aircraft finance

NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, discusses the challenges of aircraft closings during the Coronavirus pandemic.

Unlike real estate, where the exchanged property does not move, the challenge with closing on an aircraft is that eventually it must be flown to its new home. It’s a rare transaction where buyers purchase an airplane from their home airfield. Therefore, how to legally move the aircraft is one major concern for buyers during the coronavirus pandemic. Another is how to get a pre-buy inspection done.

First, there is the sticky problem of getting an aircraft inspected. It’s not clear whether maintenance and repair shops are currently open to perform pre-buy inspections, or whether their employees can even report to work. Some states have not deemed aviation techs “essential.” What jobs are deemed “essential,” how, and by whom such job designations will be enforced remains up in the air. Even if aviation techs are, parts suppliers might not be. That means needed parts may not get delivered. In normal times, a closing might take 30 days. In these abnormal times, plan on the process stretching to 45 days or more.

Beyond that, is it legal for a ferry pilot or the new owner to fly an airplane from the airport where it is hangared to its new home base?  State laws vary on the subject. How complicated it will be to transport the aircraft may depend on factors like the route of flight and the number of states involved. Is the airplane going from California to Maine? Or from Wisconsin to Indiana? One has to ask oneself, “Am I going to have a challenge from this state?” Other questions follow, including, “Which governing body would enforce such a challenge — state or federal?” “Is it within FAA or state jurisdiction?” None of that is easy to navigate.

If you can imagine the difficulty of flying from one European country to another and having to deal with the balkanized ATC system there, then you have some idea of the current complexity surrounding moving an aircraft across state lines during this pandemic. At AOPA Aviation Finance, (“AAF”), our advice is to call AOPA’s Legal Services to get better clarity on your specific situation.

That is a great benefit of AOPA, having multiple resources all in one place. This complex situation is the perfect time to tap into them.

Great advice. Great rates. From helpful and responsive reps you can trust. Three good reasons to turn to AOPA Aviation Finance when you are buying an airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (800.627.5263), or click here to request a quote.

This article was originally published by AOPA Aviation Finance Company on April 30, 2020.

FOR IMMEDIATE RELEASE

FORT LAUDERDALE, Fla. – November 4, 2019 – National Aircraft Finance Association (NAFA) is pleased to announce that NBT Bank recently joined its professional network of aviation lenders. 

“NAFA members form a network of aviation finance services who diligently and competently operate with integrity and objectivity throughout the world. We’re excited to welcome NBT Bank to our growing organization as we head to our 50th anniversary,” said Jim Blessing, President of NAFA.

NBT Bank offers personal and business banking, commercial banking and wealth management services from locations in seven states, including New York, Pennsylvania, Vermont, Massachusetts, New Hampshire, Maine and Connecticut and through its online and mobile channels. The bank added small aircraft financing to its array of lending options in 2019 and hired Douglas N. Place, Jr. as vice president of Aircraft Financing to lead their efforts. Place has nearly 15 years of experience in the financial services industry, including 10 years in aviation financing. He is also a private pilot and a member of the Board of Directors for the Greater Lawrence, MA Airport Authority.

“NBT Bank is dedicated to building strong relationships and delivering high-quality service to our customers,” said Place. “I am proud to be a part of the NBT team and to deliver small aircraft financing as an enhancement to the bank’s business options. We’re very excited to join NAFA and foster long-term, mutually-beneficial relationships throughout the aviation finance community.”

Established in 1856, NBT Bank is headquartered in Norwich, NY with its parent company, NBT Bancorp Inc. NBT Bancorp Inc. had assets of $9.7 billion as of September 30, 2019 and is traded on the Nasdaq Global Select Market under the symbol NBTB.

NBT Bank appeared on the Forbes 2019 World’s Best Banks list as the top-ranked bank in Maine,  New Hampshire, New York and Vermont. Of the 60 U.S. banks on the list, NBT Bank was ranked #14. Forbes surveyed more than 40,000 customers around the globe and rated banks on overall recommendation and satisfaction as well as five subdimensions (trust, terms and conditions, customer services, digital services and financial advice).

For more information about NBT Bank, visit nafa.aero/companies/nbt-bank.

About NAFA:  

The National Aircraft Finance Association (NAFA) is a non-profit corporation dedicated to promoting the general welfare of individuals and organizations providing aircraft financing and loans secured by aircraft; to improving the industry's service to the public; and to providing our members with a forum for education and the sharing of information and knowledge to encourage the financing, leasing and insuring of general aviation aircraft. For more information about NAFA, visit NAFA.aero.

Dear Fellow NAFA Members,

At the close of the 48th Annual NAFA Conference it became my distinct honor to take the helm of such a distinguished organization as we head toward our 50th anniversary.

The 2019 Conference was an excellent event in many respects, with presentations from industry experts, aircraft manufacturers, our keynote and economist, and lively discussions on the issues that are most topical to the NAFA membership. We are especially appreciative of our conference sponsors who have given NAFA the ability to invest in increasing the quality and content of the event year over year. Your feedback from the event is critical in our development of future years’ Conference programs. Please take the time to complete the post-conference survey if you have not already done so via the link: https://www.getfeedback.com/r/cuVU44p8.

At the Annual Meeting NAFA announced a new Code of Ethics for our membership, and the final version is attached here. We would welcome you to review and comment on the document by April 30th, as our intent is to implement this soon thereafter.

Organizationally, NAFA welcomes the addition of Ed Medici to the Board of Directors. Ed is a 20+ year veteran of the aviation industry and serves as the Managing Director at Banc of America. In addition, Jim Simpson, Senior Managing Director with First Republic Bank joins the NAFA Executive team as NAFA’s new Vice President. We are also thankful for the renewed support of our officers; Karen Griggs - Executive Director, Tobias Kleitman - Treasurer, Tony Kioussis - Secretary, and David Warner, NAFA’s General Counsel.

We received excellent feedback during the Conference on what you want to see from your NAFA membership. With this in mind, we have a lot to accomplish, and we are looking for active participants for our Committees. Please consider participating in one of the below committees:

• -  Website Development

• -  Annual Conference Planning

• -  Other Networking Event Planning

• -  Membership Committee

• -  Regulatory & Advocacy

• -  Marketing Committee

• -  Strategic Planning

• -  Sponsorships & Fundraising

If you have an interest in joining one of the above initiatives, please feel free to reach out to Karen Griggs or I (karengriggs@nafa.aero).

In moving our focus forward, we ended our event in Fort Lauderdale with an announcement as to next year’s conference dates and locations. NAFA’s 2020 conference will be hosted by the Meritage Resort in Napa Valley, California and is scheduled for April 28-May 1.  We hope you will make plans to join us!

Sincerely,

Jim Blessing

President, National Aircraft Finance Association 

jblessing@airfleetcapital.com

480.634.8129 direct

703.608.9360 cell

FOR IMMEDIATE RELEASE

EDGEWATER, Md. - Feb. 14, 2019 - National Aircraft Finance Association (NAFA) is pleased to announce that JSSI Advisory Services has joined its professional network of aviation lenders as a stand-alone member. This Jet Support Services, Inc. (JSSI®) company supports a global customer base with ad hoc services and is a leading provider of aircraft services to lenders, insurance companies and operators worldwide. 

“NAFA members proudly finance, support, or enable the financing of general and business aviation aircraft throughout the world, and we’re happy to add JSSI Advisory Services to our association,” said Ford von Weise, President of NAFA.

JSSI Advisory Services leverages 30 years of JSSI expertise and data to deliver technical advice and consulting services to clients. As an independent provider of maintenance support to virtually all makes and models of business aircraft, JSSI oversees 8,000 maintenance events per year with a global network of over 70 technical advisors. This depth and breadth of resources, along with its 2018 acquisition of Conklin & de Decker, have allowed JSSI Advisory Services to gain market share and position itself as a “one-stop shop” for aircraft owners, operators and financiers seeking guidance on often complex aviation matters. 

“We’re proud to officially join NAFA and look forward to serving members with an unparalleled suite of services,” said Jason Schwab, President of JSSI Advisory Services and Conklin & de Decker. “We can help members in any location at every stage of the aircraft life cycle, from acquisition to operation to retirement,” Schwab added. 

JSSI Advisory Services delivers many high-level professional services, including maintenance event management, ASA- and USPAP-certified appraisals, and on-site technical inspections of aircraft, records, and flight operations. Additional services include maintenance cost forecasting, completion inspections, fleet monitoring, delivery acceptance and ad hoc consulting engagements.

For three decades, JSSI has been the leading independent provider of maintenance programs to the aviation industry, covering airframes, engines and APUs. JSSI provides comprehensive, flexible and affordable financial programs and tools for managing the often unpredictable costs of operating and maintaining business and commercial jets, turboprops and helicopters.  

Much like NAFA, JSSI Advisory Services is shaped by a culture of collaboration, innovation and integrity, striving for excellence in the aviation industry. JSSI and NAFA continue to foster the highest standards in service and safety through their support of business and community. For more information about JSSI Advisory Services, visit www.jetsupport.com/advisory-services.  

About NAFA: 

The National Aircraft Finance Association (NAFA) is a non-profit corporation dedicated to promoting the general welfare of individuals and organizations providing aircraft financing and loans secured by aircraft; to improving the industry's service to the public; and to providing our members with a forum for education and the sharing of information and knowledge to encourage the financing, leasing and insuring of general aviation aircraft. For more information about NAFA, visit www.NAFA.aero.

NAFA member, Martin Ormon, founder of Aircraft Finance Corporation, has been financing new and pre-owned aircraft for over twenty  years in a niche business that has proven to be successful.

It all started with a deal back in the spring of 1998, during Ormon’s private banking days, when he was the co-owner of a hedge fund in the Northeast. Martin was tasked with assist- ing a client of his – an automobile dealer based Southern California – with a short term bridge loan to make an immediate acquisition of a partially constructed auto dealership. The client had a commitment from a local bank in the area, however due to the timing and urgency of the deal, Ormon stepped in and facilitated the loan. In exchange, the collateral for the deal was a 1996 Hawker 800xp. Within eighteen months, the deal went sour and Ormon ended up with the 1996 Hawker 800xp in his hedge fund portfolio. Ormon, being the ‘smartest guy in the room’ was challenged by his partners, “Okay, smart guy, what are we going to do now?” Ormon replied, “Well, Gentleman, it looks like we’re going into the aviation financing business.” Ormon immediately leased the aircraft to a pharmaceutical company for three years. “That’s when I discovered an attractive quality of ‘mature’ aircraft,” he explains, “even after they have been fully depreciated, their residual value can be impressive. Maintenance programs are a key factor in our credit decisions, how- ever not every aircraft we finance requires one, we do our own appraisals and verify the aircraft maintenance history, Where traditional banks shy away from aircraft aged fifteen years and older, AFC finances aircraft up to 30 years old, with loans from $500,000 to $20,000,000 Dollars.

So, how do they do it? In most cases, Aircraft Finance Corporation partners with regional banks that are federally chartered and then guarantees the loans through a percentage of term of the loan. Ormon explains, “[Our work is] really not that difficult to do. We have skin in the game and that makes a very big difference with regard to rate and term.” It is important to note, that in addition to their experience in the aircraft financing world, their work does require extensive knowledge of their customer. More than 85% of Aircraft Finance Corporation’s loans are made in house, as they under- write, service and portfolio their own loans. Furthermore, the customer’s loans do not get sold to the secondary market. On average, Aircraft Finance Corporation’s customers will keep their aircraft for 42 months. With this type of client loyalty, Aircraft Finance Corporation prides itself on 90+% customer retention. In fact, in 2017 Ormon and his employees closed 56 transactions with an average loan size of 3.2 million dollars.

“We base our amortization on 20 years. It’s our benchmark and it works. It adds to the bottom line of our customers cash flow. Aircraft Finance Corporation offers a vast range of loan programs from 3 years all the way up to 10 years, based all on 20 year amortization and up to 85% of the aircraft valuation. With regard to aviation finance brokers who very seldom have any skin in the game, this quickly becomes very frustrating to them when trying to compete with Aircraft Finance Corporation.”

After the financial crisis in 2008, the ‘big banks’ altered the way in which loans were made on aircraft transactions. With significantly shorter terms and stricter age requirements, they were no longer offering clients, what Aircraft Finance Corporation considers, really great deals. Loans on aircraft aged more than ten years requires a significantly higher down payment, comes with shorter terms and commands higher interest rates. The bar raises even higher for aircraft aged more than twenty years. Overall, resources to finance aircraft that was anything other than factory-new was scarce. Ormon recalls, “Everybody was leaving the market, with thousands of aircraft out there and available. I saw it as a great time to aggressively take market share.”

Ormon ramped up Aircraft Finance Corporation, taking an approach near completely opposite to the conventional banks. “So many aviation lenders dislike an older aircraft on their balance sheet,” Ormon reflects. “In fact, many of the big banks today frequently call Aircraft Finance Corporation to take older aircraft out of their portfolio, which we gladly do.” When it comes to new aircraft, Aircraft Finance Corporation consistently beats the ‘big banks’ who generally want to offer LIBOR-based rate programs. LIBOR-based rate programs can often leave the customer to become stuck with an escalating monthly payment shortly there after the aircraft loan is closed. Ormon believes, “Generally speaking, the ‘big banks’ do not want you to have any options; what you see is what you get.” “Earlier this year, we refi- nanced a Challenger 605 for a Texas business owner. The client had previously financed the aircraft with one of the ‘big banks’ with a monthly payment of $70,169 on a seven year term. With our 20-year term, his payment became $29,515 per month, allowing his business to utilize their new found cash flow. This is why a great percentage of our transactions are with repeat clients. Our clients range from Fortune 500 companies, to golf professionals, to manufacturing companies, etc...”

This article was originally published in BusinessAir, 2018 Vol. 28, No.10.  Photo credit: Jay Davis.

NAFA member, Alasdair Whyte, Editor and Co-Founder of Corporate Jet Investor, writes about fellow NAFA member, Jason Zilberbrand, President of VREF Aircraft Value Reference & Appraisal Services and how he is changing the world of aviation.

Few people have changed the world of finance as much as Michael Bloomberg. When he was pushed out of Salomon Brothers he created a small data company called Innovative Market Systems. Although his first customer was a bank, Bloomberg went on to change investing by giving buyers data that had always been held by sellers – data on their desks.

Jason Zilberbrand, who was an aircraft broker for 15 years and who started his career as a futures trader, wants to do the same thing for aircraft.

In April 2018 he acquired VREF, one of the best-known aircraft value guides. He now wants to give dealers, buyers and financiers better data, values forecasts and the ability to manipulate data.

“When I was a broker, I was desperate for more information, but it was impossible to easily combine other data with aviation data. We are changing that,” says Zilberbrand. At NBAA they launched new charting software that allows users to look for correlations.

VREF has also published its first residual-value forecast. It covers 65 jets, helicopters and turboprops. The good news for owners is that Zilberbrand believes that values are likely to stabilize for most types. He says that the big drops in aircraft values, which we have seen in the last few years, are over.

“History does repeat itself, but we think it is more relevant to look back at the Dot.Com downturn rather than 2008,” says Zilberbrand. “The days of big falls are over for now.”

He also believes that fleet size is a great guide to value performance. “There is a lot of power in being the class leader,” he says. “This is why we are confident about the Phenom 300E, the Pilatus PC24, the Cirrus Vision Jet and the Challenger 350 for example. We are also bullish about aircraft at the beginning of the tech cycle – there are a lot of fantastic new aircraft coming and these will depreciate more slowly.”

As a basic rule, VREF forecasts that aircraft will lose between 4% in the first year (for a Phenom 300E) to 10%. But there are some exceptions – it is forecasting that a 2018 PC-24 will appreciate slightly for two years.

VREF estimates that a 2018 Challenger 350 is worth $26.673 now. It forecasts that it will be worth $17 million in 2022 and 2023 (it believes the value will be stable in those years).

It is very bullish about the Gulfstream G500. It values the aircraft at $45.5 million now and forecasts it will be worth $43.5 million in 2019 and $43.7 million in 10 years.

While he aims to empower buyers, he is also targeting his former competitors. He adds: “The people who really need data are the dealers who are taking out $20 million bank loans that they have guaranteed themselves. I have been through that and when you are coming home to your family after doing that you want as much data as possible.”

This article was originally published by Corporate Jet Investor on October 26, 2018.

FOR IMMEDIATE RELEASE

EDGEWATER, Md. - October 23, 2018 - National Aircraft Finance Association (NAFA) is pleased to announce that Chemical Bank Commercial Finance has recently joined its professional network of aviation lenders. “NAFA members proudly finance - support or enable the financing of - general and business aviation aircraft throughout the world, and we’re happy to add Chemical Bank to our association,” said Ford von Weise, President of NAFA.

Chemical Financial Corporation offers a full range of traditional banking and fiduciary products and services, and is the largest banking company headquartered and operating branch offices in Michigan. The corporation operates through its subsidiary bank, Chemical Bank, with 212 banking offices located primarily in Michigan, northeast Ohio and northern Indiana. At June 30, 2018, the corporation had total assets of $20.28 billion. Chemical Financial Corporation’s common stock trades on the NASDAQ Stock Market under the symbol CHFC and is one of the issuers comprising the NASDAQ Global Select Market and the S&P MidCap 400 Index. They are also an FDIC member and equal housing lender.

Since 1917, Chemical’s approach to banking has been focused on community banking, highlighted by local leadership and decision making, a devotion to community and personalized service.The company offers flexible equipment loans designed to meet the various needs in financing equipment purchases, helping to put their clients’ cash to work in other ways. Whether financing the purchase of a new vehicle for a business, the cost of new equipment for a plant, or large asset acquisitions such as aircraft for corporate travel, Chemical Bank designs personalized programs specifically customized to their clients. Their team of loan professionals is known for their detailed attention throughout the loan process.                                                                                                                                      

Much like NAFA, Chemical Bank Commercial Finance is dedicated to helping their clients develop, finance and accomplish their dreams. Chemical Bank and NAFA promote excellence in leadership, offering expert advice in the aviation finance industry and sharing in the satisfaction of their clients’ successes. 

For more information about Chemical Bank Commercial Finance, visit www.chemicalbank.com. 

About NAFA:  

The National Aircraft Finance Association (NAFA) is a non-profit corporation dedicated to promoting the general welfare of individuals and organizations providing aircraft financing and loans secured by aircraft; to improving the industry's service to the public; and to providing our members with a forum for education and the sharing of information and knowledge to encourage the financing, leasing and insuring of general aviation aircraft. For more information about NAFA, visit www.NAFA.aero.

FOR IMMEDIATE RELEASE

EDGEWATER, Md. – September 1, 2018 - National Aircraft Finance Association (NAFA) is pleased to announce that Lending Associates has recently joined its professional network of aviation lenders. “NAFA members proudly finance - support or enable the financing of - general and business aviation aircraft throughout the world, and we’re happy to add Lending Associates to our association,” said Ford von Weise, President of NAFA.

Lending Associates is a provider of financing solutions for recreational and commercial aircraft acquisitions, working with a large network of quality lenders to ensure the most competitive loan rates. With years of experience, their team of experts are available to answer client questions throughout the process, helping consumers and industry professionals alike navigate today’s complex financing process. 

Lending Associates matches the best lender to their clients’ specific financing needs, maintaining the utmost privacy and confidentiality. Their loan specialists work to design a financing program to best meet each unique situation. From the initial consultation to loan closing and ongoing servicing of the loan, the company is committed to the needs and goals of the client.

"Lending Associates is proud to join NAFA in its efforts to support private aviation. From what I have seen, the members of this association have a passion for aviation and a history of moving the industry forward from all aspects, not just finance," stated Grant Smalling, President of Lending Associates. 

Much like NAFA, Lending Associates is dedicated to fostering quality, professional service throughout the aviation finance industry. Lending Associates and NAFA promote excellence in aircraft finance through their commitment to the consumer’s goals. 

For more information about Lending Associates, visit https://www.lending-associates.com/.

About NAFA:  

The National Aircraft Finance Association (NAFA) is a non-profit corporation dedicated to promoting the general welfare of individuals and organizations providing aircraft financing and loans secured by aircraft; to improving the industry's service to the public; and to providing our members with a forum for education and the sharing of information and knowledge to encourage the financing, leasing and insuring of general aviation aircraft. For more information about NAFA, visit www.NAFA.aero.

NAFA member and President of AOPA Aviation Finance Company, Adam Meredith, shares what you need to tell your finance broker to save you money.

Our goal is to save you as much money in interest rate and loan fees as possible. In order to best do that we need answers to the following 5 questions.

How will you own it?
Who is going to own the plane? Is it going to be a sole-purpose limited liability company you establish? That information is needed in advance to correctly fill out the loan documentation.  Are you going to have multiple co-owners? Some lenders won’t even deal with an aircraft that has multiple partners, others limit how many partners they’ll accept. We don’t want to waste our time or yours by contacting lenders who could be eliminated in advance.

How will you use it?
If the aircraft is going to be used to generate revenue, there are specialized lenders that prefer these types of loans and are more willing to lend money. Revenue generating aircraft are often referred to as “essential use” aircraft. Some of these include aircraft used in charter operations, helicopter tours, pipeline patrol, and parachute jumping. In general, if your plans entail essential use on your aircraft, there may be fewer lenders willing to give you a loan. Tell us right away if that is what you intend. Likewise, if you want to use the aircraft for flight training, in a Flying Club or on leaseback, these all also fall into the “essential-use” category and thus require specialized options.

How long will you keep it?
How long do you plan to keep it? Most of our customers have their aircraft less than 4-5 years. If that is your intent, you may want to consider an adjustable-rate loan or vs. a fixed-rate loan. An adjustable rate loan can save you money. Here’s an example: let’s say you want a $500,000 loan. If you went with an adjustable-rate loan (fixed for the first five years, then adjusting annually) you could save nearly $14,000 in interest over the course of those five years compared to a 20-year fixed-rate loan.

Any past problems?
Tell us up front if there have been any past credit issues. Were there past disputes or bankruptcies? Insurance companies using heavy-handed tactics? Don’t just hope it won’t be uncovered during the course of the loan application, because it will eventually be uncovered. You’re far better off having the discussion of any past problems at the start of the application process rather than explaining after the fact.

How do you make your money?
We need to be able to explain to a lender what your cash flow looks like. The end-of-year results may be good, but did the cash come in lumps? Is it dependent on the seasons, or whenever you happen to buy and sell a company? Do you get paid a commission only when you make a sale? Do you plan to retire? Many of our members are small-business owners who may have irregular cash flow but high annual income. It’s helpful if we know in advance so we can make the best possible case to a lender.

Considering aircraft ownership? AOPA Aviation Finance will make your purchase experience as smooth as possible. For information about aircraft financing, please visit www.aopafinance.com or call 1-800-62-PLANE (75263).

This article was originally published in AOPA Finance on August 1, 2018.