Market Trends

Market trends

A strong economy and increased interest in general aviation keep aircraft financing strong

By Jordanna Smida, assistant editor

April 2000

Airport Business spoke with aircraft financing companies to find out the latest trends. Results indicate a strong market, new entrants, and an optimistic outlook.

Though much of the success for the growth in aircraft financing can be attributed to a booming economy, it is only one of a few factors. According to the aircraft finance companies we spoke with, an increase in the interest of general aviation as well as the re-entry of many manufacturers into the market have also spurred the market's growth.

Competition is strong among all aircraft finance markets, notes Joe Dini, president of the National Aircraft Finance Association (NAFA). He is also vice president of general aviation for FINOVA Capital Corporation, which offers niche financing and leasing to merging growth credits, special purpose borrowers, and lessees. "Over the last five years the number of people involved in providing financing for various levels in the marketplace from good credit to emerging companies has doubled," he explains.

Dick Ramsten, manager of domestic aircraft financing for Bombardier Capital, which finances its fractional share program, Flexjets, states, "I think the real nucleus behind the growth is that prior to a year or two ago it [fractionals] was a product that had an uncertain future. It is now a program that everyone has accepted as a viable alternative to owning your own airplane," Ramsten states.

Longer terms are also a function of the steady economy. According to Bud Walker, vice president of specialty finance for MBNA, which specializes in personally owned aircraft from single-engine pistons to light business jets, many lenders are offering 20-year terms with 10 to 15 percent down payments, as opposed to 20 to 30 percent in the past. Aircraft portfolios perform well, Walker explains. "You're typically dealing with very upscale individuals or companies that are very financially solvent. Particularly in the used markets we've seen collateral values be very strong, so the result is you have a well-qualified customer and a collateral that holds its value very well."

The economy's strength has also brought more players into the aircraft finance market, notes John Newton, senior vice president of domestic sales and marketing for Cessna Finance Corporation, which specializes in new and used single-engine piston aircraft.

"We have an awful lot of competitors entering the market making the available cash or money very abundant. We have more players in our market than I've ever seen," he states.

The growth of the market is hard to pinpoint because the marketplace has become so competitive the past few years, says Al Lange, vice president of the aircraft finance division for Textron Financial Corporation, which offers aircraft lending to nearly the entire general aviation industry. "There are so many more lenders in the aviation field today then there were five years ago. There is growth in the market, but it is hard to determine the amount because of all the lenders that have entered," he states.

According to NAFA's Dini, the strong economy is reflected in the numbers: used aircraft trading increased about five to six percent a year over the last five years. He also says that the units of jets and turboprops traded has exceeded almost 2,500. The market has also seen a substantial increase in new deliveries, he notes, attributing a good portion of the orders to fractional ownership.

Increased interest in General aviation
The re-entry of many aircraft manufacturers has also played a role in the growing market, catching the attention of financial institutions.