PNC Aviation Finance

  • NAFA Administrator posted an article
    A Capital Option see more

    NAFA members, Keith Hayes, PNC Aviation Finance, and Lou Seno, JSSI, discuss operating leases in the latest Business Aviation Advisor podcast.

    It’s time to think about rebuilding your business.

    And doing so as soon as it’s safe will require traveling via business aircraft, to reconnect personally, face-to-face, with your key customers, allies, and associates.

    It also may require redeploying your capital to fund those rebuilding efforts. Using an operating lease to finance your aircraft can help you do just that.

    Listen as Keith Hayes, PNC Aviation Finance Senior Vice President, and Lou Seno, JSSI Chairman Emeritus, detail how financing a new aircraft – or refinancing your current one – via an operating lease enables you to devote more capital to your core business.

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

    Thanks for reading, listening – and flying safely!

    Listen to Podcast here

    This podcast was originally published by Business Aviation Advisor on May 18, 2020.

  • Tracey Cheek posted an article
    Private Aircraft Ownership - A More Productive Method of Business Travel. see more

    NAFA member, PNC Aviation Finance shares the advantages of private aircraft ownership.

    Private aircraft ownership can often invoke images of celebrities jet-setting to exotic locations around the world. In reality, purchasing a private aircraft can save money and offer enhanced opportunities for corporations and businesses owned by high-net-worth individuals.

    High-net-worth individuals and corporate executives want to save time and travel quickly to conduct business.

    Private and business aircraft ownership can have a positive impact by allowing executives to set their own schedules and grow their business without being at the mercy of commercial airlines. This advantage can save money and could potentially offset the cost of the private aircraft in terms of cost savings, the ability to generate additional business and enhanced travel opportunities.

    Rather than viewing the ownership of a private aircraft simply as an expense, in the right situation, it might actually provide a competitive advantage. 

    Access to Underserved or Remote Locations

    The ability to access locations that are “off the beaten track" and not adequately served by regular commercial airline service can be a key advantage of using private aircraft. If your company does business in these types of locations, using a private aircraft can save time wasted in airports, changing flights and renting a car to drive to your ultimate destination[1].

    If restricted to commercial schedules, it may be difficult to justify visiting prospects, clients or company locations in these areas on a frequent basis. This can negatively impact your business and affect potential growth opportunities.

    Privacy and productivity

    On a private aircraft, business can continue without the presence of strangers sitting in the next seat. This appeals to high-net-worth individuals who have privacy and security concerns that can't be guaranteed on commercial flights and at bustling airports.

    In some business situations, executives want to ensure their privacy if they are traveling to a sensitive business meeting involving a confidential transaction, such as a potential acquisition or opportunity with a potential new customer[2].

    A private aircraft offers an environment conducive for working, conducting meetings with other employees or business associates who are also on the flight or transacting business via phone during flight. This additional productivity can be invaluable as preparation can enhance the chances for success in any business situation.

    For business executives, the cost of the flight and related expenses to maintain the aircraft can be more than offset by the convenience of being able to fly to a meeting on your own schedule. Sometimes, just showing up can be what it takes to land a new customer.

    Tax Advantages and Issues

    Purchasing a private aircraft can offer tax advantages, but this acquisition can be more complex than buying a piece of capital equipment or real estate.

    A key issue is the ability to justify that a private aircraft is an ordinary and necessary business expense and not just a luxury or convenience purchase[3].

    If an argument can be made that business is normally conducted in locations that have limited or no commercial service, a private aircraft is easier to justify. It can also apply if travel often occurs at the spur of the moment or at irregular times.

    Using a private aircraft to address legitimate privacy and security concerns for executives and employees can be another justification.

    There can be a number of taxes, such as potential sales and use taxes, associated with private aircraft ownership, one being how the aircraft is owned. Ownership by a separate entity other than the main operating business can lead to tax implications.

    Before purchasing a private aircraft, it is wise to have your tax and legal advisers conduct a thorough review in terms of the best ownership structure and the anticipated usage to ensure the best possible tax outcome[3].

    Additionally, there are distinct rules regarding the separation of business and personal use of the aircraft. This can extend to personal use as a perk for employees and even in the case of a spouse flying on an executive plane without a business purpose.

    It's important to establish rules for usage and to account for travel using a consistent process that meets both internal and external reporting requirements.

    The diligent maintenance of usage records and the reason for each passenger being on each flight is critically important[4].

    If properly structured and used, the cost of private aircraft ownership can be partially offset by tax benefits that can reduce the cost of ownership.

    We Can Help

    PNC Aviation Finance offers knowledgeable financing solutions to make private aircraft ownership possible and affordable.

    We offer custom-tailored financing packages based on business needs and circumstances. Our experienced aviation finance team understands and has extensive knowledge regarding private aircraft ownership requirements, FAA, insurance, operating leases, etc.

    We can help you look at the implications of each option and help you decide on the best option for you or your business.

    Learn how PNC Aviation Finance can help you fly higher by visiting pnc.com/aviation.

    This article was originally published by PNC Aviation Finance.

  • Tracey Cheek posted an article
    3 Ways to Finance your own Corporate or Personal Aircraft see more

    NAFA member Keith Hayes, with PNC Aviation Finance, shares ways to finance your own corporate or personal aircraft.

    Corporate and personal aviation has returned, after being grounded, or at least stalled, in the wake of the Great Recession. Rising financial markets, growing corporate earnings, a strong U.S. dollar, and increasing consumer and business confidence are driving demand for private aircraft. Faced with crowded airports, jammed-packed commercial aircraft, and ever-present delays, high-net worth individuals and corporate executives alike are increasingly turning to private aviation to relieve the time constraints and delays of commercial flying and to take advantage of the myriad of smaller airfields located closer to their final destinations.  Before ringing the airplane broker and kicking the tires, consider these financing options:

    Traditional Loans

    No different than your smaller purchases – like houses, cars and boats – your traditional aircraft loan can be fixed rate or floating rate. Some financial institutions offer a hybrid which features a floating rate loan with the option to buy a “swap.” In other words, you can lock in your rate and benefit from early payoff and interest rate increases. Not a bad idea in a rising rate environment. Traditional loans can be structured for as short as 30 months or as long as 120 months with amortizations as long as 240 months. Just keep in mind, the longer the terms, the higher the interest rate.

    Asset Based Loans

    Over the last fifteen years, this type of financing has become an increasingly popular option for individuals and businesses seeking aircraft ownership without making financial disclosures or guarantees. Only a select number of organizations offer this product, but it has a number of benefits, including:

    • No financial disclosure or covenants – Truly hassle-free asset based financing.  No need to forward years of tax returns and K-1’s or to disclose financials of a privately owned company.
    • No or limited personal guaranties – This may be very important for companies that have bonding requirements or covenants limiting the amount of debt or guaranties than a company may incur. There may be partners involved in the ownership and the owners may be unwilling to sign on the other partner’s debt.
    • Non-recourse – If the borrower defaults, the lender can seize the plane, but cannot seek out the borrower for any further compensation.

    Aircraft Leases

    As with other types of large equipment, businesses as well as individuals may elect to lease an aircraft as an alternative to purchasing.  An individual or business may have multiple reasons to lease instead of purchase, including cash flow considerations, federal income tax considerations, sales tax considerations and accounting treatment. There are several types of leases with the choice often determined by how the aircraft will be used:

    • Non Tax Lease – The lessee (the bank or other entity granting the lease) owns the asset for tax purposes. Typically, this option is put in place for off-balance sheet treatment. The lessor will use the aircraft only for business and has an “appetite” for tax depreciation, therefore, can take advantage of the tax benefits.
    • Tax Lease – The lessor owns the asset for tax purposes, realizing the tax benefits such as the depreciation of the aircraft. Because the lessor takes the tax benefit, the lessee is typically offered a more favorable interest rate.

    Where do you start the journey to find a lender? Often, borrowers start their financing search where they have an existing banking relationship. However, that may not always be your best financial option.

    General aviation industry knowledge should be a critical criteria for your lender. For example, does your lender have expertise with the FAA requirements? Are they aware of new regulations on the horizon that could impact your purchase? Does your lender have an established specialty in aircraft financing or only do an aircraft loan every once in a while at the request of a marquee customer? Is the lender credentialed with key trade associations like the National Business Aviation Association (NBAA), National Aircraft Resale Association (NARA), or and National Aircraft Finance Association (NAFA)? If you don’t know, aircraft brokers and dealers, aviation attorneys and aircraft managers are a good source for referrals and recommendations.

    This article was published by PNC Aviation Finance.