Global Jet Capital

  • NAFA Administrator posted an article
    Sounding Board: Five Minutes With Shawn Vick, Global Jet Capital Chairman, CEO see more

    NAFA member, Shawn Vick, Chairman and CEO of Global Jet Capital, discusses business aviation.

    Shawn Vick is the chairman and CEO of Global Jet Capital, which helps corporations and individuals with the leasing and financing of new and pre- owned business jets. Vick has held leadership positions at British Aerospace, Gulfstream Aerospace, Bombardier, Landmark Aviation and Hawker Beechcraft. He is also a partner and member of the investment committee for AE Industrial Partners, a private equity firm. And he is a private pilot.

    Q. At the National Business Aviation Association Convention & Exhibition in October, Global Jet Capital had been having a banner year with an increase in the leasing and financing of business aircraft. Things changed suddenly with the COVID-19 pandemic. What is happening in the pre-owned market today?

    A. Leading up to March the pre-owned market–frankly the entire transaction market, new or pre-owned–was performing well when compared to the same period last year. Activity began to slow late in the first quarter as the virus took hold and demanded everyone’s attention. I think the beginning of this story is now well understood. Global reaction to the virus resulted in a fundamental shutdown of the world’s economies and business aviation was no different. As we sit here today, in the middle of May, flight activity is beginning to pick up–which is a very good sign. Transaction activity remains slow but has not ceased, and we feel there are a lot of owners and operators sitting tight right now waiting to see how this situation evolves. Despite the uncertainty, one thing is very clear–business aviation in the context of a global pandemic will be the most desired form of transportation as the world begins to get back to work.

    Q. What is your focus now?

    A. Since the beginning of this crisis, we’ve been primarily focused on the health and well-being of our employees. This began in February with the shutdown of our Hong Kong office and a full review of our disaster recovery plan, which includes a chapter on managing the business remotely. Since that time our Zurich, Danbury, [Connecticut]; Boca Raton, [Florida]; and Mexico City offices closed, and we have all been working remotely. While it’s been far from ideal, with the support of our video conferencing platform it’s been surprisingly efficient. We’ve also been using this “pause” in industry activity to focus attention on internal operating efficiency projects, including the transition to a new operating platform and commercial excellence initiatives. With respect to our current portfolio, we’ve naturally been paying very close attention and I’m happy to report the portfolio is performing very well. From a new business perspective, we entered 2020 with a very healthy backlog fueled by a new predelivery payment financing product we launched last year. As the crisis took hold, we managed to close several deals that were in late stages, and we are currently working with a number of clients on lease renewals and extensions. Moving forward, we are now beginning to explore reopening offices and getting our employees back to work in the safest way possible and in line with local government guidelines.

    Q. What do you see for business aviation in the near term?

    A. I think the answer to that question lies in the duration and severity of the financial disruption, and I’m not sure anyone has a crystal ball right now. But if the disruption is limited and we are heading in the right direction in the July/August time frame, with the economy beginning to rebound and the unemployment rate falling, I think that bodes well for our industry. These aircraft are as precious as they’ve ever been, particularly when one’s safety and security are a priority and you factor in social distancing. I think the bottom line is quite simple: If you can afford these assets, you’re going to keep these assets–and if you don’t have one and you can afford one, you’re likely going to acquire one.

    Q. What about aircraft values?

    A. I really think it’s too soon to say, but there is data we can look at for guidance, likely the most important of which comes from the OEM production environment. Most industry analysts are predicting a drop in new deliveries in the 30% range, meaning roughly 450 deliveries this year versus the original projections that were well above 700. And, it’s important to note, these are supply side forecasts at this stage–not demand side. As difficult as this is for the entire ecosystem, it may well act as a guardrail against significant devaluation. Also, we are not seeing a rash of distressed sales or a spike in new aircraft being listed for sale. In fact, these numbers have been coming down in recent weeks. Our sense is that owners and operators understand the value of these assets in this new context and are sitting tight as the situation unfolds.

    Q. How does this downturn compare to the recession of 2008 and 2009?

    A. It’s interesting that so much of the speculation is based on comparisons with 2008, when there is not much correlation. In 2008 the cause of the economic disruption was widespread failures in the banking systems that put the capital markets in a state of seizure. Right now, we’re dealing with the impact of a global pandemic. In comparison to 2008, government reaction and intervention has been swift and expansive. From an industry perspective, OEM production has been curtailed in a disciplined fashion to protect people–but the by-product is protection of backlogs and ultimately aircraft values. This is clearly a different environment.

    Q. What about the health of the business aircraft manufacturers?

    A. If you look at the impact of the Great Recession, several of the manufacturers got caught between a rock and a hard place with an almost instantaneous shutdown of market demand coupled with long supply chain agreements that were difficult to contractually modify. They really had no choice but to drive new product into a down market. Today, as a result of those lessons learned, the OEMs and the entire supply chain is far more agile. At this stage, this is a supply side problem resulting from shutdowns and furloughs across the entire ecosystem designed to stall the spread of the pandemic. From my perspective, everybody went into this situation together and everybody’s going to come out of it together.

    Q. What do you foresee as the split in demand from the North American and international markets?

    A. During the buildup leading to the Great Recession, the market shifted from being heavily dominated by the U.S. to a 60-40% international versus domestic split. Everyone thought that was going to be the new normal as the BRIC countries [Brazil, Russia, India and China] flourished. But as we now know, due to a variety of internal and external factors, with exception to China, the BRICs have not dominated the global economy as once predicted. The result, in term of business aircraft, is that over the past decade we’ve seen a dramatic shift back to U.S. dominance of this market. This dominance will likely ebb and flow to some extent over time, but there’s not a lot of data to support a major shift back to international dominance.

    Q. Are there any concerns on the international front?

    A. The sooner we can get through our current trade dispute with our largest trading partner and sit down at the table and have productive, meaningful and material discussions rather than throwing sticks and stones at each other and turning this pandemic into a political discussion, I think the better off we’ll all be. I also believe that will ease tensions, creating a more positive environment for the global cooperation that will be required to get the world’s economy working gain. I’m off my soapbox.

    Q. How has aircraft financing changed or not changed so far?

    A. Unlike the Great Recession, where the global banking system suffered from a near-complete lack of liquidity and the capital markets seized up, the banking system right now is in good shape. Liquidity is sound and capital is available. Despite this, lenders are being very cautious for the time being. This is completely in line with the overall industry “pause” that we are all experiencing. The aircraft financing industry will continue to monitor the overall economic environment and the health of the business jet market in order to better understand the impact this disruption is having on demand and, more importantly, aircraft values. Let’s face it: Finance and uncertainty do not coexist very well, and you could argue that we are currently at a point of maximum uncertainty. As the impact of the pandemic becomes clearer and key market indicators related to supply and demand settle into a new normal, the aircraft financing industry will follow suit.

    This article was originally published by Molly McMillin of Aviation Week on May 18, 2020.

  • NAFA Administrator posted an article
    Global Jet Capital Q1 2020 Market Briefing see more

    NAFA member, Global Jet Capital, shares their Q1 2020 Market Briefing.

    Overview

    Q1 2020 can be looked at as two separate stories. Leading up to the World Health Organization’s (WHO) announcement on March 11 that COVID-19 was an official pandemic, most key business aviation metrics were in good shape when measured against Q1 2019. Following the WHO announcement and ensuing social distancing measures, the industry entered into a forced hiatus, negatively impacting flight operations, aircraft production, and deal flow. We are now in a period of uncertainty that looks to continue through the second quarter.

    Overall, key business jet market indicators were mixed in Q1 2020.

    • Business jet operations declined 9.7 percent compared to the same period last year, a trend that had started internationally in late Q4 2019 and accelerated globally late in Q1 2020.
    • While OEM backlogs remain healthy, a mix of shutdowns and furloughs across the production ecosystem led industry forecasters to reduce supply side forecasts between 25-50%. While difficult for everyone in the industry, this unusual dynamic may act as a guardrail on aircraft values as the full impact of the pandemic plays out.

    • While inventories, as measured by the percentage of the active fleet for sale, have been inching up since Q1 2019, they ended Q1 2020 below 10%. This is a historically sound position. Furthermore, to date, there has not been a major increase in new aircraft being listed for sale.

    • The overall fleet continues to show signs of aging, with 55% of the fleet now greater than 13 years in age. While there is evidence that operators are flying aircraft longer, these data suggest a growing need for fleet renewal.

    • There is evidence that the business jet market was undergoing a fleet renewal before the outbreak of COVID-19. Operators were retiring older aircraft in response to mandated upgrade requirements, while new deliveries led to a modest increase in younger aircraft in the fleet.
    • Overall, new and pre-owned transactions for the quarter were down 6.7 percent by unit volume and 16.4 percent by dollar volume versus the same period last year. Most of the drop-off was felt in March as the industry hit the “pause” button.
    • Residual values experienced modest declines in Q1 2020 as model-by-model volatility continued.

    Looking ahead, the full effect of the coronavirus on the market remains unknown, although speculative comparisons to 2008 and the impact of the Great Recession are rampant.

    The current environment demonstrates some important differences to 2008, however. The cause of the economic disruption is a virus, not widespread failures in financial regulation. Banking systems and capital markets are not in a state of seizure. Government reaction and intervention has been swift and expansive. OEM production has been curtailed in a disciplined fashion to protect backlogs and ultimately aircraft values. This is clearly a different environment.

     

    Special Feature on the Global Economy

    The following commentary comes from Jason Thomas, Managing Director and Head of Global Research for The Carlyle Group, one of Global Jet Capital’s investors.

      1. When people don’t work, shop or travel, it shows in the economic data. March’s economic collapse continued in April with implied growth rates deeply negative across virtually every Indicator we track. Yet, when measured relative to March 31, a slow and uneven recovery in China and the first signs of life in Europe caused our (i.e., the Carlyle Group’s) forward-looking index to rise despite further deterioration in U.S. data.

      2. Officially, the U.S. economy contracted at a -4.8% annualized rate in Q1-2020, a remarkable result considering that official data were consistent with 2% annualized growth through the first 10 of the quarter’s 13 weeks. Our data suggest real consumption fell - 32% annually in April, as spending on experiences (travel, tourism, events, etc.) and big-ticket goods fell to a fraction of pre-crisis levels. The drop in industrial and logistics volumes appears less steep, but energy development is in free fall.

      3. Despite worse U.S. data, U.S. stocks rebounded sharply over the month, with the S&P 500 up by 33% from its March lows and forward price-to-earnings ratios 13% above their February peak. While much of this may be explained by the scale of announced fiscal and monetary policy support, improving public health data also play a role. The level of the S&P 500 has risen in lockstep with the decline in new COVID-19 cases (new infections net of recoveries) and projected U.S. COVID-19 mortalities.

      4. Ironically, the improvement in public health data may have come at the expense of the private health sector. The sharp decline in non- essential medical, surgical, and dental procedures subtracted 2.25 percentage points from U.S. GDP in Q1-2020, a result that implies that revenues at private health care providers and clinics are suffering every bit as much as those in the retail, energy, or airline sectors. Our data suggest U.S. health care hiring is down -15% over the course of the pandemic.

      5. While investors may be looking past the “lockdown” and focused instead on the reopening, business managers are taking a more cautious tac. Our proprietary data point to another leg down in the labor market, with hiring intentions off significantly across virtually every sector of the economy. The initial boom in grocery, delivery and logistics hiring has subsided as those businesses have scaled up to meet demand. Overall, job postings have declined by -40% over the past six weeks and capex budgets have been cut by -18%. Cancellation of jobs, projects, and equipment purchases signals that management teams are preparing for a future that looks far less sanguine than the one pictured by stock market investors.

      6. The only economy where hiring intentions increased over the past month was Italy’s.There were other signs of life in Europe: more workplaces were open and more work trips occurred, contributing to more electricity consumption and better manufacturing numbers. In many European economies, more retail establishments were open at the end of April than the end of March. Online sales continue to grow rapidly.

      7. Despite these hopeful signs, the euro zone economy continues to contract at even more dramatic rates than those observed in the U.S., with a -14% annualized fall in Q1-2020 GDP and an implied annualized decline in April retail sales of nearly -40%. Unfortunately, the economies hardest hit by the virus, Italy and Spain, will also be among the most impacted by any travel restrictions that extend into summer given tourism’s ~15% contribution to GDP.

      8. China continues to recover at a pace that looks either remarkably fast or frustratingly slow depending on your point of view. Over a span of six weeks, China went from fully locked down to operating at 95% of capacity – an impressive achievement. Rather than experience setbacks in April, the economy consolidated these gains with over 98% of retail locations in operation, an impressive 34% rebound in logistics volumes, and ongoing improvement in real estate markets. To detractors, the Chinese economy looks soft. Declines in retail foot traffic, air travel, and subway ridership all point to skittish consumers worried about a “second wave” of infections.

      9. Interestingly, the same concerns that depress transit ridership also bolster auto sales. After declining by -80% in February and - 40% last month, auto sales in China dropped by just -7% in April relative to the same month last year. An 11% annual increase in Beijing auto traffic relative to April 2019 also suggests auto demand has risen measurably. Overall retail sales continue to contract on an annual basis but at a much slower rate than observed a month ago.

      10. The effect of India’s lockdown was evident in the April data. Equipment sales fell at a -34% annual rate, suggesting that the economy is in the midst of its worst performance since the 1991 reforms.

    Read more here

    This report was originally published by Global Jet Capital on May 12, 2020.

  • Tracey Cheek posted an article
    Global Jet Capital’s Q4 2019 Quarterly Business Aviation Market Report see more

    NAFA member, Global Jet Capital, shares their quarterly business jet market briefing.

    Global Jet Capital’s Q4 2019 Quarterly Market Briefing covers the state of the aviation market for new and pre-owned business jets in 2019. Additionally, this report provides an overview of overall economic conditions, business jet flight operations, pre-owned and new market conditions, business jet transactions, and changes in aircraft residual values.

    This report includes the following insights:

    • Led by new deliveries, the business jet transaction market stabilized in the second half of 2019 after a weak first half
    • Despite threats to trade, economic growth remained slow and steady while consumer confidence and low unemployment served to reassure many business jet market participants
    • New deliveries refreshed a jet fleet that has been aging since the end of the financial crisis
    • As the overall market stabilized, inventories continued to increase, but at lower rates in Q4 than earlier in the year
    • Overall average residual values remained stable in 2018 and 2019, but model by model volatility continued, particularly in the heavy jet segment towards the end of 2019
    • Sustainability will become increasingly important to the industry, which is now developing new techniques and technologies to offset and reduce carbon emissions

    Click here to download the full report.

    This report was originally published by Global Jet Capital on February 11, 2020.

  • Tracey Cheek posted an article
    What are the Aircraft Financing Trends in 2019? see more

    NAFA members Martin Ormon, President of Aircraft Finance Corporation, and Dave Labrozzi, Chief Operating Officer of Global Jet Capital, talk with freelance writer Rohit Jaggi about the condition of the aircraft financing market.

    What's the condition of the aircraft financing market? 

    Who is seeking aircraft financing in 2019, and how are they obtaining it? Have the financing trends changed - and what's the outlook going forwards? Rohit Jaggi gets insights from financiers Dave Labrozzi and Martin Ormon.

    Business jet sales tend to follow the money. And the US economy performed unexpectedly well in the early months of 2019. Yet Business Aviation growth is slowing, in the US and the rest of the world, and business jet sales are being hit by a number of factors.

    Sales of new and used jets saw an uptick in 2018 as US tax cuts and changes in the rules on accounting for airplanes took effect. Increasing demand and steadier prices for used jets also signalled the return of some big banks and financiers to the sector, after having their fingers burnt following the financial crisis of 2008.

    But does that mean financing private jets is becoming easier for buyers? And are specialist lenders being frozen out by competition from the big players? Two companies that play to their strengths in different parts of the business jet financing market illustrated the challenges.

    Dave Labrozzi is chief operating officer of Global Jet Capital, which focuses on aircraft aged 15 years and younger.  He says that the big finance corporations are focusing on their high-net-worth clients and the biggest corporate names, but their interest flags when it comes to complicated deals, or anything other than loans secured on the value of the aircraft.

    Martin Ormon, whose Aircraft Finance Corporation services a US market for older aircraft with loans of $1m to $7m, is more scathing. “[The big bank lenders] believe their model is the best model – and it puts a noose around the customer’s neck.

    “They still want to make it an asset-based loan. An aircraft is not an asset – it depreciates from the second you step in the door and fire the engines up. Far more so than an automobile.”

    Playing to Strengths

    Ormon’s niche is credit-based, 20-year loans that keep the cost of payments down and are based on the customer’s ability to pay. Offering the example of a customer for whom he refinanced a loan on a Bombardier Challenger 605, Ormon reveals the customer had been paying a bank $70k a month.

    “With us that became $29k a month,” he illustrates. “Who is going to default first? A guy with a $29k monthly payment, or a guy with a $70k monthly payment?”

    It’s also true that those who don’t really need to borrow can do so more easily. “The high-net-worth individuals we do business with can dig into their pockets for the $50m-$60m cost of a jet,” says Labrozzi.

    “But they don’t – they prefer to put their money into their business and get double-digit returns.” The leasing deals Global Jet Capital can put together allow them to do that and have a jet.

    What’s Different About Today’s Aircraft Financing Market?

    Labrozzi is confident that there is not too much froth in the market. That was part of what happened after the financial crisis where lenders were spooked by falling asset prices into calling in their loans.

    That helped produce a cycle of further price deterioration and an increasing number of repossessions. “I don’t see that perfect storm,” says Labrozzi. “What is different this time is that the major manufacturers are building significantly fewer airplanes.” And that should help maintain values.

    But another factor helps here: A shortage of high-quality used/pre-owned jets. “Low-hour, clean airplanes are hard to find,” Ormon notes. “In the pre-owned jet market the products are not as high-quality as they were just a couple of years ago. The really great airplanes are out there, but they’re hard to find.”

    Was the US Tax Cuts Impact on Aircraft Sales Limited?

    A natural question is whether the effects of the US tax cuts and accounting changes, signed into law at the end of 2017, have already fed through?

    “The tax law change did give the industry a shot in the arm,” says Labrozzi. But it wasn’t the benefit that many thought: “People bought a jet before the end of the tax year, but then found it was a lot more difficult to deploy the tax benefits.”

    As a result Global Jet Capital has done a lot of sale and leaseback deals, because, as a leasing specialist that turns over a lot of aircraft, it can utilise the full tax benefits. “The bottom line is that it’s helped our business,” Labrozzi says.

    According to Ormon the buying ability of his customers and potential customers has not been significantly dented.

    “These guys are buying Hawker 850 for $16k a month. They’re putting $400k down. Sure, you could pay first class for $16k a month, probably non-stop around the world, but that’s not their mentality. Our clients have the cashflow, they’ve got the cash, and that’s what they want to do.

    “So – with $200k a year in payments and another $700k a year to maintain the airplane and fly it (pilots and everything) – that’s less than $1m a year to own a Hawker.”

    Looking Ahead for Aircraft Financing

    Global Jet Capital’s Q1 2019 market briefing points to trade tensions and fears of market volatility, but sees demand for new business aircraft rising at the same time as a shortage of high-quality used jets impacts the number of used aircraft sales.

    Labrozzi expects a steady market over the next couple of years. His customers are responding to economic and trade uncertainty by putting the tools in place they need to do business (including private aircraft).

    He also believes that the sector is in a trade-up replacement cycle. “A lot of my customers are getting ready to take delivery of an airplane they ordered two years ago and it’s time to move their existing airplane,” he says.

    Moreover, some highly desirable airplanes (such as the Dassault Falcon 7X) were undervalued recently when there were a lot on the market. Now the market is absorbing them quickly, Labrozzi says – they are likely to be on the market for only an average of six months.

    Ormon paints a slightly different picture. “I’d say that lending is down 15%. The aircraft sales are there – there are a lot of people paying cash for $2m and $3m airplanes, because interest rates have been low for a while and companies have just received a tax cut. Companies are awash with cash that they are not necessarily putting back into the business.”

    So the number of deals Ormon is doing is down. “Our biggest year, 2017, was 56 deals, with an average value of about $3.2m,” he says. “Our 2018 average was $2.9m, and today we’re probably doing around 35-40 deals a year. I don’t see anything changing unless we have a major financial crisis. I think this is the new norm.

    “The outlook for my sort of financing is good,” Ormon concludes. “The Hawker 800 is becoming a thing of the past and now we’re getting [better-quality] Hawker 850s and 900s that are in that price range.”

    Labrozzi is also optimistic. “There’s always plenty of business to go around,” he concludes. “I just want to get my unfair share of it…”

    More information from www.aircraftbanker.com or www.globaljetcapital.com

    This article was originally published by freelance writer Rohit Jaggi in AvBuyer on June 5, 2019.

     

  • Tracey Cheek posted an article
    Financing: Which Aircraft are Most Likely to Qualify? see more

    NAFA member Vivek Kaushal, Chief Risk Officer with Global Jet Capital, discusses financing tips on ways to maximize your chances when selecting your next aircraft.

    Is the goal of getting financing for a used aircraft really so difficult in today’s Business Aviation marketplace? Global Jet Capital’s Vivek Kaushal discusses, offering tips on ways to maximize your chances when selecting your next aircraft…
     

    If you’re thinking about financing an aircraft, you’ve probably heard that it’s relatively easy to obtain funds for a new aircraft but that financing used jets is a thornier proposition.

    That’s mostly true, but even for a new aircraft, there is no guarantee of securing funding. It’s important to remember that not all new aircraft are created equal. Lenders will always wait for a new model to prove its performance and demonstrate some trading history before going ‘all-in’.

    Existing models with a solid installed base and performance history are usually acceptable, with a few exceptions.

    While it’s mostly true that financing for new aircraft can be more easily obtained than for used, within the used realm there’s significant variation in what lenders look for and what kinds of risk they’ll tolerate. Generally speaking, a used aircraft can indeed be trickier to finance.

    Some lenders, especially those that don’t specialize in aviation financing, won’t finance aircraft over five years old, while for others, ten years is the cut-off.

    These are largely arbitrary numbers, and experienced aviation lenders know that there are more important considerations than arithmetic based on model year.

    Useful or not, some banks rely on these simple weeding-out measures because they’re constrained by conservative credit risk policies or by a lack of knowledge. Neither is conducive to a holistic approach to used aircraft financing.

    Thus, if you’ve got your eye on a used aircraft that’s got a little more history between its wings than some lenders are comfortable with, don’t despair. Older aircraft can qualify for financing, but obtaining it would typically mean engaging a specialized aviation financing partner who can work with you and navigate some of the industry particulars.

    Following are three major factors that will make a difference as to whether a specific used aircraft qualifies for financing or not…
     

    1. A Robust Installed Base/Model Performance History

    The more performance history that’s available for an aircraft model, the better. Models that have been well-accepted in the market will almost always be more likely to qualify for financing.

    For each cabin class, some models demonstrate better-than-usual value retention. These will typically have been in production at a high volume and will boast a well-documented operational and financial track record.

    Models with short production runs and low trading volume may be viewed more cautiously as collateral for financing.

    Data on a model’s installed base and recent trading history (number of pre-owned aircraft on the market/average days to trade) is typically available on AMSTAT or JETNET.
     

    2. Fleet Average Usage Levels

    An aircraft is more likely to qualify for financing if it’s at or below fleet average usage for its make and model. Bluebook and other guides can provide this information, which is a key indicator of how much service life an aircraft has left.

    If the aircraft’s usage level is significantly higher than average, lenders may get concerned about the aircraft’s remaining useful life because of heavy usage. A heavily used aircraft will tend to sell more slowly.
     

    3. Airworthiness is Non-Negotiable - Maintenance Status Matters

    To qualify for financing, an aircraft must be in very good operational condition with no history of material damage. Damage to the aircraft will be assumed to affect its reliability and value, regardless of how comprehensive the repairs. All avionics have to be up to date, with no doubt over airworthiness. All technical upgrades must be in place as well.

    One major maintenance-related consideration that may affect a lender’s decision is whether the engine is cared for under a power-by-the-hour (PBH) program or not. Most lenders consider PBH programs to be a favorable approach to mitigate the risk of expensive engine repair costs.

    Another consideration is when the next major inspection is going to take place. An airframe inspection can be expensive and take a significant amount of time. A thorough review of the aircraft’s logs and maintenance history will help to flag such issues.
     

    The Real Issue With Used Aircraft Financing

    In a nutshell, the main obstacle to financing used aircraft is the complexity of the deals themselves. Some lenders struggle with the complex considerations that go into evaluating the risk of financing a used aircraft, especially if they don’t have robust aviation knowledge.

    Those that rely on a simple exclusionary process may rule out perfectly airworthy and viable aircraft in favor of preserving a cautious risk posture. All too often, a traditional lender will ask for other forms of collateral, such as significant amounts of assets under management which it has a right of set off, rather than rely on the value of the asset or the credit of the borrower’s business.

    Someone with domain knowledge can engage with the industry’s complexity and structure a transaction that works for the aircraft, even helping clients navigate the inspection process.

    As an example, Global Jet Capital was about to close on financing an operating lease for a ten-year old Bombardier Challenger 605 when a problem was identified with the aircraft’s APU requiring it to be sent to Honeywell for an estimated eight-week repair.

    A lender unfamiliar with aviation might have considered this a “red flag,” and its policies may have also precluded it from holding its financing commitment for that length of time, leading to an end to the deal and possibly a lost deposit if the right contingencies weren’t in place.

    Instead, our understanding of the space meant we understood the need for the repair and were able to work through the delay seamlessly. Once the overhauled APU was installed, the deal closed successfully.
     

    In Summary…

    So which jets are most likely to qualify for aircraft finance? A lot is possible when you find the right partner for your Business Aviation financing and understand what matters to lenders.

    Used aircraft continue to represent terrific value for savvy buyers. Keeping in mind the three major considerations relating to a used aircraft’s finance-worthiness, you should be able to find a used aircraft that suits your business goals and save yourself the disappointment of a rejection.

    More information from www.globaljetcapital.com

    This article was originally published in AvBuyer on May 4, 2018.

     

     

  • Tracey Cheek posted an article
    What to Ask When Your Aircraft Lease is Expiring see more

    NAFA member, Steve Day, Head of Sales - Americas with Global Jet Capital, discusses the questions you should be asking when your aircraft lease is expiring.

    Your aircraft lease arrangement is coming to an end and decisions need to be made on what to do next. What are the questions you need to be asking? 


    1. Should I stay in my current aircraft?

    If you like your aircraft and it continues to fit into your business goals, it may be very easy to extend your lease to retain the same plane.

    The advantages of sticking with your current aircraft are obvious including retaining the same staff and (likely) the same hangar space, no need for additional certifications, and no new maintenance requirements—the list goes on.

    Not only that, you’ll probably be looking at minimal, if any, additional capital outlay as you move into the extended agreement. You may even be able to roll in some additional upgrades and improvements.

    That adds to the peace of mind you’ll have when you stay with something that’s been working well for you.

    A lease extension can also be a useful stop-gap measure if you’re not ready to transition. If you don’t have a plan in place or things are in a state of flux, a lease extension can help you find time to regroup.

    Let’s assume you want to move into a new aircraft, but the model you want won’t be available until a year after your lease expires. A flexible financing partner will work with you to create terms that will accommodate your timeframe and move you into the new lease seamlessly.


    2. How does my transition plan fit into my business goals?

    Perhaps recent tax changes have made you take a closer look at your approach to aviation. Perhaps your current aircraft is no longer meeting your needs. Perhaps you’re expanding into new jurisdictions. There’s certainly no guarantee that your aircraft needs will be identical to what they were when you first signed a lease that’s due to expire soon. But change is rarely a simple proposition.

    Larger aircraft don’t just come with a higher price tag—they also come with different operator certification requirements, maintenance needs, more expensive insurance and higher costs for hangar space.

    Together, those new requirements can be a larger-than-estimated drain on cash flow and time.

    Smaller aircraft, while typically less expensive, can create their own logistical struggles. Even changing where you’ll be keeping your aircraft can be a minefield. A holistic and proactive approach to transition goes a long way towards preventing budgetary surprises, and experienced operating lease providers can be a big help during this process.


    3. Do I have a conceptual transition plan?

    If the answer isn’t yes, you may be in for some turbulence. To leverage the flexibility advantages of leasing, a proactive approach to transition is key. If you don’t start planning early, especially if the aircraft you’re considering could take more than a year to deliver, you might be setting yourself up for problems as the end of the term draws near.

    In the best case scenario, a prepared lessee can move from one aircraft into another with minimal issue and little to no overlap or gaps in lease terms.

    In the worst case scenario, an unprepared lessee can find him or herself without an aircraft due to production availability of new aircraft, or difficulty finding the right plane—which can create huge logistical problems.

    Alternatively, the unprepared lessee might find him or herself paying for, maintaining and managing two aircraft at once while the initial contract wraps up.

    That’s why it’s generally a good idea to start making your transition plan 18 months before the end of the lease if you’re planning on leasing a new aircraft. If you’re planning on leasing a used aircraft, 6-12 months should be sufficient.

     

    4. What obligations will I be responsible for as I move out of this lease?

    Most lease obligations aren’t solely financial or limited to regular lease payments. Obligations to manage, insure, maintain and store the aircraft you’re leasing are important components of lease agreements, and can be a large component of the overall expenses.

    In addition, the return conditions specified in the lease will come with its own obligations – specifically written to protect the expected value of the returned asset.

    If you’re unprepared, you might find yourself blindsided, or underbudgeted as the lease term ends.

    You’ll find that an experienced lessor should be flexible in order to maintain an ongoing relationship, even if it’s a pre-expiration move into a different aircraft. In such cases, it’s usually possible to amend or extend the existing contract as necessary.

    Early termination accommodations also exist, and they don’t necessarily have to come with a hefty penalty. Speak directly with your lessor and clearly articulate your needs and concerns as you plan your transition to find out what may be possible for you.
     

    5. What kind of obligations am I getting into if I transition to a new lease?

    Not all contracts are created equal. Depending on the experience of the lessor and how the agreement is structured, your obligations may be reasonable—or they may be draconian. Lessors that are focused on the corporate aviation market, typically take the time to fully understand their customer’s needs.

    They manage their business models with a long-term view. They’re much more likely to structure transactions that are truly win/win agreements.

    Both financial and non-financial obligations (maintenance, operation, etc.) affect the expenses, so it’s important to fully understand what you’re in for with a new lease and plan accordingly.

    If you’re looking for a flexible operating lease that meets your requirements with minimal bureaucracy, you’ll likely want to consider a partner that has the expertise and market presence that cultivates customized solutions for its clients.

    For more information, visit Global Jet Capital.

    This article was originally published on AvBuyer on May 9, 2018.

  • Tracey Cheek posted an article
    What to Ask When Your Aircraft Lease is Expiring see more

    NAFA member, Steve Day, with Global Jet Capital, offers insights on what questions you should ask when your aircraft lease arrangement is coming to an end.  

    1. Should I stay in my current aircraft?

    If you like your aircraft and it continues to fit into your business goals, it may be very easy to extend your lease to retain the same plane.

    The advantages of sticking with your current aircraft are obvious including retaining the same staff and (likely) the same hangar space, no need for additional certifications, and no new maintenance requirements—the list goes on.

    Not only that, you’ll probably be looking at minimal, if any, additional capital outlay as you move into the extended agreement. You may even be able to roll in some additional upgrades and improvements.

    That adds to the peace of mind you’ll have when you stay with something that’s been working well for you.

    A lease extension can also be a useful stop-gap measure if you’re not ready to transition. If you don’t have a plan in place or things are in a state of flux, a lease extension can help you find time to regroup.

    Let’s assume you want to move into a new aircraft, but the model you want won’t be available until a year after your lease expires. A flexible financing partner will work with you to create terms that will accommodate your timeframe and move you into the new lease seamlessly.


    2. How does my transition plan fit into my business goals?

    Perhaps recent tax changes have made you take a closer look at your approach to aviation. Perhaps your current aircraft is no longer meeting your needs. Perhaps you’re expanding into new jurisdictions. There’s certainly no guarantee that your aircraft needs will be identical to what they were when you first signed a lease that’s due to expire soon. But change is rarely a simple proposition.

    Larger aircraft don’t just come with a higher price tag—they also come with different operator certification requirements, maintenance needs, more expensive insurance and higher costs for hangar space.

    Together, those new requirements can be a larger-than-estimated drain on cash flow and time.

    Smaller aircraft, while typically less expensive, can create their own logistical struggles. Even changing where you’ll be keeping your aircraft can be a minefield. A holistic and proactive approach to transition goes a long way towards preventing budgetary surprises, and experienced operating lease providers can be a big help during this process.


    3. Do I have a conceptual transition plan?

    If the answer isn’t yes, you may be in for some turbulence. To leverage the flexibility advantages of leasing, a proactive approach to transition is key. If you don’t start planning early, especially if the aircraft you’re considering could take more than a year to deliver, you might be setting yourself up for problems as the end of the term draws near.

    In the best case scenario, a prepared lessee can move from one aircraft into another with minimal issue and little to no overlap or gaps in lease terms.

    In the worst case scenario, an unprepared lessee can find him or herself without an aircraft due to production availability of new aircraft, or difficulty finding the right plane—which can create huge logistical problems.

    Alternatively, the unprepared lessee might find him or herself paying for, maintaining and managing two aircraft at once while the initial contract wraps up.

    That’s why it’s generally a good idea to start making your transition plan 18 months before the end of the lease if you’re planning on leasing a new aircraft. If you’re planning on leasing a used aircraft, 6-12 months should be sufficient.

     

    4. What obligations will I be responsible for as I move out of this lease?

    Most lease obligations aren’t solely financial or limited to regular lease payments. Obligations to manage, insure, maintain and store the aircraft you’re leasing are important components of lease agreements, and can be a large component of the overall expenses.

    In addition, the return conditions specified in the lease will come with its own obligations – specifically written to protect the expected value of the returned asset.

    If you’re unprepared, you might find yourself blindsided, or underbudgeted as the lease term ends.

    You’ll find that an experienced lessor should be flexible in order to maintain an ongoing relationship, even if it’s a pre-expiration move into a different aircraft. In such cases, it’s usually possible to amend or extend the existing contract as necessary.

    Early termination accommodations also exist, and they don’t necessarily have to come with a hefty penalty. Speak directly with your lessor and clearly articulate your needs and concerns as you plan your transition to find out what may be possible for you.
     

    5. What kind of obligations am I getting into if I transition to a new lease?

    Not all contracts are created equal. Depending on the experience of the lessor and how the agreement is structured, your obligations may be reasonable—or they may be draconian. Lessors that are focused on the corporate aviation market, typically take the time to fully understand their customer’s needs.

    They manage their business models with a long-term view. They’re much more likely to structure transactions that are truly win/win agreements.

    Both financial and non-financial obligations (maintenance, operation, etc.) affect the expenses, so it’s important to fully understand what you’re in for with a new lease and plan accordingly.

    If you’re looking for a flexible operating lease that meets your requirements with minimal bureaucracy, you’ll likely want to consider a partner that has the expertise and market presence that cultivates customized solutions for its clients.

    For more information, visit Global Jet Capital.

    This article was originally published by AvBuyer on May 9, 2018.

  • Tracey Cheek posted an article
    Global Jet Capital Reveals Importance of Financing in Driving Shift to Larger Aircraft see more

    NAFA member, Global Jet Capital, estimates the value of financing biz jets almost $23bn!

    New analysis from Global Jet Capital, a global leader in financial solutions for business aircraft, has revealed the important role financing is playing in driving the growth in business aviation.

    Since the beginning of 2016, Global Jet Capital estimates that there have been over 8,600 new and used business aircraft transacted around the globe, with the value of financing used to support those purchases totaling almost $23bn. Notably, over 60% of that financing, some $14bn, has been towards acquisitions of new and used large/heavy aircraft.

    This financing has helped increase the proportion of larger aircraft within the global fleet. Since 2016 the total number of mid-sized aircraft around the world has fallen by 8%, or 415 planes. However, these aircraft have been almost exactly replaced in number by larger models as the heavy/large jet segment has grown by 419 aircraft, a 6% increase.

    As the average purchase value of new aircraft in this larger segment was over $48.2m between 2016-2018, compared to an average of $12.5m for the balance of the market, this focus on larger aircraft provides a significant boost to the overall industry. Indeed, the overall value of deliveries of new large or heavy jets since 2016 totals $26.4bn, compared to a total figure of $14.3bn for the balance of the market.

    Global Jet Capital estimates that operating leases to the value of over $5bn are held against new and used aircraft transacted since 2016. The company has seen a significant increase in inquiries for operating leases, with clients attracted by advantages including flexibility and reduction in residual risk. Global Jet Capital expects to see growth in operating leases of over the coming five years, helping drive further aircraft acquisition.

    Of all global regions, only Africa has seen a drop in the size of its large aircraft fleet with a 2% decrease since 2016. The Middle East has remained static over this period, while all other regions have seen growth, the most significant in Latin America and the Caribbean, North America and Asia Pacific (with 8%, 7% and 6% increases respectively). North America has witnessed the largest increase in real terms, adding 317 aircraft to its large and heavy fleet, consolidating its position as the global leader for business jets.

    Dave Labrozzi, chief operating officer at Global Jet Capital said: “The figures provide a clear focus of where we are seeing expansion in the sector, and the importance of financing in supporting industry growth. The flexibility afforded by operating leases is especially beneficial in helping clients move on to higher value new model aircraft without having to remarket their existing aircraft.

    “There are significant long-term advantages in increasing the number of larger business jets in the global fleet. These obviously provide greater capacity per aircraft and therefore offer the benefits of business aviation to a wider population, something which can be particularly important for corporate owners. In addition, the increasing importance in developing new international trade links is resulting in growing demand for aircraft able to undertake longer distances to destinations which may not currently be well served by commercial airlines.”

    This article was originally published by Global Jet Capital on October 17, 2018.