Many banks and other lending institutions are slower in accepting electronic signatures, but that will change and speed up the process further. There is some hope here!

    Probably the biggest reason the process of obtaining an aircraft loan is slower than that for a car is aircraft lenders are not collateral lenders; they are cash flow and collateral lenders. Most automotive lenders can rely heavily (predominantly) on the collateral of the car because they can have greater confidence in the resale value in the event they must repossess the asset. When comparing to forecasting the resale value of an aircraft, this is much more challenging. Items like the condition or total number of hours on the engine can significantly impact value. If a lender gets back that Cirrus SR22 and the engine is run out, it’s going to easily cost up to $40,000 to overhaul it on a 10-year-old airplane that’s almost 20 percent of the aircraft value. Needless to say, forecasting the resale value of cars is a far easier task than forecasting the resale value of aircraft. 

    This article was originally published by AOPA Aviation Finance Company on May 3, 2019.

  • Tracey Cheek posted an article
    Multi-State Aircraft Use Tax: How to Navigate Complexities see more

    NAFA member, Keith Swirsky, President of GKG Law, P.C., discusses how to navigate complexities of multi-state aircraft use tax.

    Given the large amount of money involved with the purchase of corporate aircraft, many aircraft owners are rightfully concerned with sales tax and the complementary use tax. GKG Law’s Keith Swirsky and Ryan Swirsky explore…

    The concerns over sales tax and complementary use tax often prompt aircraft owners to take into consideration ways to minimize or eliminate their tax liability on the purchase.

    Most purchasers are aware that sales tax liability can be incurred based on the location of closing and will plan accordingly. Approaches include:

    • Closing in a state with no sales tax;
    • Closing in a state with an applicable exemption from sales tax for their aircraft;
    • Closing in a low sales tax state (such as the Carolinas);
    • Closing in a state with a fly-away exemption; or
    • Closing in a state where complementary use tax would be owed if sales tax were avoided.

    Strategies for Minimizing Use Tax Liability

    With respect to the latter point, most purchasers are aware that the state where they hangar their aircraft, if different from the state where closing occurred, will be owed use tax on the transaction. Therefore, they will engage aviation tax counsel to implement strategies to minimize or eliminate use tax liability.

    These strategies vary state by state, including the mechanics and requirements of seemingly similar structures. Common tax planning tactics include:

    • Sales for resale;
    • Interstate commerce exemptions;
    • Casual or isolated sale exemptions; and
    • Common carrier exemptions.

    Having planned for sales and use tax based on where the closing for the aircraft occurred and where the aircraft will be based, many aircraft owners believe that their sales and use tax concerns have ended. However, this is not the case.

    Multiple states can assert that complementary use tax is owed, even when such use tax is already being paid to another state!

    Such a situation occurs when another state asserts that it has ‘nexus’ with the aircraft. Many complex issues, often with taxpayer-adverse consequences, can result in such a situation.

    Understanding a State’s Nexus With the Aircraft

    The concept of nexus relates to the level of connection and presence between the taxpayer and the taxing jurisdiction. For a state to impose its sales or use tax, the taxpayer must have sufficient nexus with that state.

    The level of connection and presence required to establish nexus to assert use tax on an aircraft varies state-by-state and, unfortunately for the taxpayer, there is often a lack of clear guidance on what level of contact constitutes sufficient nexus.

    As stated, the hangar location is sufficient to establish nexus. However, it is possible that landings in other states, even infrequently, can create nexus with such states. In this circumstance, other factors are generally required, with factors commonly considered including:

    • Regularity of travel to the state;
    • The total days in the state during a ‘testing period’; and 
    • Whether the taxpayer has other connections to the state (e.g. payroll, property, transactions, tax return filings, etc.).

    Proper advance planning with experienced aviation tax counsel can mitigate such tax risk.

    It is important to note that the ability to mitigate such tax risk will be severely compromised if such planning occurs after the aircraft has been operated, or more commonly, after receipt of a use tax bill from such other state(s).

    What if Additional Use Tax Nexus Can’t be Avoided?

    In the event additional use tax nexus is unavoidable, a taxpayer may be eligible to receive credit for taxes already paid to the original taxing state.

    Generally, states give a credit for ‘like’ or ‘similar’ taxes paid to another state. So, assuming the taxpayer paid, or is paying (if a leasing structure) a meaningful amount of taxes to State A, the challenge is to convince State B that the taxes paid or being paid to State A are ‘like’ or ‘similar’ taxes.

    It is equally important that the aircraft was not used in State B prior to being used in State A, in as much as State B can deny the credit on the basis that State A owes the credit and not State B.

    In Summary…

    While avoiding, or paying sales tax is relatively straightforward, use tax planning is complex and cumbersome. The tax planning intricacies should also factor in a healthy measure of practical guidance.

    Once again, experienced aviation tax counsel should be engaged, in advance of the aircraft purchase. As always, the bigger picture of the flexibility of corporate aircraft utilization is paramount!

    This article was originally published by AvBuyer on July 12, 2019.

     

  • Tracey Cheek posted an article
    Handle With Care - Importing Aircraft into the U.S. see more

    NAFA member, Tobias Kleitman, President and Founder of TVPX Group of Companies, discusses importing aircraft into the U.S. and what you need to know.

    More than 61% of all business turbine aircraft owners and users are U.S.-based, due in large part to the strong demand for secure travel among the more than 4,000 airports without scheduled airline service. Coupled with current low used aircraft inventory levels, your next aircraft likely may be imported from outside the U.S.

    But unlike traditional types of merchandise that enter U.S. customs territory on trucks or cargo container ships, business aircraft brought to the U.S. in preparation for sale often transport themselves. They are both the merchandise AND the method of transportation.

    Because of this unique characteristic, when a used aircraft first enters the U.S. for a pre-buy inspection, it must be imported and clear customs as merchandise. This is a very different process from an aircraft entering the U.S. as a vehicle transporting passengers, who must clear customs when they disembark.

    When merchandise such as an aircraft enters the U.S., the government requires that certain information be accurately reported. Among other information, it wants to know:

    • Who is the importer of record? This can be the buyer, the seller, a customs broker, or any party with a financial interest in the transaction. 
    • Who is the ultimate consignee? This can be the party in the U.S. that receives the merchandise, such as the buyer.
    • What is the value of the aircraft, the empty (unladen) weight in kilograms, and the Harmonized Tariff Classification Code (an internationally standardized system of names and numbers to classify traded products)?
    • What is the country of origin and manufacture, and what is the manufacturer’s ID number? 

    When importing an aircraft, you must fulfill several requirements, including:

    • A Customs Bond Form 301. All merchandise that comes into the U.S. must come in under a surety bond – an insurance policy that guarantees that U.S. Customs will be paid the duties, taxes, and fees that are owed.
    • Timely payment of the merchandise processing fees, fees on shipments owed to U.S. Customs, in addition to duties and taxes.
    • Entry forms, such as Customs Form 3461 (Entry) and Customs Form 7501 (Entry Summary), must be filed, along with any other documents required by the port of entry, such as a pro forma invoice, a bill of sale, airworthiness certificate, and/or eAPIS manifest.

    The pre-closing process of a non-U.S. aircraft is fraught with uncertainties, including the fact that there is no guaranty that the sale will be consummated. So it’s understandable why sellers might think it premature to undertake the process of clearing the aircraft through customs when it is brought in for a pre-buy inspection. Even when the terms of the sale are agreed upon, it could take weeks or even months before the closing.

    Then, when the buyer asks for evidence that the aircraft was properly imported and finds out that it was not, among the potential alternative solutions the parties have are:

    • The importer can risk paying a hefty penalty for late filing, if found negligent by U.S. Customs & Border Protection, or
    • The parties can decide to fly out of the U.S. and then fly back in to properly make entry: an expensive and inconvenient way to import an aircraft (this should not be done without consulting a customs attorney).

    There may be other complicating factors that require direct communications with U.S. Customs, so it’s best to retain a customs attorney to have that conversation on behalf of the importer.

    With proper pre-planning, you can avoid each of these undesirable scenarios. The best practice is to import the aircraft before it goes to the pre-buy inspection. Then, if the sale doesn’t close, simply export the aircraft back out of the U.S. The entire process can be handled expeditiously by a licensed customs broker.

    This article was originally published by Business Aviation Advisor on September 1, 2019.

  • Tracey Cheek posted an article
    Buying a Foreign Aircraft and Importing It see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, shares what you need to know when purchasing and importing a foreign aircraft.

    Buying an aircraft is a complex transaction. Buying one from outside the United States and importing it only adds to the complexity. Paperwork and timing are two major aspects of a domestic deal that can become complicated with foreign transactions and the importation process.

    For instance, in the United States there’s only one place to go to verify aircraft records--the Federal Aviation Administration (FAA). Assuming an aircraft has spent its entire history in the United States, most reputable title companies should be able to ferret out any claims impacting the title by performing a quick title search.

    By contrast, in Canada, for example, there is no central source for determining an aircraft’s chain of ownership. Aircraft registration in that country is done at the regional level. There are many different provincial and territorial level queries that would need to be done to ascertain whether there are any claims outstanding on Canadian-owned aircraft.

    Every country has its own, distinct registration process. Unfamiliarity with a country's aircraft registration procedures can significantly impede the timing of the transaction and increase the paperwork. It should be mentioned that the International Registry (IR) was originally intended to help address this issue. However, the IR falls significantly short in providing certainty of a clear chain of title, even on those aircraft it covers.

    Aircraft pre-purchase inspection is another potential minefield. AOPA Finance recently stepped in to help somebody who had imported a plane without setting up a thorough Purchase and Sale Agreement (P&S). The two parties agreed the seller would fly the plane to the United States. Both also agreed the buyer could have an annual inspection performed by the buyer’s A&P as part of the pre-purchase inspection. During the annual, the buyer’s mechanic discovered several issues with the aircraft.

    A dispute arose over which country’s definition of airworthiness took precedence. The seller believed the aircraft was airworthy when it departed his country. The buyer’s mechanic begged to differ. So both the plane and the deal were in pieces. To add insult to lack of planning, the lender refused to release funds until somebody signed off that the aircraft was airworthy.

    In the United States, that somebody is the FAA’s designated airworthiness representative (DAR). Not only does the DAR control that aspect of the transaction, this person also oversees the de-registration and registration process. Every country also has their equivalent, which means there are options on how to proceed. Whichever course is chosen, it involves getting on the DAR's calendar, and paperwork.

    Other details to be resolved include: In which country will the plane be de-registered? How will it be flown or ferried into the United States? Where and how will it clear U.S. Customs? And how will the aircraft be re-registered?

    Our advice is to hammer out a rock-solid purchase and sales agreement before embarking on your journey. Clearly spell out all the details to make sure expectations are realistic. Have the P&S elaborate what’s going to happen, when and who is going to take care of which parts of the process. Have it specified when the money will become non-refundable, when the entire amount of the loan is funded into escrow, and when those funds will be released to the seller.

    Disputes happen. Lay out what the dispute resolution process will be. Clarify the logistics of when and where the aircraft will be de-registered and subsequently re-registered. Specify the time period for the designated airworthiness representative to inspect and deem the aircraft airworthy by U.S. standards.

    Our other piece of advice is to get title insurance. It doesn’t cost a lot on the one hand, and on the other hand, having a U.S.-based title insurance company to defend you if something does occur is more than worth the cost. Don’t skimp on this item. Get title insurance.

    AOPA has a plethora of online resources. We also can be helpful through our Legal Services Plan. We’re not the only ones. There is a small industry of other aviation professional service providers out there who are in the business of importing aircraft. Our goal is to provide an understanding of the process and help set expectations. Buying a foreign aircraft and importing it is absolutely a case where hiring professional service providers can only benefit you.

    This article was originally published by AOPA Aviation Finance Company on May 28, 2019.

  • Tracey Cheek posted an article
    AINsight: Millennials' Shared Use Is a Real Deal see more

    NAFA member, David G. Mayer, Partner at Shackelford, Bowen, McKinley & Norton, LLP, discusses millennials, shared use, and private jet travel.

    Millennials—those ranging in age from 21 to 37 years old this year—have discovered the private jet travel experience, and they like it. With unique attributes, this generation seems broadly interested in on-demand chartering, sharing flights with friends and, to a lesser extent, owning jets and other types of private aircraft—always on their terms.

    Also known as “Gen Y,” Millennials seem to enjoy private aircraft travel “experiences” at an acceptable cost with emphasis on safety, freedom, personalization, efficiency, speed, privacy, customization, and transparency—all couched in a high level of service and luxury. They also crave digital connectivity, mobility, and flexibility to travel when and where they want, preferably arranging private flights on mobile devices.

    Their perception of the benefits of business aviation includes accessibility of aircraft on-demand, the ability of aircraft to save time, and the efficiency of aircraft travel to increase their work productivity.

    Finally, Millennials care deeply about climate change and social causes. They might prefer aircraft operators that demonstrate their environmental responsibility. In fact, the business aviation community has long been committed to mitigating climate change, proven in part by the formation of a broad industry coalition that emphasizes developing and using sustainable aviation fuel (SAF).

    As a generation of roughly 73 million adults, Millennials often have high ambitions. Their top aspiration and priority in 2019, according to Deloitte, is to travel and see the world (57 percent). But their needs and wants are far more than aspirational. Some Millennials have, and others in the foreseeable future may earn or inherit, more than enough money to travel by private aircraft amid their peers who, by one report, now make up nearly half of the world’s super-wealthy, including Millennial billionaires.

    Indeed, Millennials already seem to be altering the business aviation industry by transforming a business aircraft from a product for purchase into a tool for transportation services in their “click and ride” world.

    VIABLE STEPS FOR MILLENNIALS TO ACCESS PRIVATE AIRCRAFT

    What, then, is the right generational, practical, and legal path forward in business aviation to meet the needs and wants of Gen Y? Setting aside the critical issue of selecting the right aircraft for use or purchase, let’s consider two high-level access and legal structures for Millennials to buy, use and share private aircraft along with the corresponding obligations, risks, and benefits.

    First, Millennials can decide, and currently seem to prefer, to experience private aviation travel without commitment to, or investment in, aircraft. They simply prefer to click and ride. Second, Millennials can elect to own or lease a fractional share of an aircraft or a whole aircraft.

    Regardless of what Millennials choose, private aviation is highly regulated. The FAA oversees the safety of U.S.-registered aircraft operations under the FARs, including Part 91 private flights and Part 135 charter.

    Further, now—perhaps more than ever—the FAA is looking for, and potentially taking enforcement actions against, operational and other violations of the FARs. Even with this FAA presence in mind, Millennials can still share ownership or use of aircraft with others or go it alone—as long as they properly structure their arrangements under the FARs.

    The following two use and ownership options work under the FARs:

    • Use only with no ownership commitment—click and ride. Many Part 135 operators do and increasingly will offer charter-based services such as on-demand charter flights (like renting a car), jet cards (types of pre-paid flight debit cards), block charter programs (package of charter flight hours), club or member programs (reduced flight costs for up-front fees). With myriad choices available, Millennials can select flights by criteria that meet their personal life values, economics and travel preferences, including aircraft type, flight sharing, transparency, connectivity, and privacy.

    Although many of the services might be easy and simple for Millennials to use, it is imperative that Millennials do not trade their safety just to pay lower charter fees offered by flying with illegal charter operators. Millennials should do their diligence to identify and steer clear of such legal and personal risks.

    • Own or lease specific aircraft. Properly structured, Millennials, solo or in a group, can take a deeper commitment in accessing private aircraft by leasing or owning an aircraft. Ownership, of course, requires a capital investment in an aircraft unlike the click-and-ride model, which has no ownership component. Banks may want to lend part or all of the purchase price to Millennials or buy and lease the aircraft to them, which frees up cash for Millennial to deploy in other ventures or equities.

    Within the option to buy or lease aircraft, Millennials can buy and finance or lease a fraction or whole private aircraft. Although a large number of financiers compete to finance or lease whole aircraft, relatively few lenders or lessors finance fractional shares.

    Fractional share programs, regulated under Part 91K, offer one good way to dip a toe into the water of aircraft ownership. Fractional shareowners buy and use a certain number of flight hours associated with owning or leasing as little as a one-sixteenth share of an aircraft.  This type of purchase might appeal to Millennials who decide to change their interests from click-and-ride offerings to ownership in an aircraft fleet that, for example, uses newer engines and fuels that minimize an aircraft’s carbon footprint, has an outstanding safety record, or has better connectivity features on the ground and aloft.

    The next step up in commitment is to buy or lease a whole private aircraft instead of a fraction of one. A Millennial might be able to locate and buy an aircraft that adequately meets his or her personal life values and needs, including size, customization, privacy, and technology. Whole aircraft purchases start to make sense when flying at least 200 hours per year. Before then, click-and-ride or fractional programs might work better economically.

    FARS NEVER FAR AWAY

    If Millennials need or want to share ownership or leasing of an aircraft jointly with others, they can legally structure such sharing under the FARs. However, being an owner and an operator might not be the same thing, and a joint operator (either as a joint owner or a joint lessee) under Part 91 can be tricky. For example, as a general rule, no cost-sharing, reimbursements, or other compensation in any form can be conveyed to any operator or owner for any Part 91 flight, other than under very limited circumstances.

    In many situations, receipt of compensation by the operator will convert the Part 91 flight into an illegal charter. However, if correctly structured, Part 91 will allow Millennials to enter into certain joint ownership and leasing arrangements that Millennials can use to accomplish their objectives.

    In contrast, under a bona fide Part 135 flight operation, Millennials can devise their own cost-sharing arrangements under appropriate agreements with much greater flexibility, typically at a higher cost than Part 91 flights.

    Millennials today and in the foreseeable future will have the financial means to use or acquire personal aircraft. Only time will tell whether Gen Y prefers to fly private aircraft as a service free of the ownership risks or lean into the world of aircraft ownership or leasing, alone and with friends, to fulfill life experiences and work objectives. No matter which way Millennials go, the FARs will be right there with them.

    This article was originally published in AINonline on September 13, 2019.

  • Tracey Cheek posted an article
    2019 Aircraft Transactions - It Is Not Too Early To Plan For A Successful 2019 Closing see more

    NAFA member, Amanda Applegate, Partner with Aerlex Law Group, discusses how to plan for a successful aircraft closing in 2019.

    As we move into the last several months of 2019, whole aircraft transaction volume will increase, particularly in December. Personally, I have a number of clients who are ready to proceed immediately with a purchase or sale once either the right inventory can be sourced or once a buyer is found for the aircraft that is listed for sale. Assuming the right aircraft can be found for buyers or the right buyer can be found by sellers, as transaction volumes increase those providing support services such as aircraft consultants, insurance agents, escrow companies and pre-buy inspection facilities may start to see the stress of the demand. As always, having a well-established acquisition or sales team and a process plan can help insure that nothing gets missed, that the closings go as planned and are completed in the 2019 calendar year. Ten items to consider to help closing occur in 2019:

    1. If you are considering selling in 2019, list the aircraft for sale as soon as possible to allow enough time for the sales process to conclude before the end of the year.

    2. If you are considering buying in 2019, you should already be looking for the right aircraft. Inventory is lower in many aircraft categories than it has been for years. Therefore sourcing the right aircraft is taking longer than it has in the past and may require expanding the search to outside of the United States.

    3. Many inspection facilities have long wait times to schedule a pre-buy inspection. As soon as an aircraft is sourced or a buyer is found (or perhaps even before), look for a pre-buy slot and try to hold it if possible. As a seller, if certain inspections are coming due, perhaps scheduling these in conjunction with a potential pre-buy inspection may help with reserving a slot.

    4. If you have an existing aircraft and plan to replace it, consult your tax team early in the process. Your tax team may recommend that both transactions occur in the same year since 1031 likekind exchanges are no longer available.

    5. If you are seeking depreciation in 2019 (bonus or straight-line), then the aircraft being purchased needs to be placed into service and used for business (preferably exclusively for business if closing is near the end of the year) before the end of the year.

    6. When support service providers are busy, checklists and a team leader become imperative. There must be one person leading the team who is checking to make sure all aspects of the transaction are completed prior to closing (i.e. assignment of mx. programs, insurance, funds, lender agreements, management agreements, international registry account set up, etc.).

    7. The last day of the year in 2019 is on a Tuesday. In the past, the FAA registry has closed early on holidays and also for weather. It is recommended that 2019 closings be completed no later than December 27, 2019 in order to allow time for the aircraft to be placed into service before year end and avoid any unexpected closing delays that could occur.

    8. Lenders are starting to require all ancillary documents be in place prior to funding. If the aircraft is going to be managed, chartered or on maintenance programs, the lender may require all of these documents be in place along with its own consent agreements, prior to closing. It is likely that these documents will not be allowed to be done as post-closing items, so plan enough time to get all relevant documents in order prior to year-end. Alternatively, consider paying cash and arrange financing after closing.

    9. If the transaction is a crossborder transaction, make sure all parties are realistic on the amount of time the import/export process will take and that there will not be any delays in getting the Aircraft on the new country registry.

    10. Having upgrades done at the same time as the pre-buy inspection often saves downtime on the aircraft for the buyer. However, it may also push the closing into 2020. Therefore, if a 2019 closing is important a close review of the calendar should be made to make sure the upgrades can be completed and the aircraft returned to service prior to the end of the year.

    This article was originally published in BusinessAir Magazine, August 2019, Volume 29, No. 8 and on Aerlex.com on September 12, 2019.

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

    FOR IMMEDIATE RELEASE

    EDGEWATER, Md. – Nov. 13, 2019 – National Aircraft Finance Association (NAFA) is pleased to announce that Sky Allies Capital has recently joined its professional network of aviation lenders. 

    “NAFA members form a network of aviation finance services who diligently and competently operate with integrity and objectivity throughout the world. We’re excited to welcome Sky Allies to our growing organization as we head to our 50th anniversary,” said Jim Blessing, president of NAFA.

    Sky Allies is a group of finance and aviation industry professionals – financing and leasing airplanes, helicopters, flight simulators and other aviation or industrial and technological equipment. The company specializes in credit challenged borrowers and other abnormal deal opportunities. They also offer special hourly simulator leasing programs for flight schools.

    The company is privately held and based in Las Vegas, NV. Sky Allies is a member of the American Association of Commercial Finance Brokers and thereby adhere to a Code of Ethics Program as voted on by their broker members. Their principal has 26 years experience in the aviation industry, is a Citation 525 rated pilot, ATP and an airplane owner.

    Much like NAFA, Sky Allies Capital is focused on the financing of aircraft – putting business plans in the air. Sky Allies and NAFA are committed to the highest level of customer service, fostering long lasting business relationships throughout the aviation industry.

    For more information about Sky Allies Capital, visit nafa.aero/companies/sky-allies-capital.

    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 knowledge to encourage the financing, leasing and insuring of general aviation aircraft. For more information about NAFA, visit NAFA.aero.

     

  • Tracey Cheek posted an article
    How Can Borrowing More Cost Less? see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, explains the credit matrix when looking for an aircraft loan.

    An AOPA Finance client recently requested a quote for financing a single-engine aircraft. He was looking to finance $70,000, and was quoted what the interest rate would be based on that figure. However, had the client borrowed $75,000 instead of $70,000, the rate would have been a whole percentage point lower, saving him money. Why is that?

    Many borrowers believe the way to get the best interest rate is through a large down payment and a great credit score. But actually the No. 1 factor in determining the interest rate offered on a loan is the amount of money being lent. Lenders structure each loan around a credit matrix. The matrix is comprised--among other things--of ranges of loan amounts, the loan-to-value (LTV) ratio, an individual's total financial picture, and least of all, that person's credit score.

    Lenders group loans into "buckets," or ranges of loan amounts. For example, in the case of our client, one range included loan amounts from $50,000 to $74,999. Additionally, each range of loans has a default initial interest rate associated with it.

    In this case, the lender's next higher range had an interest rate one full percentage point lower associated with it. This client had said a top priority of his was to get the lowest possible interest rate. Therefore, we knew if our client had the flexibility to increase his loan by $5,000, it would put him in the higher range, where the default lending rate was better.

    Initially, he saw increasing the loan by $5,000 as beneficial only for the lender. We pointed out that this lender also had a loan structure that allowed for additional prepayments without penalty. If our client was willing to hold back $5,000 of his down payment and increase the loan to $75,000, he could, on Day 2 of the loan, take that held back $5,000 and apply it immediately to the principal. That would get him back to $70,000 on the loan while maintaining the lower interest rate of the $75,000 loan, thus saving him money. That’s one example of how borrowing more can cost less.

    Loan-to-value (LTV) is the second-most important element in constructing the credit matrix. LTV is a financial term used by lenders to express the ratio of a loan to the value of the asset purchased. Generally, an LTV of 80%-85% is deemed an acceptable risk. LTV requirements are most frequently influenced by the aircraft and how quickly it is likely to depreciate. In other words, LTV requirements may be applied on a sliding scale. Generally, the more quickly a plane is likely to depreciate, the more money down or lower an acceptable LTV and vice versa. Additionally, by putting even more money down and thus lowering the LTV you can frequently gain better interest rates and terms.

    The last, and least important, component of the credit matrix is one's credit score. Despite what retail financial institutions and credit reporting agencies pushing credit protection products advertise in the media, credit scores for aircraft loans have only a small influence on how lenders determine a loan's interest rate. The difference between a good credit score and a great credit score might be a mere quarter of a percent. It’s a lousy credit score that will hurt the most. A poor credit score may cost the borrower a full percentage point, or the loan itself.

    Ultimately, obtaining the best loan for you is about providing you the best perspective on all aspects of it. AOPA Finance brokers stand ready to share the kind of knowledge, nuance and expertise that can navigate you to the best loan for your situation.

    This article was originally published by AOPA Aviation Finance Company on May 28, 2019.

  • Tracey Cheek posted an article
    NAFA Announces Dawn Hudson as Keynote Speaker for 49th Annual Conference see more

    NAFA Announces Dawn Hudson as Keynote Speaker for 49th Annual Conference

     

    FOR IMMEDIATE RELEASE

    EDGEWATER, Md. – November 11, 2019 – The National Aircraft Finance Association (NAFA) is pleased to announce that Dawn Hudson will be the keynote speaker at their upcoming 49th Annual Conference, to be held April 28th through May 1st, 2020, at The Meritage Resort in Napa Valley, California. Hudson will be presenting to an audience of aviation industry and finance experts with a global reach – supporting or enabling the financing of general and business aviation aircraft throughout the world. 

    Widely recognized as one of the most important female business executives of the past decade, Dawn Hudson is the former Chief Marketing Officer at the National Football League and the former President and CEO of Pepsi Cola North America. She has led an impressive career spanning high-level posts in media, retail, consumer goods, consulting, and healthcare at some of the biggest corporations in the world. 

    Hudson’s work has been focused on revolutionizing and strengthening brands’ positioning and marketing, tapping into culture change as fuel for innovative business strategies, and championing inclusive leadership and diversity. She has been recognized as the “Most Vital Leader in Tech, Media, and Marketing” by AdWeek – topping a list of 50 industry titans – and twice as one of Fortune magazine’s “50 Most Powerful Women in Business.” 

    Dawn Hudson is an electric speaker – as an advocate of smart reinvention and growth, she shares insights on turning adversity into an advantage, building a global presence, and why in today’s business climate innovation must be central to everything from distribution to selling stories to human capital management. Hudson speaks about the power of brand, how to embrace change and drive innovation, and the importance of strong and inclusive leadership.

    The 49th Annual Meeting of the National Aircraft Finance Association will bring together the most active aircraft lenders in North America and worldwide to network and discuss issues topical to the industry, including: aviation regulatory changes, banking system regulatory changes, updates on new aircraft entering the marketplace, and other issues pertinent to aircraft buyers and their support systems. 

    “Dawn Hudson is an amazing mind with sharp insights into driving innovation, leadership and inclusion for successful business practices, and we are thrilled to have her speaking to our members and other attendees at the upcoming conference,” said Jim Blessing, President of NAFA. Hudson will present on “Inclusive Leadership” for the approximately 250 attendees on Thursday, April 30th, 2020. Additional details and time will be determined at a later date – visit NAFA.aero/events for information.

    For more information about Dawn Hudson, visit leadingauthorities.com/speakers/dawn-hudson.

    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 knowledge to encourage the financing, leasing and insuring of general aviation aircraft. For more information about NAFA, visit NAFA.aero.

  • Tracey Cheek posted an article
    2019 Q4 Market Update see more

    NAFA member, Lone Mountain Aircraft, shares their 2019 Q4 Market Update.

    Aircraft owners face an ever-changing market. That is why our team of experts is committed to being your ally in aviation. Whether buying, selling or financing, Lone Mountain Aircraft simplifies the aircraft ownership experience so you can have peace of mind with each step of the process.

    Jet Market By Spencer Bain

    Not much has changed lately in the jet market from last quarter to this quarter. Vaguely increased jet transactions, mildly downturned turboprop sales, lax calls backs and half-day Fridays prove the market is experiencing its traditional summer slow down. As of late, Lone Mountain is working closely with the business owner or board member wanting a plane they can fly, rather than a disconnected c-suite. As one beloved owner-pilot told me recently, “Spencer, I’m willing to buy a plane now rather than later because I know that my tax situation tells me I can make an advantageous tax purchase now.” Lone Mountain stands ready to assist those who want to take advantage.

     

    Turboprop Market By Gordon Ramsay

    The third quarter is remaining active, and yet seems to be slightly slowing across the single-engine turbine market. With global economic questions surrounding trade disputes and upcoming elections, folks seem to be hesitating as it relates to high dollar purchases. Fourth-quarter usually strengthens with end-of-year motivated acquisitions, and this year should be no different.

     

    Cirrus Market By Daniel Christman

    Summer is generally a time of slower sales in the piston market as most buyers are busy with summer vacation travels. While first-quarter sales were up from 2018 to 2019, second-quarter pre-owned Cirrus sales were flat. As we turn the corner into fall, the action begins to heat up as summer temperatures cool down with the end-of-year tax planning season right around the corner. The Generation 2 Avidyne market segment continues to remain hot with appropriately priced aircraft selling in less than 60 days. The Generation 6 SR22T market continues to be a bit on the heavy side but as Cirrus closes the books on available aircraft in 2019, sales activity is expected to increase helping to thin that market. Lone Mountain has had the unique opportunity to sell five pre-owned SF50s so far this year and we expect that number to continue to grow.

    As markets continue to change, Lone Mountain Aircraft helps clients bring clarity and expertise to their side of the table. We are proud to be one of the preeminent sellers of pre-owned aircraft worldwide and offer both sales and acquisition services for all types of aircraft. Our team would love to be part of your next success story in aviation!

    This market update was originally published by Lone Mountain Aircraft on September 16, 2019.

  • Tracey Cheek posted an article
    Is There a Minimum Purchase Price to Obtain a 10-Year Loan? see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, answers your aviation loan questions. 

    Q: What's the minimum purchase price to obtain a 10-year loan? I'm looking at aircraft in the $20K-$30K range after 1960.

    A: Thank you for reaching out. The minimum loan amount required for a 10-year term is $20,000. This is after the minimum 15% down payment. Therefore, the minimum purchase price should be around $24,000.  Please feel free to give us a call as you get closer to purchasing. We always recommend that AOPA pilots get pre-approved as they shop.

    Q: I'm thinking of buying my first plane. Would you finance an experimental one? The one I am looking at this moment is a SONEX 2016, tri-gear, with asking price of $39K. What is rate and term?

    A: A number of our lenders offer financing on experimental aircraft. In some cases, a lender may require that the aircraft have an appraisal. Our account executives will discuss that requirement with you early in the application process. A SONEX is common enough that an appraisal is not likely needed. For a purchase price of $39,000 rates will fall around 7.5% for 10 years. Keep in touch as you search. Our account executives can help with providing rate quotes and valuations as you shop around.

    This article was originally published by AOPA Aviation Finance Company on June 12, 2019.

  • Tracey Cheek posted an article
    Hagerty Jet Group Releases Q3 2019 Market Update for Gulfstream Aircraft see more

    NAFA member, Hagerty Jet Group, released the latest Gulfstream Aircraft Market Update.

    Will Gulfstream Announce 2 New Long-Range Models at NBAA 2019?

    In our Quarterly Market Update for Gulfstream Aircraft back in Q1 2017, Hagerty Jet Group commented that Gulfstream was overdue for a replacement or improvement to the G650. Almost 2 years later, we feel certain the announcement is finally here after years of development and speculation.

    Gulfstream recently updated their website and marketing materials. For reasons that should become obvious in the coming weeks, Gulfstream is no longer advertising the G650 – just the G650ER. This leads us to believe they will imminently launch two new models, likely to be named the G700 and G800. We think the G650ER will be replaced with a model, potentially called the G800, to match the nearly 8,000nm range. A second larger model with 4-zone cabin plus a dedicated crew rest area could be named the G700, which would be consistent with their branding and an estimated 7,000nm range.

    Back in 2017, we speculated that one of the key features we expect to see is the Symmetry Cockpit which was designed for the G500 and G600 and is receiving amazing feedback from operators. Gulfstream continues to stay ahead of the competition when it comes to technology, and it only makes sense for the latest technology to be available on their flagship aircraft.

    We don’t think there will be any need to modify the wing significantly. Since the wing
    fuel tank on the G650ER has never been used to its fullest capacity, we believe another 2,000 lbs. of fuel could be accommodated. The G650ER already has a published range of 7,500nm and has already broken world records over 8,000nm.

    We expect the G700 to have four dedicated cabin zones plus a crew rest area. Gulfstream will need to extend the fuselage by at least 8 feet to make this the longest Gulfstream ever. The longer fuselage will keep Gulfstream in competition with the Global 7500, which also features the four-zone configuration plus crew rest area. The G700 will probably include 2 more windows on each side which means more natural light in the cabin – one of the most impressive features on the Global 7500.

    With the larger and heavier airframe, something would have to be done with the power plants. Gulfstream chose the Pratt & Whitney model engines on the G500 and G600
    – a notable departure from the traditional Rolls Royce Engines. Although P&W likely competed for the new engine, we believe that Rolls Royce will partner with Gulfstream for the new models. It’s unlikely they have modified the BR-725 engine. The Pearl engine on the Global 6500 isn’t powerful enough. Perhaps the most exciting news we can expect

    is a clean sheet design engine specifically built for Gulfstream by Rolls Royce. If this is the case, loyal Gulfstream operators will be super pleased by the reunion of the two companies.

    The largest airshow in North America, NBAA, will be held in Las Vegas from October 22- 24. This is typically the most popular venue for new product launches. However, with less than 3 weeks from the big convention, there’s been no news out of the Savannah manufacturer. Details are being held closely under wraps. In typical Gulfstream fashion, we may expect to see at least one test aircraft on display at NBAA. The only thing better would be a completed G700.

    In the event the new products are announced, they will be the most notable headlines at NBAA in years and the demand to get on board the new models will be greater than ever.

    Click here to see the full report.  

    This report was originally published by Hagerty Jet Group on October 1, 2019.

  • Tracey Cheek posted an article
    Aircraft Insurance Trends Upward - “A change is gonna come…” see more

    Competition among underwriters has kept aviation insurance rates low for more than a decade – unsustainably low. That’s why those good times have come to an end, resulting in fewer insurers, tighter underwriting standards, and more scrutiny of pilot experience and training – creating today’s hard market with increased rates.

    But that’s history. What’s in the cards for 2020 – and beyond – and what can you do to hold the line on increased overhead cost?

    Stephen P. Johns, LL Johns Aviation Insurance, and John Brogan, USAIG president, discuss the market and give you some helpful advice in Aircraft Insurance Trends Upward.

    When there’s more to be said than space and copy deadlines allow, you can rely on the Business Aviation Advisor “Above and Beyond” podcast series to get you the information you need, enabling you to make the most of your aviation investments.

    Thanks for reading – and listening!

    This article was originally published by Business Aviation Advisor on October 29, 2019.

  • Tracey Cheek posted an article
    Elevate Jet Joins National Aircraft Finance Association see more

    FOR IMMEDIATE RELEASE

    EDGEWATER, Md. – October 18, 2019 – National Aircraft Finance Association (NAFA) is pleased to announce that Elevate Jet recently joined its professional network of aviation lenders. 

    “NAFA members form a network of aviation finance services who diligently and competently operate with integrity and objectivity throughout the world. We’re excited to welcome Elevate Jet to our growing organization as we head to our 50th anniversary,” said Jim Blessing, President of NAFA.

    Elevate Jet, a subsidiary of Elevate Holdings, is a trusted and professional single-source set of solutions for private jet owners and flyers, offering aircraft management, corporate shuttle, consultancy, and advisory services. The company has been serving private aviation with professional services since 2003, advising private flyers concerning their aviation interests.

    Elevate is a premier aircraft management company founded on the growing need for boutique style aircraft management. The company is designed to align with their clients’ mission profiles, providing highly customized services to private aircraft owners and flyers. Their experienced aviation team has a wealth of industry knowledge and intelligence that ensures exemplary levels of bespoke service in aircraft management and aircraft consultancy

    Much like NAFA, Elevate Jet places great importance on fostering knowledge, experience and trustworthiness throughout the aviation industry, providing the highest levels of professionalism in aviation asset management advisory.

    “Elevate Jet takes our fiscal responsibilities to our managed aircraft owners seriously, as well as to the clients that retain us to provide aviation advisory services,” said Patti Ann Sullivan, Executive Vice President – Aircraft Management. “The NAFA forums for discussion of issues impacting the aviation and finance industry, exploration of best practices and review of risk mitigation strategies, along with continuous education benefit the industry and the aircraft owners and flyers that we are fortunate to serve. It is for these reasons Elevate Jet is pleased to be a member of the esteemed NAFA association." 

    For more information about Elevate Jet, visit nafa.aero/companies/elevate-jet-llc.

    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 knowledge to encourage the financing, leasing and insuring of general aviation aircraft. For more information about NAFA, visit NAFA.aero.