Airplane Lending Soars in Southern California

Mission Oaks Bank has made $4.5 million in aircraft loans in less than three months.

Juan Alonzo, vice president of aircraft lending for the 6-year-old bank based in Temecula, is the only aircraft loan officer in San Bernardino and Riverside counties.

About a dozen banks offer the service, said Norman Morales, president of Vineyard Bank (Nasdaq: VNBC) in Corona.

"We hope to have our aircraft lending department running in the next 12 to 18 months," said Morales, who believes aircraft lending will meet the need of the bank's target customers. "Our desired clientele are owners/operators of their own businesses. They are entrepreneurs or business owners who are affluent and successful."

Bank of America became the largest supplier of aircraft loans in 2005 when it merged with MBNA, acquiring its arm of aircraft lending, said Will Wilson, spokesman for Bank of America.

"We have over $5 billion with 700 aircraft clients around the world in our portfolio," he said. "Southern California is an important market for us. We're the biggest lender in the business. There are not a lot out there."

Because of the expertise involved in aircraft loans, few banks provide the service.

"A qualified and experienced team with expertise in the field is hard to find," said Morales, whose bank is in the process of looking right now. "You can't go train a banker to do it. You have to find a person in the business. It is a specialty."

Alonzo, a former loan manager for Crocker Bank in Riverside, was pushed into the aircraft lending business.

One day his boss asked, "What do you know about aircraft lending?"

"Nothing," Alonzo said.

He was given 60 days to learn the business.

"I borrowed every book I could find and have been in the business now for 20 years," said Alonzo, who took flying lessons but can no longer pursue his pilot's license due to medical issues. "I love it. I've turned it into a career."

Among the tougher aspects are learning to appraise an aircraft and finding dependable appraisers, he said.

"You have to know if the aircraft is worth the $150,000 it's being appraised for, or only $50,000," he said.

He started with Mission Oaks (OTC: MOKB) in November with one assistant loan officer helping him.

Alonzo's goal this year is to generate $15 million in aircraft loans, or about 60 planes, he said. Plane loans range from $50,000 to $4.5 million. The average loan is $250,000.

California has 37,994 of the 228,000 private-licensed pilots in the nation, according to the Federal Aviation Administration.

There are 1,796 registered private aircraft in Riverside County and 1,702 in San Bernardino County. As of January 2006, the FAA reported California led the nation with 30,277 registered aircraft, more than any other state. There are 263 airports in the state.

Riverside County has 1,493 licensed pilots and San Bernardino has 1,248, according to research by the FAA.

"We have a steady flow of customers," said Alonzo, who helped start aviation lending departments at four other banks that have since closed or merged. "We have 10 to 12 deals going right now and others wanting to be pre-approved. There is so much money around here."

Loans range from $50,000 for a 30-year-old, two-seat, Cessna 172 to $4.5 million for a corporate jet, Alonzo said.

"Business owners today can't manage their company's business on an airline schedule," said Shawn Beaver, vice president of operations for Guardian Jet Center in Ontario, where 300 private planes land each month. "Convenience and time are what private planes give their owners. Corporate clients aren't slowing down, we're getting busier by the day. The demand is very much increasing."

Guardian Jet Center, which leases, services private planes and charters airplanes, had gross revenue of $16 million in 2006.

"Much of our income is from fueling the planes that land here," Beaver said.

Volume was up 24% last year for Bank of America aircraft loans, Wilson said.

He did not comment on specific numbers.

Purchasing a plane is not like buying an automobile, Alonzo said.

"You have to qualify for the loan and be able to do the upkeep," he said.

"Our clients are mostly upper-end professionals, like doctors and small-business owners, who want luxury items. It narrows down to good credit and good income."

His clients come from New Mexico, California, Washington, Colorado, Utah, Nevada and Oregon.

Twice a week, Alonzo visits airports from Long Beach to San Bernardino.

"They all know me and refer business to me when they are asked where to purchase," said Alonzo, who flies to Northern California twice a year to solicit business for the bank.

"Mostly, my customers are from California."

The average aircraft owner trades up or sells after three years, Alonzo said. Most aircraft loans are for 20 years.

"They either get tired of paying the bills or want a faster plane," he said.

"One customer, a doctor, told me not to call him at home about the loan on a new aircraft. He was going to tell his wife during their Hawaii vacation," Alonzo said. "She got a new car and he was able to get the new plane by the time he returned from vacation."

Most wives do not want to fly with their husbands, Alonzo said.

"I explain it to my wife and other people this way, it's like getting your driver's license when you become a pilot," said Alonzo.

"You get your license and drive around the neighborhood and figure out you have a lot of opportunities. Pilots are the same way. They get a taste of it and then want more speed or an upgrade."

Because a person can get a pilot's license at 16 years old, some of his clients are young, Alonzo said.

"One of my clients was 21 years old," he said. "He had gotten his license at 16 and was a millionaire from making video games. He wanted his own plane.

"That's the best part of this job," Alonzo said." I never know who's going to call next."

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