COVID-19

  • NAFA Administrator posted an article
    Impact of COVID-19 on the Business Aviation Market Part II see more

    NAFA members, General Aviation Services and AMSTAT, share their Business Aviation Market Report.

    To view the full report, click here

    This report was originally published by AMSTAT on December 19, 2020.

  • NAFA Administrator posted an article
    Finding Growth in a Changed World see more

    NAFA member, David Mayer,  Partner at Shackelford, Bowen, McKinley & Norton, LLP, shares his perspective of business aviation amid the pandemic.

    Shifting markets are creating new opportunities in a world altered by COVID-19. Here are some to consider.


    WITH EVERY NEW YEAR COME HOPES FOR A BETTER WORLD, and 2021 is fairly bristling with them. Of particular relevance to equipment finance companies is the Equipment Leasing & Finance Foundation’s 2021 Equipment Leasing & Finance U.S. Economic Outlook, which forecasts 7.8% growth in equipment and software investment this year, and 4.7% growth in the U.S. Gross Domestic Product. Heartened by plans for widely distributed vaccines against COVID-19, industries and the companies within them are re-tooling to apply permanently many of the technologies and efficiencies necessitated by the pandemic. Equipment Leasing & Finance spoke to leaders in several equipment sectors experiencing changes that are leading to growth.Here’s what we learned:

     

    There’s a Window in Trucking 

    Howard Shiebler is President of Crossroads Equipment & Finance LLC and Chairman of Velocity SBA, both in Rancho Cucamonga, California. Financing commercial trucks for transportation companies gives him a strategic view of one of the largest and most dynamic sectors in equipment finance. “We’re in an abnormally strong market now, both with values and the demand for tractors and trailers,” he says. “For those financing in this space, new business volume is up and repossessed inventory is selling quickly, and at good prices.”

    The big question is how long current conditions will last. Increased consumer spending, much of it done online, helped freight markets recover quickly from initial pandemic shock. If economic recovery continues, Shiebler expects the strong transportation market to last well into 2021.

    “Additionally, manufacturers of trucks and trailers have had their supply chains and work forces impacted by the pandemic, and the corresponding shortage of new equipment has driven demand and prices for used equipment to unusually high levels,” Shiebler notes. He adds, “I think some e-commerce-driven demand will become permanent, and manufacturers will eventually catch up with market demand, leading to a more typically cyclical transportation finance market.”

    Nonetheless, Shiebler says equipment finance companies must still do a thorough job of underwriting in the space or risk getting into trouble. “When the economy slows, we’ll see freight rates drop, defaults increase and used truck prices drop fairly quickly,” he warns. “Lenders that understand this cycle underwrite to it, and they also properly staff collections and remarketing operations to deal with increased defaults.”

     

    Healthcare Providers Want More Options 

    Jon Biorkman is President of Healthcare Financial Services at GE Healthcare. As the dynamics of the medical equipment market change, he sees healthcare providers revisiting budgeting, capital structure and other fundamentals of corporate finance to re-evaluate strategy and develop multiple scenarios for use in times of economic uncertainty.

    “To account for variability, leadership teams are examining operating and non-operating cashflows, liquidity sources and cash on the balance sheet,” says Biorkman. “And as market dynamics continue to change, we’re bringing optionality to the table. This can be in terms of structure that allows for the deferment of a more permanent position, or increased liquidity to protect against unpredictable variability in patient volumes, payors and reimbursement trends.”

    One such option is an escrow agreement that pre-funds capital for future equipment acquisitions. “The benefit is to lock in interest rates today, and secure capital for upcoming needs,” says Biorkman. Another option shortens the lease term, enabling equipment usage without full capital outlay. 

    “Creativity is something that matters to customers, and if we look at the market we’ve been operating in, it’s been incredibly dynamic,” Biorkman observes. “We view our role as providing customers with options for a future that may not be certain. We’re having candid conversations with them, being very grounded as it relates to financial projections—where they were before, where they are now, where they’re going. Liquidity and cash on the balance sheet have always been important, but today, customers are placing a premium on both—and alternative financial structures can really provide more tools.”

     

    Aircraft Has Pockets of Promise

    David Mayer, Partner at Shackelford, Bowen, McKinley & Norton, LLP, in Dallas, says the COVID crisis created a potential cash crunch for some owners of aircraft, and that a significant number of these are refinancing or entering into sale-leasebacks to cash out their equity in the equipment. “This is a global phenomenon, also driven in part by lower interest rates,” says Mayer. The upshot: opportunities exist in sale-leasebacks for those able to take residual risk, not just in tax leases, but in true or operating leases.

    Mayer says there are also leases in which the credit advanced is fully paid out and the asset is sold for a purchase price at the end, which can be as low as $1 or another agreed price. “These deals have been active since the emergence of the pandemic and since rates have dropped,” he says. “I expect this trend to continue into 2021.”

    Mayer has handled a number of such transactions and sees a particular market for the refinancing of larger jets with a value of $7 million or more. “One challenge for equipment finance companies will be to persuade customers that they won’t suffer ‘brain damage’ from engaging in a financing transaction,” says Mayer, tongue in cheek. “I say that because, compared to purchasing or borrowing, leasing is a more complex transaction.” Another deterrent among high-net-worth individuals and companies is pride of ownership and reluctance to use a financing product or allow a lessor or lender to control use of their aircraft. 

    “Make no mistake, the market is under stress and the pandemic is not helping,” Mayer cautions. “Companies that buy, lease or charter aircraft are leaving the business. But financiers are ready, able and willing to finance, and are doing more secured loans than true leases because they’re unable or unwilling to take the risk on the value of these assets.”

    The aircraft market was on a downslope that started in 2019, and prices dropped another 10 to 15% at the start of COVID-19 before showing later indications of stabilizing. “But owners didn’t panic and sell; they were smart enough to stand by and wait—unlike what happened in 2008,” says Mayer. “Now equipment finance companies can provide these owners with smart and viable solutions in the form of true leases, tax leases, loans and sale-leasebacks.”

     

    Small Businesses Need Your Capital

    Marlin Capital Solutions provides equipment financing, working-capital loans, vendor financing and franchise financing to approximately 100,000 small businesses throughout the U.S. Thus, the company’s portfolio is a small-business index for sentiment and economic health, and CEO Jeff Hilzinger says the pandemic put the company “right at the center” of the 2020 economic storm.

    “After ensuring the safety of our employees and the stability of our financial portfolio, we transferred people from our front office to our servicing team and immediately began reaching out to customers,” says Hilzinger. “We processed almost 6,000 requests for payment relief, most of them during April and May. And because we own a bank, we have an SBA license and were able to lend under the PPP program. We quickly created a platform to do that. Along with the payment relief we were providing, our goal was to preserve as much liquidity for our borrowers and in our own portfolio as possible.”

    As Marlin helped its customers, the company also saw an opportunity to help itself. “The PPP platform we obtained was digital, and we’d always known we needed to become more digital,” says Hilzinger. “Once we took care of our employees, partners and customers and saw that the pandemic would last a while, we realized it could be a crisis of opportunity for us. We decided to dramatically accelerate our digitization and have been focused on it since June.”

    In 2015, the New Jersey-based, small-ticket Independent had introduced a working-capital loan product to compete against fin techs. “We were always careful with it, because it hadn’t gone through a complete business cycle,” says Hilzinger. “But it turns out that the product performed much better than we expected, so now we’re redoubling our efforts 
    with it.”

    Because the small-business market resides next to the consumer market, Hilzinger says much of what consumers do with their personal credit can be projected for use in small business. “Once customers can access us digitally, we’ll be able to offer lines of credit and other micro-ticket products that were too much work to provide when our processes were manual,” he says. “Now we can offer these in ways that will be exciting to small businesses, and of economic benefit to us. Going digital definitely opens up new opportunities.”

     

    Schools Urgently Need IT 

    Insight Financial Services (IFS) in Costa Mesa, California began studying the nuances of the k-12 school market about six years ago with the goal of doing business there. Through networking, they were introduced to OETC, an Oregon-based consortium that offers contracts for products supplied to K-12 schools and universities throughout the Pacific Northwest. “Needs were starting to change for schools at the time, and one of our customers suggested we talk to OETC about the consortium developing an RFP for school districts to lease IT,” says Andy Hashimoto, Vice President. 

    Over the next year, Hashimoto and Colleen O’Donnell, IFS Senior Vice President of State, Local and Education Business, explained to OETC the benefits municipalities and schools could leverage through leasing. A contract with IFS would allow OETC-member schools to acquire equipment without requesting proposals. 

    “What we found with many schools is that their previous plan had been to put equipment in the classroom with teachers and keep it until it didn’t work anymore,” says O’Donnell. “But the idea was evolving that schools need a sustainable strategy for IT and a budget to support it. They need technology that matches the curriculum, technology for both students and teachers that brings digital learning to life.” 

    COVID-19 greatly accelerated the need, and this past October, IFS was awarded a three-year contract as an approved IT equipment leasing services vendor in California. The contract is in addition to a nationwide agreement IFS already has with OETC, and expands the services the company can provide in California. 

    “This is a growing market for us, and we’ve experienced significant growth over the last couple of years,” says Hashimoto. “Today, school districts need large numbers of devices, and these can be acquired through a leasing contract that manages the entire life cycle.”

    To that point, Hashimoto says much of IFS’s growth in the school market is attributable to asset management services included in the company’s contracts. “The asset management is geared to specific devices and allows school districts to be in control of what happens to the equipment,” he says. And because IFS tailors its leases to individual school-district budgets and needs, IFS is able to serve every customer. “We invest the time with each school district to customize the solution so that it works specifically for them,” says O’Donnell. “We structure from beginning to end to help them have the technology they need to support learning in the classroom and from home.”

    Asked for suggestions for other equipment finance companies considering the school market, Hashimoto and O’Donnell have several thoughts. “Colleen and I have joked that we are evangelists for leasing, but it’s true that customers need to be educated about how leasing can help them,” says Hashimoto. “Our message about this has been the same since we started with the education market, but with COVID-19 driving and accelerating the need for IT equipment, what we had to say became that much more important and understandable. Communicate often with your customers, and explain clearly how leasing can be a solution for budgets, for obtaining the equipment they need, and for controlling what happens to that equipment at the end of the lease.” 

    Adds O’Donnell, “I’d say the willingness to be nimble, to explore the market deeply and invest time communicating with prospects and building relationships, is extremely important. Working this way is a cornerstone of our business, and by doing it, we’re in  a position to respond immediately when needs change or a crisis arises. It’s how we provide solutions our  customers are looking for.”

    This article originally appeared in Equipment Leasing & Finance Magazine's Jan/Feb 2021 Issue.

  • NAFA Administrator posted an article
    Extended Downtime? How to Maintain Your Jet see more

    NAFA member, George Kleros, Sr. Vice President, Strategic Event Management & Fleet Support at JSSI, discusses COVID-19's impact on the economy, flight department extended downtime, and the maintenance needs of business aircraft.

    If you are one of the flight departments anticipating some extended downtime, following are some areas to give attention to regarding the day-to-day maintenance needs of your aircraft...

    As we begin to consider what the new normal entails on the other side of the coronavirus crisis, it’s clear this will not be an instantaneous recovery for Business Aviation. However, it’s unlikely we will see a return to what we experienced in 2009, one of the most difficult years our industry has ever faced.

    In recent weeks JSSI has been performing claims oversite for insurance underwriters in addition to appraisals, lease returns and aircraft default recoveries for financial institutions.

    Based on the cases we have seen so far, it is apparent that many similar issues that occurred in 2009 have resurfaced.

    For example, although they may not intend to immediately sell their aircraft, many owners have no plans to fly for the foreseeable future, and the overarching behavior at this time is to severely reduce expenses wherever possible.

    There are several important factors to consider when making the decision to cut operating costs and pause aircraft utilization. Here are five areas you should consider as part of financially responsible decision-making during a period of extended downtime.

    Aircraft Inactivity Choices

    When an aircraft sits unused, you have two choices:

    1. Exercise the aircraft, or
    2. Preserve the aircraft.

    In the short-term, exercising the aircraft is going to represent better value for money. Proper preservation of the engines, avionics, APU and airframe requires an extensive, labor-intensive process that involves special equipment to perform correctly.

    Furthermore, several preservation steps will need to reoccur periodically throughout the downtime for certain items.

    At some point, there will be a need to fly the aircraft again, or there may be an opportunity to sell the asset which will require a quick turn to return to airworthiness.

    The process to take an aircraft out of preservation is equally extensive and requires additional labor hours because of all the operational checks involved. The complex process makes sense if you plan to store the aircraft for more than six months, but it is not cost-effective for anything less than that.

    In addition, taking steps to exercise the aircraft will help ensure all systems are working correctly and any issues can be addressed as and when they are discovered, not at the last minute.

    Inspections Remain Necessary

    When an aircraft is parked, it is obviously not accumulating hours or landings. This means hourly or landing-driven inspections are no longer accomplished because they are not due.

    Despite this, it is still highly recommended to keep up with all scheduled calendar inspection events. These are in place for several important reasons, including to control corrosion and keep parts lubricated to prevent future damage.

    The inspection of particular areas of the aircraft at specific intervals is pre-determined by OEM engineers and is based on their findings that a potential issue is most likely to surface within that period. Timely corrective action will allow for the issue to be resolved as efficiently as possible.

    It should also be noted that performing inspections too early might mean missing an underlying problem that is not yet serious enough to be detected and treated. 

    Waiting until the next time the inspection is required may then put you past the critical point, ultimately requiring extensive repairs and special engineering that may contribute to a loss in aircraft value.

    On the other hand, choosing to push the inspection out beyond the scheduled time could lead to the same scenario and extensive damage being incurred from not addressing the problem sooner. This is especially true for aircraft that spend most days outside on the ramp.

    It is therefore highly important to follow the Chapter 5 calendar schedule and always remain within the designed inspection schedule for your specific aircraft.

    Click here to read the full article.

    This article was originally published by AvBuyer on May 11, 2020.

  • NAFA Administrator posted an article
    Business Aviation: An Enduring Value Proposition see more

    NAFA member, Shawn Vick, Chairman and CEO of Global Jet Capital, was featured in the August 2020 issue of JetNet iQ Pulse, a digital report published by JETNET that provides up-to-date information and unique insight on the state of the business aviation market.

    Within the “Business Aviation: An Enduring Value Proposition” segment of the issue (page 3), Vick shares his insight on fact-based assessments and industry introspection. He discusses how the effects of the COVID-19 shutdowns translate to the business aviation market. Additionally, he claims that the result of suppressed production and transaction activity during this time can be seen in inventory levels that remain around 10 percent, a range considered healthy for a global fleet of 22,000 business jets. In comparison, over the course of 2008, inventory levels averaged over 15 percent. Finally, he encourages teams to “use this period of uncertainty and its associated business slowdown to take a close look at our respective business for areas of improvement ranging from supplier agreements, operating systems, go to market and brand strategies, to employee engagement”.

    Read the full article here.

    This article was originally published by JETNET on August 27, 2020, in JETNET iQ Pulse, page 3.

  • NAFA Administrator posted an article
    NAFA Webinar: The Industry's Response to Aircraft/Facility Cleanliness and Safety see more

    The Industry's Response to Aircraft/Facility Cleanliness and Safety

    Meet our Moderator and Panelists:

    Gil Wolin, Publisher, Business Aviation Advisor Magazine.

    Ed Bolen, President and CEO, NBAA (National Business Aviation Association) 

    Pete Bunce, President and CEO, GAMA (General Aviation Manufacturers Association)

    Tim Obitts, President & CEO, NATA (National Air Transportation Association)

    Mark Baker, President, AOPA (Aircraft Owners and Pilots Association)

    This NAFA webinar originally aired on October 15, 2020.

  • NAFA Administrator posted an article
    Immediate Private Aviation Solutions During and After a Pandemic see more

    NAFA member, Amanda Applegate, Partner with Aerlex Law Group, answers your questions regarding private aviation during and after a pandemic.

    As the United States and other countries around the world start to lift their stay-at-home restrictions, many individuals and companies are electing to increase or exclusively fly privately for the foreseeable future. Prior to the global pandemic, a number of companies and individuals used either a hybrid solution of flying, which included both private and commercial flights, while others elected to fly all flights commercially, even when private aviation was financially viable. The reasons for these choices, such as cost savings or flight shaming, are now being significantly overshadowed as a result of the global pandemic. Today those companies that previously used a hybrid model have new mandates which extend private flying rights to more employees for both business and/or personal use. In addition, those who previously elected to fly commercially are now more likely to select a private aviation solution when it is financially practicable.

    I have been inundated with questions related to immediately available solutions to cover the new normal individuals and companies are navigating. When looking for a private aviation solution the usual choices are still available: ad hoc charter, membership programs, pre-paid jet cards, leases, fractional ownership and whole aircraft ownership. What is different and hard to evaluate is the financial stability of the various service providers. When considering a service provider for private aviation, a few new questions should be asked:

    • What was the cash position of the service provider prior to the pandemic?
    • Did the service provider receive any funds from the CARES Act?
    • Has the service provider defaulted on any significant loans?
    • If funds are prepaid to the service provider, are the funds maintained in separate accounts and who is the owner of those accounts?
    • What budget cuts has the service provider implemented during the pandemic? Have any employees been laid off?

    We have already seen the closure of some private aviation companies as a result of the downturn in flying caused by the global pandemic. Some of these companies had significant prepaid deposits from customers on hand at the time of the closure, which are unlikely to be recoverable. Furthermore, we know that as companies struggle financially that budget cuts will be made, and it is important to understand how the budget cuts may impact safety and service.

    As a result of the financial uncertainty of many private aviation companies, it is more important than ever to have any unsecured prepaid funds maintained in a separate account and in the name of the customer. If that is not an option and the financial information of the service provider is questionable or not available, then negotiating that the prepayment of funds be adjusted into smaller and more frequent payments is recommended.

    When transitioning into a private aviation solution and/or increasing private aviation use, it is also important to look at the duration of time that the use and/or increase in private aviation use will occur. If the new normal for you or your company will likely become a permanent change, then whole aircraft ownership or fractional ownership should be strongly considered, particularly if the number of flight hours needed per year will exceed 100. If the change is anticipated to be temporary or the number of flight hours needed is not significant, then a less permanent solution such as a membership program, jet card or a fractional lease should be considered. If whole aircraft ownership is not the solution selected, then the cleaning process and safety procedures implemented by the service providers should also be evaluated.

    Finally, it is important to not rush the process of purchasing an aircraft or selecting a private aviation service provider. Be sure to evaluate the service provider selected and in the case of the purchase of a whole aircraft, the aircraft selected should go through a complete pre-purchase inspection. Taking such precautions and being deliberate in your evaluations will save you money and help you avoid pitfalls in the future.

    This article was originally published by Aerlex Law Group on July 14, 2020, in Articles, BusinessAir Magazine, The Latest.

  • NAFA Administrator posted an article
    How Creative Thinking Closes Deals see more

    NAFA member, Jetcraft's Pascal Bachmann, discusses closing deals in the business aviation industry during COVID-19.

    If you want to survive and thrive in turbulent times, you need to be flexible, inventive and tenacious. The business aviation industry is no exception. It requires clever thinking to close major deals during Covid-19.

    Bringing buyers and aircraft together safely for viewings during lockdown has been a challenge, but it’s hard for clients to place a deposit on a multi-million-dollar private jet they haven’t seen in person. In some cases, we’ve used high-resolution photos and video to bring the viewing experience to the customer. In others, we’ve flown the aircraft directly to the buyer’s hometown for a viewing.

    I’m proud to say that Jetcraft recently facilitated the closing of a US-based Embraer Legacy 450 aircraft in a record-breaking seven days.  This is not typical, though.  Every deal is different, and whatever logistical challenges we face, they can be overcome with a little imagination. A complex European sale of a Dassault Falcon 7X, which closed on April 1, is one such example.

     

    NAVIGATING A COMPLEX CLOSING DURING COVID-19

    Firstly, we needed to find crew who could drive to Geneva, where the 7X was located, and make the arrangements to ensure those pilots could enter Switzerland. The buyer also wanted to paint the aircraft after closing, so we had to find an FBO open and able to carry out the work.

    Our initial plan to close the deal in Guernsey became impractical when coronavirus struck and a 14-day quarantine was imposed on anyone landing there. I’m not saying it’s not nice to spend two weeks on that beautiful island, but understandably the buyer didn’t want their new jet to be stuck there after closing.

    We found a second possible location, which might have worked with clever manoeuvring of crew across international borders, but we needed a confirmed tax ruling from the authorities, who were shut down and wouldn’t respond.

    By now, we were considering a bit of everything, including closing in international airspace, which would have been possible but not ideal from a tax perspective. Clients might want to use this option in future, though, especially if Covid-19 border restrictions remain in place

    We finally found a closed airport in the buyer’s home country, so we had to arrange for the facility to open, and firefighters to be present, to be able to land the jet and complete the deal there.

    We still faced the challenge of retrieving aircraft documents from an OEM service center in another country. With minimal staff working at the facility, even finding keys to the archive doors took longer than usual. I was so frustrated, I nearly jumped in my car and drove there to get the paperwork myself!

    We were determined never to be beaten. At every stage of the transaction, our team persevered, and had the vision to find a creative solution.

    NAVIGATING A SEVEN-DAY CLOSING DURING COVID-19 

    Considering the complexity of the Falcon 7X closing, how did our sales team move so quickly to close the Embraer Legacy 450 aircraft in seven days?

    The aircraft (part of our owned inventory) was new, so no further inspections were needed ahead of the sale. We took the lead in flying the jet to the buyer in the US for initial viewing.

    It always takes two parties to close a deal. Both our team and the cash buyer did everything promised to secure the sale quickly. This kind of mutual commitment is priceless.

    Throughout the Covid-19 lockdown, demand to buy or upgrade private jets has remained. There are definitely challenges in meeting those requests – if we’re bringing a European aircraft to the US, for example, we need European pilots for the test flight after going through the ‘C’ check. But it’s easier to move aircraft around the US than Europe because there aren’t border closings between states, so we’re repositioning some of our jets there for viewings.

    With an experienced and creative sales team in place, aircraft trading can continue wherever you are, even in a lockdown, while keeping all parties healthy and safe and following the guidance of authorities. Miracles take time, but we can usually manage the impossible within 24 hours.

    This article was originally published by Jetcraft on June 29, 2020.

  • NAFA Administrator posted an article
    Business Jets: Not Just for Business see more

    NAFA member, Peter Antonenko, Chief Operating Officer at Jetcraft, discusses the business of business aviation.

    I’ll come right out and say it: I love airplanes, I love flying, and I love the business of business aviation. The combination of short-field landing capabilities, range and speed make private aircraft a perfect corporate tool. But something that’s often overlooked is how business aviation has an exceptionally broad range of utilizations, particularly in times of crisis, supporting air ambulance, cargo, and governmental missions.

    Many industries have done an excellent job pivoting to meet the demands of the Covid-19 pandemic – distilleries making hand sanitizer, fashion brands stitching surgical masks and car manufacturers producing ventilators.  At Jetcraft, we are proud and privileged to be part of a sector that was ready to act when needed.

    For example, aircraft cabins configured to carry the same life support equipment found in trauma centers have been used widely to transport patients, especially during this crisis. The variety of these specially equipped business jets gives people access to larger hospitals regardless of how small their local runway is, or how far they need to travel. This medical capability was true before Covid-19 and it will remain true long after.

    Medevac operations are not the only use for business aircraft during a pandemic. Throughout this crisis we have seen private jets previously used for corporate missions being offered for cargo – in particular, transporting personal protective equipment, ventilators and medications. Efficiency is a must at times like this, as outbreaks spike at different rates around the world and needs are constantly shifting.

    Statistically, 40% of air cargo is transported in the belly hold of passenger aircraft. With a significant portion of the world’s airline fleet grounded, a pinch point to move supplies occurred. Business aviation stepped up with owners and operators taking on some of the critical capacity needs.

    A focal point of air transport, business or commercial, has been putting people in front of one another with great speed. Video conferencing is helping fulfill the role of in-person meetings in the short term, but the need hasn’t been replaced. In this regard, business aviation has been instrumental in the fight against Covid-19, as governments and agencies use private aircraft to fly scientists on fact-finding missions and reposition medical staff to areas with a shortage.

    As for corporate owners, these jets have proven more useful than they may have ever imagined. Business aircraft are making it possible to move employees during a time when airline flight options are minimal, and allowing key individuals to be where they are needed to keep supply lines running smoothly.

    Business aviation has long been a tool designed to fit around people’s needs, and it is also worth mentioning the select group of people who make these missions possible. It is thanks to the pilots, mechanics, ground crews, line technicians, and staff at the manufacturers, FBOs and MROs across the globe, that staffed, flew and maintained these aircraft so they might complete their missions. To them, we share our greatest thanks for their hard work in enabling our sector to support Covid-19 relief efforts, and for their continued dedication to our industry now, before, and in the future.

    This article was originally published by Jetcraft on May 27, 2020.

  • NAFA Administrator posted an article
    AMSTAT and VANGAS publish charts demonstrating the impact of COVID-19. see more

    Tinton Falls, NJ – July 22, 2020: AMSTAT and partner VANGAS Aviation Services, the leading provider of business aviation analytics have published charts showing monthly trends in business aircraft values in 2020 by market group. This data has been generated using the AMSTAT Aircraft Valuation Tool.

    In the Heavy Business Jet market group, 2020 stated with a 4% increase in the average estimated value for this group. This trend was reversed in the second half of March and start of April offsetting the initial gains and more with a 7% decline. Values plateaued in late April and early May and then proceeded to fall 16% for a net year-to-date decline of 18%. Early data suggests a recent slowdown in this decline.

    In the Super-Mid Business Jet market group estimated values rose for the first 2 months of 2020, gaining 6%. There then followed a period of values oscillated between March and April. Between the second half of May through June the average estimated value for Super-Mid Business Jets fell 15%. Year-to-date values in this group fell 14%.

    As with the Heavy Jet and Super-Mid Business Jet groups, the Medium Business Jet average estimated value rose at the start of 2020. For Medium Jets this increase was 3%. Between February and May average estimated values in this market group fell 22%. This downward trend slowed in June and may have started to level off recently.

    In the Business Turboprop market group, the average estimated value rose 4% between January and February 2020. The trend between March and May was generally downward, falling a net 14%. As with the Light Jet group, the average estimated value of Business Turboprops has lately started to regain some of the loses from earlier months. Since the start of June, the average estimated value has risen 5%.

    Andrew Young, AMSTAT General Manager said: “The AMSTAT Aircraft Valuation Tool is constantly incorporating the latest market data and is able to quickly generate serial number specific aircraft values that reflect current market conditions. The data generated by this tool has enabled VANGAS to create the charts we see here showing the impact of COVID-19 on aircraft values in 2020 and how some market segments might be starting to show some recovery in values.”

    Don Spieth at VANGAS added, “The Aircraft Valuation Tool allows users to access information about current market conditions including event driven impact like COVID 19. We are also able to leverage decades of AMSTAT research to determine probabilistic outcomes by comparing previous market disruptions in business aviation. These tools empower our industry with the ability to react to trends and adverse market conditions to better serve their clients.”

    Read full report here

    This release was originally published by AMSTAT on July 22, 2020.

  • NAFA Administrator posted an article
    AINsight: Best Five Options To Fly Privately see more

    NAFA member, David G. Mayer, Partner with Shackelford, Bowen, McKinley & Norton, LLP, shares the best options to fly privately. 

    As commercial airlines attempt to fill seats amid the Covid-19 pandemic, some families, businesses, and individuals have made a flight to safety by traveling again or for the first time on private aircraft.

    These travelers set their schedules and itineraries for on-demand business or personal flights. They can travel to about 5,300 public-use airports in the U.S., roughly 10 times the number of airports available to commercial aircraft. International airport access expands the flexibility to travel globally. Travelers greatly value saving travel time, the healthy and safe environment, productivity, and convenience of private aircraft while enjoying a comfortable, interconnected, and protected flight experience.

    Although the reasons to fly privately may be obvious, especially in the age of Covid-19, deciding on the right providers and approaches to flying are more complex. Three modes of aircraft travel involve no capital investment: chartering, jet or fraction cards, and membership programs. Each of these options holds strong attributes for new and some repeat flyers. Two other options require capital outlays for frequent flyers: purchasing a whole aircraft or a fractional share of an aircraft.

    Before All Else

    Before making choices from the five types of private aircraft travel described below, each person should complete the following diligence and processes to select the best possible flight experience:

    • Aircraft supports the mission. Identify the right aircraft for your “mission”—industry lingo that refers to identifying the details of a trip. In general, a mission profile covers logistics, operating hours, amenities, connectivity, catering, luggage/storage capacity, number of passengers, and travel distance. One size aircraft might not fit all travel needs, especially for owners or lessees that have access to only one aircraft.

    • Stellar manager, operator, and pilot safety records. Insist that the commercial operator, aircraft manager, and pilots have stellar safety records. The commercial operator should supply a top-flight team, including experienced pilots approved by the operator’s insurer. Managers, operators, and pilots should be free of enforcement actions by, or violation notices from, the FAA. Ask them.

    • Aircraft in good condition. Confirm whether the aircraft complies with its manufacturer’s maintenance and regulatory requirements. The aircraft should also present a well-maintained physical appearance.

    • Robust Covid-19 protocols. Verify that the aircraft manager, commercial operator, and FBO have designed and implemented a robust Covid-19 safety protocol for ground personnel, passengers, and crew, including health screening, social distancing, and personal protective equipment.

    • Adequate insurance coverage. Require that the aircraft manager or commercial operator provide written evidence of comprehensive liability insurance to protect you despite the tightening insurance markets.

    • Aviation experts. Use business aviation experts, including various brokers, technical consultants, and aviation lawyers, to assist in evaluating, documenting, and closing the best option or options for you.

    Chartering Aircraft

    charter is simply an ad hoc transportation service by private aircraft by the seat or whole aircraft. Charter makes the most sense for occasional and new flyers including those seeking a healthy and safe aircraft travel environment during the pandemic. Although more complicated, a charter is like taking a taxi. In legal terms, charter operators engage in air commerce by carrying persons or property for compensation or hire. You can hire a charter service in most cities with a private or public-use airport.

    Perhaps the simplest question about a charter and other options is what kind of aircraft does the traveler need to satisfy his or her top travel priorities? And how much will she or he spend to travel on a private aircraft? Charter rates can easily climb from approximately $1,200 to $12,000 per hour or more, depending on the aircraft selected from light jet or turboprop to an ultra-long-range jet.

    Though charter rates are not inexpensive, charters are somewhat more affordable because charter rates have dropped since 2019. Also, Congress approved, among other tax benefits, an excise tax holiday in the CARES Act, which suspends the 7.5 percent flight excise tax on amounts paid to charter operators from March 28, 2020, to Dec. 31, 2020.

    Cost transparency is sometimes challenging in the charter world. Travelers should ask for receipts detailing charges on their accounts, watch for overlapping charges, and tie the charges to final invoices. It is advisable to compare operator fleet sizes and business models.

    One persistent legal and safety concern arises from illegal charter operations. Broadly speaking, illegal charters occur when the aircraft operator or pilot conducts charter operations without proper certification or fails to comply with strict safety requirements in applicable regulations. Illegal charters have ensnared frequent and occasional charter travelers.

    Customers should look for red flags such as an operator asking customers to sign short-term leases or timesharing agreements. As a result of these regulatory violations, the FAA has, in coordination with the business aviation industry, stepped up its enforcement actions against operators and warned pilots to shun illegal charter operations.

    Membership Programs

    Fee-paying members typically have access to private aircraft for a set number of hours that may range from 25 to 100 hours per year. Program terms, aircraft fleets, and quality vary widely as does pricing for membership and flights. Before joining, travelers should compare programs of operators that have developed creative ways to travel at a predictable cost.

    Jet and Fraction Cards

    Jet and fraction cards cost more than most other aircraft travel options and work like a pre-paid credit card that a traveler uses to pay for 25 to 100 or more flight hours. The cards enable travelers to dip a toe into private aviation. Card amounts vary, starting as low as $25,000 and perhaps lower in this changing segment. These cards and other options can provide supplemental lift to enhance travel flexibility.

    Whole Aircraft Ownership or Leasing

    Buying or leasing a “whole” aircraft often makes sense once a traveler anticipates using at least 200 flight hours per year and wants to control the use, customization, operational control, repair facilities, crewing, base location, and availability of the aircraft. However, many of my clients acquire aircraft knowing they will need fewer hours but also expecting to charter the aircraft to others to offset fixed costs.

    At the outset of deciding whether to buy a whole aircraft, businesses should determine whether bonus depreciation and other tax benefits may be available and structured to reduce their after-tax cost of ownership and operations. Financing is widely available for whole aircraft at historically low rates. It is important to use aviation experts here as purchase, sale, financing, or leasing transactions are often complex.

    Fractional Share Ownership

    Simpler than owning or leasing a whole aircraft, an owner or lessee of an aircraft fractional share typically commits to a five-year program. A fraction typically corresponds to a certain number of annual flight hours, often ranging from 25 to 300 hours, though some programs instead use number of travel days instead of flight hours. Fractional programs charge monthly management and per-hour flight fees, differ in quality, and provide highly personalized service. Bonus depreciation and/or other federal tax benefits might be available like whole aircraft. A few banks will lease or finance a fractional share.

    Conclusion

    To mitigate Covid-19 infection risk, some families, businesses, and individuals have abandoned commercial aircraft travel for on-demand travel in private aircraft. The five best options for such private aircraft flights consist of charter services, membership programs, and jet or fraction cards, along with purchasing or leasing whole or fractional shares of these aircraft.

    Covid-19 has boosted demand to fly by private aircraft, especially charter services. Perhaps this demand foretells a new era of sustainable growth in private aircraft travel as people realize that these flights not only save time but might also save lives.

    Disclaimer: This blog is not intended to convey, and does not convey, legal or other advice. Each person should consult his or her advisors to make decisions about flying privately, as well as any legal or economic implications, risks, or terms in connection with any such decision.

    This article was originally published by AINonline on July 17, 2020.

  • NAFA Administrator posted an article
    AMSTAT releases interim business aircraft resale market data showing the short‐term impact of COVID‐ see more

    Tinton Falls, NJ – June 17, 2020: According to AMSTAT and partner VANGAS Aviation Services, the leader in business aviation analytics the average and median values of pre‐owned business aircraft have fallen between 10% and 15% so far during the COVID‐19 crisis, with some individual make model markets seeing decreases in excess of 20%. The update shows these declines in value in all segments since early April with some evidence of a recent slowing of this decline in some market segments.

    The report also shows that inventories have increased since mid‐March, but the increase is a continuation of a pre‐existing trend. The inventory of Business Jets was up 1.6% between January and March and then up 4.2% since mid‐March. The inventory of Business Turboprops was largely unchanged between January and March and up 2.8% from March to May. Inventory levels remain below 2016 levels and significantly below 2009 levels.

    Further, the report shows that resale retail transactions for Business Jets were ahead of 2019 levels in January and February but were down 23% in March YoY and down 40% in April YoY. Resale retail transactions for Turboprops were at or ahead of 2019 levels in January and February but were down 27% in March YoY and down 40% in April YoY.

    Andrew Young, AMSTAT General Manager said: “It remains to be seen whether the trends of the last few months will continue long‐term. However, whether the result of a COVID‐19 driven reduction in travel or the logistical issues surrounding getting deals done under quarantine, or both, there was a year‐over‐year reduction in resale transactions in March and April this year. Further, the analytics clearly show a reduction in estimated aircraft values”. He added, “what is also interesting is that inventories, while up, are not indicating a panic to sell and levels remain below recent highs seen in 2017. If inventory levels remain relatively low and interest in business aviation materializes as an alternative to commercial travel in parallel with an economic recovery, then we might expect to see a significant uptick in transaction activity leading to a recovery in aircraft values in the coming months”.

    For a full copy of the report go to:

    https://www.amstatcorp.com/pages/PressReleases/AMSTAT_Resale_Market_Update_June2020.pdf.

    About the AMSTAT Aircraft Valuation Tool

    The AMSTAT Aircraft Valuation Tool (AVT) is fully integrated into the AMSTAT Premier service and calculates objective statistically generated serial number specific estimated values for business aircraft in seconds.

    About AMSTAT, Inc.

    AMSTAT is the leading provider of market research information and services to the corporate aviation industry. Founded in 1982, and based in Tinton Falls, NJ, AMSTAT introduced the concept of providing researched information to corporate aviation professionals. AMSTAT’s mission is to provide timely, accurate, and objective market information to its customers. AMSTAT products and services provide aviation market and statistical information that generates revenue and delivers competitive advantage to brokers/dealers, finance companies, fractional providers, and suppliers of aircraft parts and services.

    Information: Andrew Young, AMSTAT GM, 732‐530‐6400 x147, andrew@amstatcorp.com

  • NAFA Administrator posted an article
    Adam Meredith, of AOPA Finance, addresses commonly asked questions on aircraft ownership. see more

    NAFA member, Adam Meredith, President of AOPA Finance, addresses commonly asked questions on aircraft ownership during this difficult time.  Purchasing an aircraft can be a challenging process under normal circumstances, but can be even more difficult to navigate during market volatility.

    Question: With the current market volatility, do you find that lenders are tightening or loosening their credit requirements?

    Answer: We have definitely seen some that are tightening credit. Specifically, some lenders are requesting copies of bank/investment statements that are within the last couple of days (vs. 30 days, under regular times). Given stock market volatility this isn’t too surprising. Also, we’ve seen some lenders that are being more cautious lending to individuals with direct financial exposure to COVID-19 (i.e. service industry companies not deemed essential).

    Question: What advice are you giving to members who were currently looking to purchase before all of the shelter in place orders? Should we continue our search or place our search on hold until all of this blows over?

    If you’re personally at high risk (financially or otherwise) to COVID-19, you’d be well advised to pause the purchase process. However, for everyone else, I’d encourage you to keep looking and work with sellers to create a plan for how to push through the closing process. For advice on guidance with shelter in place requirements, reach out to our trusted legal staff if you’re a legal services plan participant. If not, reach out to our Pilot Information Center to get the latest guidance.

    This article was originally published by AOPA Finance on April 23, 2020.

  • NAFA Administrator posted an article
    Filing Aircraft Registration Documents With The FAA Registry During The COVID-19 Pandemic: What You see more

    NAFA member, Greg Reigel, Partner with Shackelford, Bowen, McKinley & Norton, LLP, discusses filing documents with the FAA Registry during the COVID-19 Pandemic.

    In another instance of a “new-normal” resulting from COVID-19, the window at the FAA Registry, where real-time filing of aircraft registration documents used to occur, has closed.  Although the FAA Registry is still open (for now), it has implemented new procedures for filing of aircraft registration documents.  Three options are now available for recording documents:

    Document Drop Bins.

    The FAA has placed two bins outside the Public Documents room.   One bin will be marked “Priority” and one bin will be for “Normal” processing (i.e. not priority).  The FAA will retrieve documents from the Priority Bin every hour. It will retrieve documents submitted for normal processing twice a day.

    Documents are filed when they are placed in one of the bins. However, will not be possible to obtain an immediate filing time for the documents as was the case in the past.  Actual filing times will only be available after the documents are indexed in, scanned and available for viewing online.  It is presently unclear how long that process will take.

    E-Mail Filing To An Electronic Portal.

    The FAA has a new e-mail filing process available subject to a number of limitations. Submitted documents must be digitally signed (i.e. Docusign, Adobe Sign, etc.) and each document must be 20 pages or less. Only one aircraft may be submitted in each e-mail and filing fees must be pre-paid at Pay.gov.

    After submission, FAA will send an e-mail acknowledging receipt.  However, documents will be processed during normal business hours with filing times available the same as when documents are filed via the bins.

    Filing Via Mail.

    As has always been the case, documents can still be filed via U.S. Mail, FedEx and UPS. And similar to the bin and e-mail filing, actual filing times will only be available once the documents are processed and in the FAA Registry’s system.

    These new processes will also impact timing for receiving a “fly-wire” and for receiving Form 135 needed to accomplish International Registry filings.  But it is unclear how much longer it will take to receive these back from the FAA.

    Conclusion.

    The good news:  The FAA Registry is still open and processing aircraft registration documents (for now). The bad news:  These updated procedures will result in some delays in closing transactions, and a little less certainty regarding when documents were actually “filed” by the FAA. For example, in a transaction transferring risk of loss at the time of filing, that could present a problem.

    Parties to aircraft transactions should review their documents to determine whether they are consistent with the new procedures. If they aren’t, parties should amend as needed.

    This article was originally published by Shackelford, Bowen, McKinley & Norton, LLP. on March 23, 2020.

  • NAFA Administrator posted an article
    How To Shield Bizjet Owners from Virus Claims see more

    NAFA member, David G. Mayer, Partner with Shackelford, Bowen, McKinley & Norton, LLP, discusses ways for bizjet owners to mitigate risk of COVID-19-related claims.

    The sudden onslaught of the contagious and deadly Covid-19 pandemic delivered a severe blow to business aviation’s global flight activity and paused (but did not derail) preowned business jet retail sale and lease transactions. The pandemic has already changed so much in our lives that, for now, no one can envision what a “new normal” will look like for business aviation.

    Regardless of what happens, today, as governments ease shelter at home restrictions, business aircraft owners and lessees, along with their managers and Part 135 operators (together, owners), face an imperative to protect anyone from Covid-19 who might come in physical contact with, or travel on, the operator’s business aircraft.

    These people include owners and their families, other passengers, crew, independent contractors, employees, and ground support personnel (together, affected individuals). The imperative applies both to Part 91 and 135 operations. If owners do not meet this obligation head-on, it seems inevitable that affected individuals will make negligence claims against owners for exposure to, and illness or death from, Covid-19.

    THREE WAYS TO MITIGATE RISK OF COVID-19-RELATED CLAIMS

    Owners should use this period of slower flight and market activity to take the following three actions that might limit the chances for affected individuals to contract Covid-19 and blunt any incentive to make damage claims against owners for their alleged negligence:

    First, develop comprehensive business aircraft protocols for each business aircraft to create a healthy and safe environment inside of, and close to, the aircraft.

    Second, request Covid-19 waivers and indemnities from affected individuals to mitigate the risk of Covid-19-related liability claims based on negligence or other legal theories.

    Finally, confirm whether the owner carries, or the owner can buy, liability insurance coverage that will respond to such liability claims.

    Covid-19 Negligence Explained

    As a general legal principle, business aircraft owners may be negligent and liable for money damages if the owner breaches its duty of reasonable care to maintain a safe and healthy environment for affected individuals inside of, or close to, their aircraft.

    Broadly speaking, the duty occurs because an owner can reasonably foresee that Covid-19 might live in and on business aircraft, be transmitted inside or close to the aircraft by one person to another, or from personal items such as luggage to an affected individual. If negligence is proven, a judge or jury can then award significant money damages in favor of the affected individual or his/her estate.

    Importantly, the affected individual who contracts Covid-19 must prove that the breach of the owner’s duty of reasonable care is the “proximate cause” of the Covid-19 illness or death. That is, the affected individual must provide evidence of an almost indisputable connection between his or her Covid-19 condition and the exposure to Covid-19 inside of, or close to, the business aircraft.

    As such, causation is likely to be the most difficult element to prove, especially given the challenges in tracing from the affected individual to the aircraft environment as the only possible source of the affected individual’s infection. However, no owner should rely on the difficulty of proving causation as an excuse to ignore safeguards and fail to develop a high-quality aircraft protocol.

    DEVELOPING A COVID-19 AIRCRAFT PROTOCOL 

    As noted above, owners can, and immediately should, develop and enforce a comprehensive protocol designed to protect any affected individual who is inside of, or might come in physical contact with, a business aircraft, its cargo, and any other affected individual. A protocol, in this context, refers to written standards, practices, and behaviors established by owners to ensure that the environment inside of, and close to, their business aircraft is free of the Covid-19 infection.

    Although important, cleaning and disinfecting an aircraft by itself does not constitute an aircraft protocol. Owners should include many other elements in a protocol such as screening each affected individual, safely bag or wrap potentially infected luggage, test passengers for Covid-19 before the flight, and provide each passenger with personal hygiene supplies and masks that must be used inside the aircraft.

    To help them meticulously design and write, as well as implement and update, a Covid-19 health and safety protocol, owners should hire appropriate medical, cleaning, and safety experts to contribute relevant parts of, and comment on, the entire protocol. Some managers and Part 135 operators have already taken steps to create all or part of a protocol or a rough equivalent, which is positive.

    Further, owners should conduct periodic audits to confirm strict compliance with the protocols. They should also retain records on, and immediately rectify any shortfalls from, the protocol implementation such as recording dates and times of disinfecting in and around an aircraft. These steps might entail some additional effort, but they should help mount a good defense to negligence claims.

    In all situations, owners and affected individuals should limit travel with operators that have not developed and comply with a protocol on every flight. After all, only one mistake or negligent act or omission can lead to tragic consequences involving Covid-19.

    COVID-19 RESOURCES TO CREATE A PROTOCOL

    In writing and updating the protocols, owners, experts, and their lawyers should study pertinent information from, among others, the World Health Organization, Centers for Disease Control, FAA, EBAA, and NATA. Notably, NBAA recently published a comprehensive resource that owners can use as the foundation of a quality aircraft protocol.

    Aircraft manufacturers should be able and willing to provide consulting services and aircraft products, including fresh air intake and filtering systems, to mitigate safety risks and negligence claims.

    LIABILITY INSURANCE COVERAGE TO MINIMIZE PAYOUTS FROMCOVID-19 CLAIMS

    Liability insurance might cover Covid-19 negligence claims relating to business aircraft. Owners and their aviation insurance experts or lawyers should examine the wording in their liability insurance policies to determine whether any coverage exists against these claims. Some, but not all policies, contain explicit exclusions for viruses, which means Covid-19 claims might not be covered.

    Prospects to buy such insurance now are dismal, but large accounts might have a shot. If there is potential coverage, the insurer might have a “duty to defend” the insured, at the insurer’s expense, and therefore engage counsel to defend the insured against the Covid-19 claims.

    WAIVERS AND INDEMNITIES TO LIMIT IMPACT OF COVID-19 CLAIMS

    Each owner should ask any affected individual, before a flight, for a written, signed waiver of claims for Covid-19 illness or death. Separately, managers and Part 135 operators might consider asking for waivers and indemnities from owners for damages to furniture and hard surfaces in the aircraft allegedly caused by disinfecting chemicals used in or on the aircraft to rid the areas of Covid-19. Courts generally enforce properly drafted waivers and indemnities, but applicable laws might alter this outcome.

    CONCLUSION

    Covid-19 affects all of us in different ways. In business aviation, it seems urgent that, as governments lift stay-at-home restrictions, owners develop and implement comprehensive Covid-19 health and safety protocols for their business aircraft, secure waivers, and indemnities and maintain appropriate liability insurance.

    Properly structured, a protocol can protect the lives of business aircraft owners and their families, crews, independent contractors, employees, and ground support personnel from illness and death caused by Covid-19. Protocols can boost confidence in traveling by business aircraft and mitigate the risk of complex, expensive, and lengthy liability lawsuits against the business aircraft owners, managers, and Part 135 operators.

    The right choice seems obvious, but the end of this healthcare crisis and recovery of business aviation remains far from certain.

    Author note: “This blog is not intended to create or constitute, nor does it create or constitute, an attorney-client or any other legal relationship. No statement in this communication constitutes legal advice nor should any communication herein be construed, relied upon, or interpreted as legal advice. This communication is for general information purposes only regarding recent legal developments of interest, and is not a substitute for legal counsel on any subject matter. No reader should act or refrain from acting on the basis of any information included herein without seeking appropriate legal advice on the particular facts and circumstances affecting that reader.”

    This article was originally published by AINonline on May 15, 2020.