If you’ve identified the perfect plane for your needs, then it’s time to start thinking about financing. Before reaching out to a lender, it makes sense to prepare for the process and answer a few basic questions.
What to expect during financing
The aircraft financing process is very similar to the application process for a home mortgage. The lender requests financial information from the loan applicant, then conducts an appraisal to determine the value of the aircraft. The lender also executes a title search to ensure no outstanding liens or issues exist.
Finally, the loan paperwork is initiated by the lender. Documents include a security agreement (in the event the borrower defaults on the loan) and a promissory note that outlines the terms of the loan. At closing, the paperwork is signed, and the new title is transferred to the aircraft owner.
Before you begin
Here are some of the key questions to weigh before sitting down with a lender:
- Who will be responsible for repaying the loan? Will the loan be extended to your corporation, an individual or a corporate subsidiary? Are there extenuating circumstances that may require backing by a third-party, such as a partner or investor?
- What are the preferred loan repayment terms? How much is the company or individual prepared to offer for down payment? Will payments be made on a monthly or quarterly basis?
- What are the tax implications of this purchase? Research the best place to register the aircraft to reduce sales tax. Discuss with an accountant the best method to handle depreciation so that overall tax liability is reduced.
- How many hours will the aircraft fly each year? Will the plane be maintained by private staff or an external management company? Will the jet be made available for charter or a third-party for use?
What’s trending in lending
Because of continued uncertainty in the financial markets, lenders are applying tighter controls to loan terms. In the past, many banks required that the age of the aircraft combined with the term of the loan not exceed 30 years. Unfortunately, that guideline has dropped recently to just 20 years, making newer aircraft an attractive option for many buyers.
Lenders also expect to build strong relationships with borrowers, meaning companies must be candid about the health of their business and proactive about turning over financial information.
Financing is one of the most important steps in the buying process because of its impact on the total cost of aircraft ownership. Taking time to prepare and think about the best loan arrangement will lead to a sound strategic investment — and more enjoyment of that investment.
Two major events happened in the past week in aviation. From the super-huge Boeing Intercontinental to the lightweight, fuel-efficient Volta Volare GT4, advances in aircraft design are certainly moving in opposite directions.
Let’s see what each development brings to the world of aviation.
After six years of troubleshooting, the Boeing 747-8 Intercontinental was finally delivered to Lufthansa in Seattle, Wash. The 467-passenger jet will start service June 1, flying between Frankfurt, Germany, and Washington, D.C. This double-decker airplane has the newest wing-engine combo, and it marks the launch of the lie-flat business class. Larger cabins, thinner economy-class seats and roomier cargo bins are new features for the interior. You can see a slide show of the jet here.
At the other end of the spectrum is the tiny Volta Volare GT4. This four-passenger aircraft is an electric hybrid plane that has a range of 300 miles on batteries before the engine kicks in to carry the Volare a maximum of 1,000 miles. The batteries weigh about 900 pounds, and the 1.5 liter gasoline engine uses a 23-gallon tank. No lie-flat seats or first-class cabin are included.
I would guess the Boeing is more comfortable, but the Volare offers a more adventurous experience. So which one would you rather fly in?
There’s no getting around it: As news reports continue to expose corporate (and government) excesses in spending, public outrage lingers. Unfair or not, the corporate jet has perhaps become one of the easiest targets for shareholders, the media and people looking for evidence of corporate greed and fiscal mismanagement.
However, it’s important to recognize that this public sensitivity doesn’t mean private air travel isn’t a practical, financially smart option for many business travelers. The benefits for companies that use private jets can be significant.
Flying privately increases work productivity during travel. In addition, doing business in a global economy often exposes high-profile corporate executives to security threats, and sticking with private flights reduces some of that personal risk. In many cases, it makes good business sense to fly privately when lost hours on the ground can mean a corresponding loss in revenue.
Full disclosure
Still, with the convenience of private air travel comes the responsibility to establish and enforce corporate guidelines about private jet use. Most business aviation experts agree that companies should seek to be as transparent as possible when communicating with shareholders and employees about the business reasons behind owning or using private aircraft.
To help make the case for private air travel, keep meticulous records of each flight including destination, purpose and costs, along with potential revenue impact. Also, if corporate executives are allowed to use a company jet for personal use, provide documentation that outlines how the company will be reimbursed for those costs.
Share the wins
Make sure to communicate the successes that result from private air travel. If your CEO was able to avert a customer service nightmare by hopping a last-minute private flight to the client’s location, release the details of the trip and the amount of revenue that was protected. Openly discuss how back-to-back sales calls at multiple client locations spread around the country brought in unexpected revenue in just a few short days — and cost less than multiple longer trips.
When the trip is appropriate and aligns with the demands and goals of the business, allow employees at all levels of the company access to the company’s private plane. Leading an organization with the example of open and proactive communication about private air travel can head off resentment from employees and mistaken assumptions by shareholders. And that can translate to even more business success in the future.
Jet brokers have the best advice about the process of buying a used aircraft that suits both your style and your pocketbook. You may know the features and styles you want, but you may not have a great deal of background knowledge or in-depth technical knowledge about private aircraft. Jet brokers know the advantages and disadvantages of each type of jet available and are able to advise accordingly.
A professional jet broker, for instance, will advise you not to shell out millions of dollars for a new aircraft and its current technology when a plane that will suit your needs is available on the pre-owned market. With the help of a broker, you’ll make your purchase based on fact — not whim or fancy.
Ensuring safety and accuracy
A jet broker is a useful ally for an individual ready to buy a jet. Here are a few of the services you can expect a reputable jet broker to complete.
- Determine the condition of the aircraft.
- Recommend an unbiased mechanical inspection firm.
- Make sure the taxes are paid in full.
- Compare asking price to true market value of the jet.
A professional jet broker will perform the due-diligence check, ensuring that you are buying a plane that will serve your needs so you don’t have to upgrade in a year, or pay extra for space, fuel and salaries when you don’t need to.
The right features, the right price
Jet brokers such as L&L International are experts in the investment opportunities of used airplanes for sale. They understand the needs of specific buyers and the qualities of each of the used airplanes on the market.
The first thing that a jet broker will do is a full cost analysis. The breakdown of your needs will factor highly in this. If you are looking for a small airplane to transport people around the country, then you won’t need to spend extra money on an ultra-long range jet capable of intercontinental travel.
L&L International understands what features buyers of used jets are searching for, and the qualities of specific jet airplanes that may be especially suitable to the particular needs of those clients.
So, whether you have used jets for sale or are looking to purchase a used aircraft, relying on a jet broker is the most efficient way to maximize your chances of success.
Sure, flight logs, regular maintenance, jet fuel, and an excellent pilot are important aspects of jet travel. Nobody wants to merely sit on the runway — you want to actually go somewhere. So we get it. The mechanics and practical details are essential.
But let’s move on. In-Flight Entertainment (IFE) is really where it’s at. This is what your guests are going to be talking about — how the movie played simultaneously on four different screens. Or how the bass was bumpin’ from the Bose surround sound. Or how the client played Modern Warfare 3 on the PS3 the entire trip.
A great IFE system will take your private jet experience to another level. It’s important, which is why we covered some basics in our newsletter a few months ago. And now our friends at BlueSky Business Aviation News just wrote a piece that reviews some advances in IFE. No matter the size of your aircraft, there’s an innovative, customizable IFE solution for you.
The options are nearly unlimited: On-board Ethernet, Blu-Ray player, game systems, satellite radio. Tell us — what’s the one thing your aircraft has to have?
A lot of attention has been given to the ballooning private aviation market in Asia — and rightly so! But what about other parts of the world? For instance, what’s going on in the Middle East?
The Middle East and Northern Africa region is one of the fastest growing and most attractive aviation markets in the world. Middle East Business Aviation Association (MEBAA) predicts growth of 15-20 percent in the area over the next six years, achieving a market value of $1 billion by 2018.
Even though political unrest troubles the Middle East, private aviation continues to grow. For companies serious about doing business there, a private jet is a serious competitive advantage. Many locations in Afghanistan, Iraq and parts of Africa are unreachable except by air, and commercial airlines don’t offer frequent flights there.
As in Asia, inadequate aviation infrastructure is certainly an obstacle to rapid growth of the private aviation market.
“The support infrastructure in the Middle East remains weak and does not meet the market demands,” explains Bilal Yousuf of Al Jaber Aviation LLC.
Most of the jets in the Middle East region are mid-sized, typically seating between six and 19 passengers. However, some of the largest private jets in the world are in the United Arab Emirates and Qatar, including this Boeing 747 V.I.P., which could seat 460 but instead has a two-car garage, horse and camel stables , and a rotating prayer room that always faces Mecca. Wow!
February’s Singapore Air Show set a new record of more than $31 billion in expected sales, a tripling of estimated contracts from the 2010 event. What was the big takeaway? Aircraft manufacturers are focused on meeting demands of their customers in the expanding Asian markets.
Showing off in a big way
Large jet manufacturers Boeing and Airbus, in spite of recent production and repair problems in both companies’ fleets, arrived in Singapore to unveil their latest product offerings. Boeing showed off the 787 Dreamliner that, due to its ultra-lightweight carbon composition, uses 20 percent less fuel and boasts cabin appointments designed to increase passenger comfort. Japan’s ANA was the first carrier to take ownership of the new plane.
Airbus, appealing to its ultra-wealthy client base, brought its ACJ318 business-class jet, which features sophisticated interiors, including a separate bedroom and dining area.
Small jets appeal to a new class of buyers
Plenty of smaller, private jets were on display as well. Embraer displayed the Phenom 100, a five-seat plane with an attractive sticker price of just $4 million. In a well-publicized move, Embraer also unveiled Jackie Chan’s new plane, a Legacy 650, which features an eye-popping red and yellow dragon on the livery. The Brazilian-owned company has focused its energies on landing customers from the emerging BRIC countries.
Small jet manufacturer, Bombardier partnered with Garuda, Indonesia’s top carrier, to supply 18 new CRJ 1000 jets intended for short, regional hops. Bombardier also listed the Global Express aircraft for sale — a 14-seater business class jet for $26 million.
Italy’s Piaggo brought its sleek-bodied Aero Avanti II to Singapore, asserting that the aircraft is the fastest turboprop in production. There’s good reason to believe the claim — the company is backed by auto performance leader, Ferrari.
An event that’s grabbing attention
The contracts announced at the event are further evidence of the dramatic rise in demand for new aircraft within Asia, which now makes the Singapore Air Show one of the most important events in the global aviation community. We can’t wait to see what’s in store in 2014!
Just a few of the important aviation stories in the news this week.
Consistent Improvement in Pre-owned Aircraft Market
The numbers keep demonstrating that the private, pre-owned aircraft market is slowly regaining ground. Inventories fell, number of transactions increased and days on market decreased in February 2012.
Lasers a Growing Concern
Put the laser down. Ground-to-air laser events have grown astronomically: 20 reported in 2005, nearly 2,000 in 2010. That’s just in the U.K. The numbers are increasing, and lasers focused on aircraft nearing an airport are a growing concern.
Tokyo Takes Major Step in Bizav Infrastructure
Tokyo has opened its first dedicated business jet terminal. Tokyo has fallen behind other cities in the region in developing infrastructure around business jet travel, so this terminal marks a turning point in the attitude toward private aircraft.
Embraer and Boeing Partnership
This new cooperation includes three areas of emphasis: safety and efficiency; research and technology; and sustainable aviation biofuels. The announcement comes the same day that the U.S. and Brazil signed an agreement to deepen cooperation between the two nations over civil aviation.
What do you think is the most important news item? Tell us.
The average private aircraft found in North America is a relatively modest affair, with neutral, somewhat predictable interiors. It’s not surprising that the elite aircraft owners in Asia expect their private jets to reflect their own unique cultures. Manufacturers are geared up to meet the needs of the growing and diverse Asian clientele.
Asian cultures, sophisticated interiors
Asian buyers overwhelmingly prefer to purchase brand new aircraft. Customization of the aircraft interior is popular in Asia with unusual appointments such a red walls and large, communal tables for family-style meals or mid-flight games of Mah Jong.
One glance at Jackie Chan’s private jet, made by Embraer, and you’ll know you’re not in Kansas anymore — or anywhere near North America, for that matter. The exterior of the customized aircraft sports a red and yellow motif, with a dramatic dragon design.
When it comes to selection of materials, no detail is too small. Aircraft manufacturer, Bombardier, prefers to source leather for their aircraft interiors from free-range cows grazed at high altitudes. In Switzerland, for example, free range cows are less likely to be bitten by mosquitos or encounter barbed-wire fences, ensuring a flaw-free leather product.
The smart and practical amenities
The Asian buyer is not only preoccupied with design. Some of the customization of Asian-owned aircraft is focused on safety. Many of the new planes feature high-tech controls and leading-edge equipment designed to make navigating Asia’s smoggier environmental conditions safer.
These new, customized jets may be available for sale in a few years, so don’t be surprised if the next pre-owned jet that catches your eye features an interior that adheres to the design principles of Feng Shui. You may even experience some unexpected balance, harmony and luck.
Many manufacturers have high hopes pinned on ballooning demand for private aircraft in countries throughout Asia, especially in China. While the demand for jets is certainly there, and a growing number of high-net-worth individuals can afford them, one essential aspect of a thriving aviation industry is missing: adequate infrastructure.
Here are just a few obstacles that will need to be removed in order to see true promise in the Asian market:
- Lack of trained pilots and technicians
- High tax on imported jets
- Minimal service support system for business aviation
While training and educating individuals for aviation jobs is fairly simple to achieve, several of the other issues require government intervention and policy changes. These infrastructure and policy updates will determine the timeline and scope of the Asian aviation market expansion.
