buying an aircraft

NAFA member, CFS Jets, discusses what questions to ask prior to signing your aircraft lease.

Signing an aircraft lease can be an attractive option for operators seeking flexibility without hefty upfront costs. However, before diving into an agreement, it’s essential to ask the right questions. Understanding lease structures, return conditions, and potential operational restrictions can save you from unexpected challenges down the road. Consulting legal experts and gathering insights from industry specialists can further ensure a smooth leasing experience. In this post, we’ll explore critical considerations for would-be lessees to keep in mind before signing on the dotted line. Continue reading to learn more about the questions you should ask before signing an aircraft lease. 

Leases are a popular option for aircraft operators, providing flexible access to a platform without the need for large capital investments. But what are the big questions would-be lessees should ask before signing on the dotted line? Gerrard Cowan finds out…

Confirming that the chosen structure will achieve your objectives is a good place to start, he adds.

Global Jet Capital is a major US-based provider of leasing (and other lending solutions) for business aircraft. These include operating leases, where the aircraft is owned by the lessor for the duration of the lease and handed over at the end of the term; finance leases, through which the lessee can take eventual ownership of the asset; and sale and leaseback arrangements, where an owner sells their platform to the lessor and then leases it back, enabling them to free up capital while retaining the use of the aircraft.

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This article was originally published by CFS Jets on October 9, 2024.

NAFA member David G. Mayer, Partner with Shackelford, McKinley & Norton LLP, discusses what it takes and who it takes to successfully complete an aircraft purchase.

No one should buy a used aircraft on the fly. But that does not mean the parties cannot, or should not, move quickly and efficiently to close a purchase. Some prospective purchasers treat buying an aircraft as if it is just like acquiring real estate, a car, or a boat. However, those purchases do not trigger similar complex and intersecting regulatory, liability, tax, risk management, financing/leasing, and technical equipment issues.

Sometimes trying to pace or schedule an aircraft purchase from any point in the deal continuum to closing seems more aspirational than practical. After more than four decades of practicing law, it seems no deal is the same; no deal is “simple;” and few purchases occur without external factors complicating decisions such as the U.S. presidential election, turbulent geopolitics, and economic conditions. How, then, does a purchaser start this buying journey, and what should the purchaser expect to happen?

Transaction Teams

First and foremost, a potential purchaser should hire an aircraft broker with aircraft market knowledge, strong business aviation industry relationships, team-oriented negotiating skills, and economic analysis capability. Some technical consultants also function well as brokers. Such brokers know and, in real-time, can apply to purchase decisions such factors as increasing aircraft inventories, constraints on pilot availability and high compensation, declining interest rates, and fluctuating prices in different aircraft makes and models.

Second—or first to help assess team members—a purchaser should select an aviation lawyer with deep aviation legal knowledge and deal experience, wide industry contacts, and a sense of urgency aligned with the client’s objectives.

Third, the lawyer and broker can and should recommend other appropriate aviation resources, including aviation insurance brokers, tax accountants, technical consultants, FAA counsel, and escrow and trust companies. These people, acting concurrently with the lawyer and broker, can help pick up the pace, facilitate a smooth closing, and enhance the quality of services to the parties.

Aviation professionals understand how to work rapidly, interactively, and responsively in tight coordination with their seller and purchaser clients while avoiding mistakes like those I previously identified (see “AINsight: 7 Avoidable Mistakes in Acquiring a Bizjet”).

Unfortunately, in my experience, some purchasers seem reluctant or decline to incur the expense for these resources, even in large aircraft purchases. They believe their inside counsel or other non-aviation lawyer alone can manage the process and aviation issues. Through no fault of those lawyers, the choice may result in significant mistakes such as operating the aircraft in violation of the Federal Aviation Regulations (FARs), incurring sales tax, structuring to limit personal liability, and reducing federal income tax benefits.

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This article was originally published by AIN on September 13, 2024.

Can you afford a private jet? Beyond the purchase price, it’s crucial to evaluate the full scope of ownership costs. From hourly Direct Operating Costs (DOCs) to maintenance, fuel, and crew expenses, understanding these variables will determine your actual budget. Analyzing these factors in relation to your planned usage will help you gauge the true cost of ownership. Additionally, considering unexpected costs and fluctuations in expenses will give you a more accurate financial picture. Continue reading to learn more about what it truly means to afford a private jet, including how to assess the comprehensive costs beyond just the purchase price.

Let’s assume you’ve found what looks like the ideal aircraft to buy for your mission requirement. The purchase price falls within range, but does that necessarily mean you can afford it?

Analyzing the hourly Direct Operating Costs (DOCs) of the aircraft is vital. It is particularly important to look at the DOC from the perspective of the average stage length you anticipate flying, as well as how these might change on shorter or longer flights.

The DOC (which we’ll refer to as the Variable Costs) should include fuel, maintenance, landing, parking and ground handling fees, spare parts, crew expenses (including layovers), and catering costs, among others.

You’ll need to establish several assumptions when preparing a variable cost analysis which will form the baseline of your assessment.

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This article was originally published by NAFA member CFS Jets on August 14, 2024.

Acquiring a business jet is a significant investment that demands expertise, meticulous planning, and an in-depth understanding of the aviation industry. The process involves careful evaluation of market options, detailed inspections, and strategic negotiations to ensure the best value for your investment. From identifying the right aircraft to navigating the complexities of financing and legal requirements, every step requires a dedicated approach to achieve a successful and seamless acquisition.

Understanding Your Flying Profile

The first step in any successful aircraft acquisition is understanding your unique flying profile. This includes typical travel destinations, flight frequency, passenger requirements, and specific operational needs. Whether long-range capabilities for international travel, a spacious cabin for in-flight meetings, or advanced avionics for enhanced safety, identifying these needs ensures you invest in an aircraft that meets your specific requirements.

Comprehensive Insight into Operating Costs

Owning and operating a business jet involves various costs beyond the initial purchase price, such as maintenance, fuel, crew salaries, insurance, and hangar fees. Detailed cost analyses and transparent information on these operating costs are crucial for making informed decisions. Understanding the full spectrum of operating costs allows for accurate budgeting and long-term sustainability of your investment. This helps in choosing an aircraft that fits within your financial framework while delivering the required performance

Thorough Pre-Buy Inspections

A crucial step in the aircraft acquisition process is the pre-buy inspection. This meticulous inspection ensures that the aircraft is in optimal condition and free from any hidden issues that could impact its performance, safety, or residual value. Pre-buy inspections cover every aspect of the aircraft, from the airframe and engines to the avionics and interior. Scrutinizing maintenance records, verifying compliance with airworthiness directives, and assessing the overall condition of the aircraft ensures a clear understanding of the aircraft's health and any potential future maintenance requirements.

Leveraging Vast Industry Experience for the Best Deal

Securing the best deal involves more than just negotiating the purchase price. It requires understanding market trends, having access to a broad network of industry contacts, and leveraging experience to navigate the complexities of the transaction. Industry experience and deep market knowledge are key to negotiating favorable terms, whether it's the purchase price, warranties, or after-sales support. Expertise in these areas ensures that you get the most value from your investment, making the acquisition process as smooth and beneficial as possible.

Ensuring Regulatory Compliance

Navigating the regulatory landscape is a critical aspect of business jet acquisitions. Understanding and complying with aviation regulations, registration requirements, and operational guidelines is essential to ensure the legality and safety of your aircraft operations. Expert guidance in this area helps mitigate risks associated with regulatory non-compliance and ensures a seamless integration of the aircraft into your operations.

Long-Term Asset Management

Once the acquisition is complete, effective asset management becomes crucial. This includes regular maintenance, timely upgrades, and strategic planning for the aircraft's lifecycle. Implementing a proactive maintenance strategy ensures optimal performance and extends the aircraft's lifespan. Additionally, understanding the resale market and timing can significantly impact the long-term value of your investment.

Future-Proofing Your Investment

Incorporating future trends and technological advancements into your acquisition strategy can future-proof your investment. Staying abreast of innovations in aircraft design, avionics, and sustainable aviation fuels ensures that your aircraft remains competitive and compliant with evolving industry standards. Planning for future upgrades and considering the environmental impact of your aircraft operations can also enhance the sustainability and desirability of your asset.

Conclusion

Acquiring a business jet is a significant investment that requires expert advice, careful planning, and a personalized approach. Combining these elements delivers a seamless and efficient acquisition process. From understanding your flying profile and operating costs to conducting thorough pre-buy inspections, ensuring regulatory compliance, and negotiating the best deal, the goal is to ensure you receive an aircraft that perfectly suits your needs and budget. Expert advice helps make informed, cost-effective decisions, removes risk, and ultimately maximizes the value of your investment, making the journey towards owning the perfect business jet a successful one.

This article was written by NAFA member, Chris Langan, Director of Marketing, ZenithJet, and published by NAFA on August 12, 2024.

FOR IMMEDIATE RELEASE: August 2, 2024

Contact: Tracey Cheek  
tlc@nafa.aero   
405-850-1292  

Alex Martin
alex@aircraftcash.com
859-694-8589  

NAFA Welcomes New Member: Aircraft Guarantee & Lending  

Edgewater, MD – August 2, 2024—The National Aircraft Finance Association (NAFA) is pleased to announce that Aircraft Guarantee & Lending has recently joined its network of aviation professionals. Aircraft Guarantee & Lending (AGL) is an aircraft loan and insurance brokerage. 

“Aircraft Guarantee & Lending joining NAFA is a step forward in advancing our mission to improve and facilitate the financing process to support aircraft buyers,” said Ed Medici, NAFA President. “We welcome AGL to our growing organization and enhancing opportunities for all our members.”  

About Aircraft Guarantee & Lending: 
Aircraft Guarantee and Lending is a family-oriented company dedicated to providing comprehensive financial solutions for the aviation industry. With a focus on aircraft financing and insurance, they offer competitive rates and personalized service to clients nationwide. Their partnership with AirMart Aircraft Sales & Brokerage allows them to streamline the aircraft purchasing process and provide clients with a one-stop shop for all their aviation needs. 

Additionally, Aircraft Guarantee and Lending is committed to supporting the aviation community through various initiatives and partnerships. They are known for their exceptional customer service and dedication to building long-term relationships with their clients. “AGL partners with multiple banks that are NAFA members,” says spokesperson Alex Martin, “We are excited to grow our banking relationship with new banks and provide banks with indirect aircraft loan volume.”  

To learn more, visit aircraftcash.com.  

About NAFA:   
The National Aircraft Finance Association (NAFA) is a professional association that has been promoting the general welfare of aircraft finance for over 50 years. Our network of members is comprised of lenders and product service providers who work together to finance general and business aviation aircraft. NAFA sets the standard for best practices in aviation finance by educating its members on the most up-to-date industry trends and best practices. Government legislation, market influences, and industry insights allow member companies to provide the highest quality services the industry has to offer. 

An aircraft purchase and sale agreement is the central document in any aircraft transaction, setting forth the most important terms of the deal. Gerrard Cowan with AvBuyer asks industry experts to outline the major focuses in such agreements.

According to Stephen Hofer, President of Los Angeles-based Aerlex Law Group, not only does the aircraft purchase agreement set forth all essential commercial terms of the transaction, but it serves as the roadmap to guide all parties – particularly the seller, buyer, brokers and escrow company – as they navigate their way from the point of signature to the point of closing and delivery.

It is, therefore, vital to pay careful attention long before it comes to signing on the dotted line, he says. When the parties are ready to begin drafting a purchase and sale agreement, they will already have reached a meeting of the minds on the most basic points, such as what is being sold and the sale price.

Complications can arise in determining the delivery conditions, however. “In what condition, exactly, is the seller agreeing to deliver the aircraft at closing?” Hofer highlights.

“Sellers and buyers often have not focused on this issue at the time a Letter of Intent (LOI) is signed, so it’s up to the lawyers, working with their clients, the brokers, the technical representatives and sometimes the Pre-Purchase Inspection facility, to reach a clear understanding of the specifications the aircraft will satisfy at the moment the seller hands over the keys at the delivery location.”

Depending on how the purchase agreement is drafted, the precise language regarding delivery condition can sometimes cost one of the parties thousands, or even hundreds of thousands of dollars because it will help determine what constitutes a discrepancy or ‘squawk’, and who’s responsible for fixing it.

“Very careful attention needs to be paid to the contract at this stage of the drafting,” Hofer stresses. 

Aircraft Purchase Agreements Handle the Unexpected

The purchase and sale agreement is central to a transaction not just because it defines an outline of how a deal is to proceed, but because it also contemplates “just about any sort of event, nuance or occurrence that might take place – those that are expected and unexpected”, Janine K. Iannarelli, President of Par Avion Ltd, shares.

Provisions to deal with the unexpected are perhaps the most important element, she says, because there needs to be a means to deal with something like damage occurring to the aircraft in the course of the transaction.

Unexpected events could also involve financial difficulties that impact the buyer or seller and their ability to conclude the deal. Iannarelli says she has even seen deals fall apart because one of the parties has passed away.

“You have to have a means with which to unravel the transaction in a fair and equitable fashion, because you can’t just break a deal,” she highlights. Usually, a financial solution is involved: the forfeiture of the deposit (or part of the deposit), for instance, or specific damages depending on the reason for the default.

Read full article here

This article was written by Gerrard Cowan with AvBuyer, and originally published on July 22, 2024.

They should form an integral part of due diligence in any aircraft transaction, but who pays for the findings that emerge from a Pre-Purchase Inspection, and what benefits do they offer both seller and buyer? Gerrard Cowan, with AvBuyer, learns more.

Pre-buy or pre-purchase inspections (PPIs) are critical to the aircraft acquisition process, ensuring the aircraft meets the required technical and airworthiness standards. It can be a complex area, with varying financial implications. But what are some of the common issues that arise from the process that buyers and sellers should be aware of?

The need for a PPI is clear. It isn’t possible to obtain a full understanding of the asset from a due diligence perspective based on technical specifications or remote records and photos alone, says Rob Watts, Director of Consulting at ACC Aviation.

“Performing a thorough inspection of the aircraft/engine and its records will ensure that the buyer knows what they’re buying, [the aircraft’s] technical condition and airworthiness status, and make the buyer aware of any potential maintenance expenditure liabilities they may be acquiring,” he says.

“The inspection also serves as the basis for further price (or other conditions) negotiations, should it be required.”

George Kleros, Senior Vice President of Advisory Services at JSSI, says a PPI should always be considered a mandatory step in the transaction process, adding that the complexity of the process is often impacted by such factors as the aircraft’s age and operating region. However, the PPI “may have been overlooked during the pandemic as one of the seller’s conditions to expedite the sale.”

Who Pays for any Issues the PPI Identifies?

Typically, the issue of who pays for what following a Pre-Purchase Inspection will be clearly identified in the aircraft purchase agreement, says Kleros.

“Airworthiness squawks - which require corrective action immediately to allow the aircraft to fly - usually default back to the seller. Non-airworthy discrepancies such as exterior/interior cosmetic issues or wear-and-tear could be deferred and deflected back to the buyer,” he explains.

There may be concessions on either side, but “it all depends on the willingness of the seller and buyer to compromise and come to an agreement.”

Read full article here

This article was written by Gerrard Cowan of AvBuyer and originally published on July 25, 2024.

FOR IMMEDIATE RELEASE: July 11, 2024 

Contact: Tracey Cheek 
tlc@nafa.aero  
405-850-1292 

Scott Oshman 
info@oshmanaviation.com 
817-661-0234  

NAFA Welcomes New Member: Oshman Aviation 

Edgewater, MD –July 11, 2024—The National Aircraft Finance Association (NAFA) is pleased to announce that Oshman Aviation has recently joined its network of aviation professionals. Oshman Aviation is an IADA-accredited aircraft dealer that provides aircraft sales, management and consulting services. 

“NAFA members proudly finance, support or enable the financing of general and business aviation aircraft throughout the world, and we are happy to add Oshman Aviation to our association,” said Ed Medici, President of NAFA. 

About Oshman Aviation:
Established in 2017 and based in Fort Worth, Texas, Oshman Aviation is an IADA accredited aircraft dealer providing aircraft sales, management, and consulting services. The company specializes in business jets and turboprops, focusing on Beechcraft King Air and Cessna Citation models. Operating as an inventorying dealer, Oshman Aviation acquires and sells aircraft from its inventory while offering global brokerage services to its clientele.

“Oshman Aviation is proud to join NAFA as the industry-leading association for aircraft finance,” said Scott Oshman, Oshman Aviation’s President. “We look forward to partnering with NAFA members and are committed to providing current market data to NAFA members and their clients, facilitating informed decision-making in aircraft transactions.” 

When purchasing or selling an aircraft, assembling a team of trusted and experienced professionals is important for ensuring a smooth and successful transaction. This team should be vetted to ensure the highest ethical standards and levels of experience. Oshman Aviation is dedicated to providing its clients and partners with ethical, comprehensive and value-based services. 

To learn more, visit oshmanaviation.com. 

About NAFA:  
The National Aircraft Finance Association (NAFA) is a professional association that has been promoting the general welfare of aircraft finance for over 50 years. Our network of members is comprised of lenders and product service providers who work together to finance general and business aviation aircraft. NAFA sets the standard for best practices in aviation finance by educating its members on the most up-to-date industry trends and best practices. Government legislation, market influences, and industry insights allow member companies to provide the highest quality services the industry has to offer. 

If an engine upgrade makes sense for your aircraft, you don’t necessarily have to foot the bill up-front. Gerrard Cowan, with AvBuyer, speaks to a selection of industry experts to find out when financing might make the most sense, and how to approach this.

There can be significant benefits to an engine upgrade for business aircraft where they are available. Operational performance is enhanced, fuel consumption lessened, and resale value can be boosted. But how can owners considering an engine upgrade set about financing their upgrade?

This is a complex area, with an owner’s decisions likely to be influenced by a variety of factors, such as their demands for the aircraft in the long-term, the age of the platform, and any existing financing arrangements.

For many business aircraft owners, it could make sense to simply acquire an entirely new aircraft. But for some, a good option is to remove their existing engine(s) and replace it/them with another.

Blackhawk Aerospace is a specialist provider of such engine upgrade work through its XP Engine+ Upgrade program. As of May 2024, the company had upgraded over 1,000 Beechcraft King Air, Cessna Caravan, Conquest and Piper Cheyenne aircraft with factory-new Pratt & Whitney Canada engines.

Edwin Black, the company’s President, explains that the company develops Supplemental Type Certificates (STCs) to take the stock engine out of an aircraft and install a brand- new engine with more horsepower.

“The demand is strong because everyone wants to go faster,” he says. “We are seeing more demand now than we ever have in Blackhawk's 25-year history and it’s because of the convenience of flying private vs commercial, especially when you are flying for your business.”
 

When is it Easiest to Finance an Aircraft Engine Upgrade?

The easiest way to finance an upgrade is “if you don’t have an aircraft already and are in the market, because you can buy the aircraft and engines at the same time and roll them into the same loan,” he suggests.

When you already have an engine, however, it takes more effort to get financing, though Blackhawk has been working with providers who have offered such solutions for just the engine for some time. “Financing helps customers enjoy the benefits of flying faster sooner rather than later,” Black adds.

Pratt & Whitney Canada (P&WC) has worked closely with Blackhawk for over 20 years, explains Geoffrey Corbeil, Executive Director for Commercial Services at the engine manufacturer, highlighting that Blackhawk celebrated its 150th upgrade of a Cessna Caravan in October 2023 with two options available: XP140 and Vy conversions, featuring P&WC PT6A-140 and PT6A-42A engines, respectively.

According to Corbeil, financing options will naturally depend on the owner’s circumstances. But, even when financing is involved, there can be a significant increase in aircraft value, he adds.

More broadly, Corbeil says owners should consider enrolling in an engine program, such as P&WC’s ESP.

Read full article here

This article was originally published by AvBuyer on June 24, 2024.

FOR IMMEDIATE RELEASE: June 27, 2024 

Contact: Tracey Cheek  
tlc@nafa.aero  
405-850-1292 

Tim Pollard 
Managing Member 
(817) 626-7000 
opportunity@apogeefinance.com 

NAFA Welcomes New Member: Apogee Finance  

Edgewater, MD –June 27, 2024—The National Aircraft Finance Association (NAFA) is pleased to announce that Apogee Finance has recently joined its network of aviation professionals. Apogee Finance, founded in 2013 by industry veteran Tim Pollard, provides specialized financial services for private and corporate aircraft transactions, offering comprehensive market knowledge, real-time valuations and streamlined processes.  

“NAFA members facilitate the financing of general and business aviation aircraft on a global scale,” said Ed Medici, NAFA President. “We welcome and support the services Apogee Finance provides that play a role in advancing the interests of NAFA members within the aviation industry.”  

About Apogee Finance: 
Apogee Finance, established in 2013, offers specialized financial services for the private and corporate aircraft markets. The company aims to facilitate efficient transactions in the time-sensitive aviation industry.  

With over 60 years of combined aviation experience, the Apogee team provides:  

• Comprehensive market knowledge 
• Real-time aircraft valuations 
• Personalized services 
• Streamlined paperwork processes
• Competitive rates  

To learn more, visit apogeefinance.com. 

About Tim Pollard: 
For over 30 years, Tim Pollard has been a reputable leader in the aviation industry. With over 900 transactions behind him, Tim is a market expert, passionate about airplanes and fostering exceptional customer satisfaction. After launching Pollard Aircraft Sales in 1993, Tim has continually evolved his company to accommodate customer needs and meet market demands. As a seasoned aircraft sales professional with a comprehensive view of the industry, he understands how difficult it can be to obtain financing for certain aircraft, especially in a timely manner. As a solution, he established Apogee Finance to provide customized and efficient financing options for aircraft dealers, brokers and end users. 

About NAFA: 
The National Aircraft Finance Association (NAFA) is a professional association that has been promoting the general welfare of aircraft finance for over 50 years. Our network of members is comprised of lenders and product service providers who work together to finance general and business aviation aircraft. NAFA sets the standard for best practices in aviation finance by educating its members on the most up-to-date industry trends and best practices. Government legislation, market influences, and industry insights allow member companies to provide the highest quality services the industry has to offer. 

Many buyers instinctively want to pay the full purchase price in cash when purchasing an aircraft. While this may seem like the simplest and most expedient option, there are several compelling reasons to consider financing your aircraft purchase instead of liquidating investments to pay all cash. 

In this article, we will explore ten key reasons financing an aircraft can be a smart financial move and how working with experienced aviation finance professionals can help you navigate the process with confidence.  

1. Keep your cash invested 

One of the most significant advantages of financing an aircraft is the ability to keep your cash invested. Selling stocks, cashing in investments and depleting cash reserves can come with big opportunity costs and tax implications. Even if you have enough liquidity to buy an aircraft outright, that money could, over time, likely generate far greater returns if you keep it invested in the market or your business.  

Discussing your plans with your investment advisor first may help you understand exactly what opportunities you may be foregoing and the consequences associated with divesting.  With interest rates spanning the 6% to 7% range, still comparatively low from a historical perspective, the cost of financing will often be less than the expected return you can earn on that cash if invested wisely. 

Additionally, financing can free up that capital for other investments or business opportunities. This can be advantageous for business owners who need to maintain liquidity to seize new opportunities or manage possible future cash flow gaps effectively. Keeping your capital invested in your business or other high-return investments can often yield better financial outcomes than tying it up in an aircraft.  

2. Preserve liquidity for necessary or unexpected ownership costs  

Buying an aircraft involves many more expenses beyond the purchase price, including taxes, registration fees, hangar costs, maintenance, insurance, crewing and more. Paying all cash upfront can leave you cash-strapped when these additional ownership costs arise.   

For example, investing in a comprehensive aircraft maintenance/engine program can provide significant benefits when owning a turbine aircraft. These programs are prepaid hourly services that help make sure your aircraft remains in top condition, which is important for maintaining its value. By keeping the engine hours at a "zero level" through regular maintenance, you can maximize the appraisal value of your aircraft when it comes time to sell.  

Financing preserves liquidity, so you have cash on hand for this as well as any future upgrades or unforeseen issues. This financial flexibility is important, especially in the aviation industry, where unexpected costs can be significant.  

3. Preserve liquidity for risk mitigation  

Consider how cash on hand can help cover unexpected expenses outside of the aviation world. Individuals should think about how they will deploy their cash reserves if a potential issue arises that might deplete their remaining liquidity. For example, a reversal of fortune related to changing economic circumstances or paying for an unexpected family health event that could significantly change your financial situation.  

Financing up-front could potentially avert the need to sell the aircraft or obtain cash-out financing in order to raise funds to address unforeseen events down the road. Note that obtaining cash-out financing after the fact is not guaranteed due to many factors, such as collateral depreciation. Furthermore, there is rate risk associated with cash-out financing at a future date down the road. Last, economic downturns may impact your financial capacity and future ability to obtain cash-out financing.   

Business owners may need to maintain cash reserves to satisfy liquidity covenants and fulfill any prior financing commitments, such as lines of credit or long-term financing obligations. When considering the interest rate offered to your business, it’s important to recognize that having a cash cushion serves as a buffer to cover these potential future requirements.  

4. Tax advantages of financing  

The interest on an aircraft loan is often a tax-deductible expense, and financing lets you take advantage of not only depreciation deductions but also interest expenses, which offset income.  

Under current bonus depreciation rules, you may deduct for eligible aircraft, up to 60% of the purchase price in the first year, which is further enhanced by the addition of those interest expenses. For business aircraft, these benefits can be substantial, making financing an attractive option from a tax planning perspective.  

5. Easier to resell 

Keeping your cash invested provides greater flexibility if you need to resell the financed aircraft. You won’t be pressured to liquidate the aircraft quickly, often at a discount, to recoup the capital invested in the aircraft. This flexibility can be beneficial in a volatile market where aircraft values can fluctuate.

6. Easier than you think 

Many buyers dread the paperwork and hassle of financing an aircraft. However, working with an experienced aviation lender, like the professionals at the National Aircraft Finance Association (NAFA), makes the process easier. From brokers, lenders, accountants and more, NAFA members understand aircraft purchases and can walk you through the process. This knowledge can streamline the acquisition process, especially making it easier and less stressful for first-time buyers.  

7. Manageable monthly payments 

Aircraft financing typically offers manageable monthly payments, which can be easier to handle than a large lump-sum payment. This lets you spread the cost of the aircraft over time, making it more affordable and less of a financial burden. Fixed interest rates on loans can also provide predictability in your financial planning. 

8. Potential for better aircraft 

Financing can enable you to leverage your cash to buy a better aircraft than you could afford with cash. A larger down payment often translates to better interest rates and terms. This can mean better performance, newer technology and greater comfort, which can enhance your flying experience and potentially increase the aircraft’s desirability in a future resale environment. By spreading the cost over time, you can access higher-quality aircraft that better meet your mission.  

9. Avoid unwarranted tax consequences  

As broadly discussed above, paying cash for an aircraft often requires liquidating investments, which can trigger capital gains taxes and reduce your overall investment portfolio. Financing lets you avoid these tax implications and keep your investment portfolio intact, continuing to grow and generate returns. This can be important for individuals nearing retirement or those with significant investment portfolios.  

10. Professional guidance and support 

Working with specialized aviation finance professionals can provide valuable guidance and support throughout the financing process. These experts understand the unique parts of aircraft financing and can help you navigate the complexities, ensuring you get the best terms and conditions for your loan. This professional support can make the financing process smoother and more efficient.  

Lenders have developed standardized compliance checklists and processes to ensure judicious steps are taken before the sale is finalized. These steps include but are not limited to confirming the aircraft's airworthiness is certified, verifying that annual inspections have been completed, review of Appraisal, pre-buy inspections, title searches and escrow instructions related to the sale. Professionals will ensure these forms and procedures are properly completed throughout the process. By following these established protocols, you can take flight in a timely manner while remaining compliant with all legal requirements. 

Conclusion

While paying cash for an aircraft may seem like the simplest option, financing offers many advantages that can make it a smarter financial decision. From preserving liquidity and taking advantage of tax benefits to keeping your cash invested and maintaining financial flexibility to pay for aircraft expenses and taxes, financing can provide significant benefits for aircraft buyers.  

By working with experienced aviation finance professionals, like NAFA members, you can navigate the financing process with confidence and make your dream of aircraft ownership a reality.  

The best financing choice depends on your unique financial situation, tax status, liquidity needs and aircraft usage. Consult your financial advisor, but for many aircraft buyers, financing is the smartest way to make airplane ownership a reality.  

About Keith Graham:  

Keith Graham is Senior Vice President at Salem Five Bank in Georgetown, Massachusetts, where he has served as Manager of the Aviation Finance Division for almost 20 years. Keith has over 35 years as a licensed pilot and aviation financial professional.  

About NAFA:  

The National Aircraft Finance Association (NAFA) is a professional association that has been promoting the general welfare of aircraft finance for over 50 years. Our network of members is comprised of lenders and product service providers who work together to finance general and business aviation aircraft. NAFA sets the standard for best practices in aviation finance by educating its members on the most up-to-date industry trends and best practices. Government legislation, market influences, and industry insights allow member companies to provide the highest quality services the industry has to offer. 


Disclaimer:

The information given in this article is for general informational purposes only and is not professional financial, tax or legal advice. While we strive to provide accurate and updated information, it is not a substitute for professional advice tailored to your specific financial situation. Before deciding on the purchase or financing or an aircraft, we strongly recommend consulting with a qualified financial advisor, tax professional or legal expert who can provide guidance based on your individual circumstances. Neither the author nor the publisher assumes any responsibility or liability for any financial decisions made based on the information in this article.  

FOR IMMEDIATE RELEASE: May 28, 2024 

Contact:
Tracey Cheek  
tlc@nafa.aero  
405-850-1292 

Marcelo Abello 
intljettraders@aol.com 
954-491-1941 

NAFA Welcomes New Member: International Jet Traders 

Edgewater, MD – May 28, 2024—The National Aircraft Finance Association (NAFA) is pleased to announce that International Jet Traders has recently joined its network of aviation professionals. International Jet Traders services clients worldwide by selling and acquiring jets, turbo-prop airplanes and turbine-powered helicopters.   

“International Jet Traders joining NAFA is a step forward in advancing our mission to improve and facilitate the financing process to support aircraft buyers,” said Ed Medici, NAFA President. We welcome International Jet Traders to our growing organization and enhancing opportunities for all our members.”  

About International Jet Traders: 
Marcelo Abello, chief executive and founder of International Jet Traders, has specialized in the sales and acquisition of jet aircraft and helicopters since 1984. Marcelo formed International Jet Traders in 1991 to satisfy worldwide buyers and sellers of jets, turbo-prop airplanes and turbine-powered helicopters. Today, the company provides personalized aircraft brokerage and acquisition services to an ever-expanding international client base.  

Marcelo has built a reputation for integrity and customer-centric operations that focus on short and long-term client interests. Since the inception of International Jet Traders, the company has handled sales and acquisitions of over 500 aircraft. 

Sonya Sheldon, who assumed the role of Partner at International Jet Traders in January 2024, adds experience and technical knowledge to the company's leadership team. With over three decades of dedicated service in the Business Aviation sector, including notable roles as Vice President of Sales in the pre-owned aviation industry and as a Flight Test Engineer and Senior Sales Engineer at Gulfstream Aerospace, Sonya's arrival aligns seamlessly with International Jet Traders' commitment to delivering top-quality performance and personalized service. 

International Jet Traders focuses on corporate aircraft sales and acquisitions. This specialized approach ensures a commitment to negotiating contracts that prioritize the client’s best interests. With access to the latest technology and market research, the company possesses correct and updated information on the pricing and availability of every registered airplane worldwide, enabling it to seize key opportunities that maximize clients' return on investment.  

The company works closely with a select clientele to help them achieve their corporate aviation goals, fostering long-lasting business relationships that provide value to their client’s aviation departments. The company’s success is clear in its impressive track record, with much of its business coming from repeat customers. The team leverages its industry knowledge to identify strategic opportunities quickly and cost-effectively while maintaining high ethical standards.  

For more information, visit http://www.intljettraders.com/. 

About NAFA:  
The National Aircraft Finance Association (NAFA) is a professional association that has been promoting the general welfare of aircraft finance for over 50 years. Our network of members is comprised of lenders and product service providers who work together to finance general and business aviation aircraft. NAFA sets the standard for best practices in aviation finance by educating its members on the most up-to-date industry trends and best practices. Government legislation, market influences, and industry insights allow member companies to provide the highest quality services the industry has to offer. 

FOR IMMEDIATE RELEASE: May 15, 2024 

Contact: Tracey Cheek 
tlc@nafa.aero 
405-850-1292

Matthew Scantlin 
SVP, Director of Commercial Banking 
405-260-9836 
M: 405-641-0456 
MScantlin@prism.bank 

 
NAFA Welcomes New Member: Prism Bank 

Edgewater, MD –May 15, 2024—The National Aircraft Finance Association (NAFA) is pleased to announce that Prism Bank has recently joined its network of aviation professionals. Prism Bank offers personalized lending solutions and consultation services to help clients achieve their aviation aspirations.   

“NAFA members proudly finance, support or enable the financing of general and business aviation aircraft throughout the world, and we are happy to add Prism Bank to our association,” said Ed Medici, President of NAFA.   

About Prism Bank: 

Prism Bank has been a trusted institution serving central Oklahoma and beyond since 1909. Their dedicated team and entrepreneurial culture have contributed to their customers’ success for over a century. The bank's service offerings include several areas of specialization, and it is a leader in aviation finance. 

Prism Bank understands the intricacies of aircraft ownership. Whether you're an aviation enthusiast or an experienced pilot, its dedicated Aviation Finance team will find a solution to turn your dreams into reality. 

Prism Bank’s approach goes beyond traditional lending. They create a personalized pathway to ownership that aligns with your financial goals. 

• Personalized Lending Solutions: Tailored lending solutions perfectly fit your financial situation and aviation aspirations. 

• Consultative Approach: The Aviation Finance Team guides you throughout the process, understanding your financial position and aircraft needs to simplify the complexities of financing. 

• Exceptional Service: Their commitment to outstanding customer service ensures they meet your needs from the initial consultation to the moment you take ownership. 

• Central Access to Title Operation: Located near the FAA’s Aircraft Registration, Prism Bank has unparalleled access to aviation industry professionals and support services. Convenient access to these services, as well as the FAA titling office, can streamline the process of purchasing your aircraft. 

• Well-Connected Lending: Their fast turnaround time and competitive rates aren’t their doing alone. They nurture and maintain professional relationships with aircraft brokers, legal professionals and state offices to create an exceptional client experience. 

• Seamless Process: Their experience originating these loans ensures that financing an aircraft is as seamless and hassle-free as possible. They guide you through every step of the process with outstanding service and support, so you get the best solution for you without delay. 

For more information, visit https://prism.bank/. 

About NAFA:  
The National Aircraft Finance Association (NAFA) is a professional association that has been promoting the general welfare of aircraft finance for over 50 years. Our network of members is comprised of lenders and product service providers who work together to finance general and business aviation aircraft. NAFA sets the standard for best practices in aviation finance by educating its members on the most up-to-date industry trends and best practices. Government legislation, market influences, and industry insights allow member companies to provide the highest quality services the industry has to offer. 

Every US state has its own combination of sales and use taxes, property taxes, and sometimes other surcharges it assesses on business aircraft based in, or even just flying to, the state. So how do you know where to arrange delivery of an aircraft to make best use of these? AvBuyer's Chris Kjelgaard asks the experts...

In addition to accounting for sales and use taxes on business aircraft, some states have generous exemptions too, so it’s fair to say that a tax consultant should always be one of the first team members hired by business aircraft buyers in the US to ensure the purchase is handled professionally, smoothly, and concludes successfully.

The most important thing is to call [the tax advisor] first, so you don’t make bad decisions, Daniel Cheung, Principal of aviation accountancy firm Aviation Tax Consultants highlights. “Make your tax planning proactively – call in a tax consultant in advance,” before the aircraft transaction gets under way.

Another reason why a tax consultant should be a core member of any US-based business aircraft acquisition team is that “the [US] tax code is not friendly in terms of complexity,” adds Cheung. “You have to deal with the IRS, the FAA, and even the Securities and Exchange Commission if you’re a public company.”

Cheung explains “proper planning obviously is the key” for any owner buying a business aircraft to minimize their tax exposure to the purchase. Assessments of sales and use taxes depend on where the aircraft is based or hangared, “particularly if the aircraft lives in two or three places”, in which case it may be subject to sales and use taxes in more than one state.

For instance, he notes, “Chicago, Illinois is extremely difficult in terms of tax, but Gary, Indiana [just over the Illinois-Indiana state border a few miles south of Chicago] is not.”

According to Cheung, “80% of the tax planning is based on IRS requirements”. These requirements should be a more immediate concern for the buyer’s purchase advisory team than compliance with FAA regulations, he says, because compliance is ongoing but the tax payment is one-time.

“So the primary discussion is focused on income tax requirements and ownership structure, because the key to the planning is ownership structure”, says Cheung.

“Who owns the aircraft is the key in terms of getting the bonus depreciation rights” which can be offset against tax liability, and “the corporate structure of the client will determine the structure of the ownership of the aircraft”.

Read full article here

This article was originally published by AvBuyer on May 8, 2024.

There are several basic things to know before buying an aircraft, and some less obvious areas too. Having asked the experts to highlight some of these in his previous article, Chris Kjelgaard continues with another five...

After establishing the need for aircraft buyers to pick the right broker, add the right experts to the acquisition team, set and maintain an adequate transaction timeline and meet the financier’s documentation needs, there are other things that should be known before proceeding to buy a business jet.

Did you miss Part 1 of this article? Find it here.

Duncan Aviation’s Sales and Acquisition Specialists Tim Barber and Leah Alexander, and OGARAJETS’ Head of Global Sales, Dustin Cordier share some more things buyers should be clear about...

1. Insist on a PPI and a Full Aircraft Logbook Review

During the height of the post-Covid sales boom, many first-time business aircraft buyers accepted sale terms which did not allow for any pre-purchase inspection of the aircraft and its maintenance records to be performed.

However, every responsible broker and aircraft technical inspector would never recommend that a buyer allow a seller to dictate this. If allowed, it effectively means the buyer is agreeing to buy an aircraft sight unseen without any knowledge of the aircraft’s condition.

At the very least, the buyer should insist that the technical inspector representing them in the purchase negotiations be given full access to the aircraft’s logbook, says Cordier.

The logbook contains the aircraft’s full maintenance history because it should contain full details of each fault found, repair performed and overhaul conducted on the aircraft, including – for US-registered aircraft – a copy of every FAA Form 337 recording major damage and repair.

For the seller to offer the buyer access only to the maintenance tracking software record for the aircraft is not sufficient. “Using maintenance tracking software for that review is like watching a movie version of the book,” Cordier says.

Read full article here

This article was originally published by AvBuyer's Chris Kjelgaard on April 23, 2024.