“Never assume anything and be prepared for anything,” was the advice from Frederic Larue, partner and co-founder partner and co-founder of Echo Aviation Leasing Corporation at this week’s Corporate Jet Investor Town Hall online meeting.
“In aircraft financing, too many times I’ve witnessed financing becoming a last-minute decision,” he told the fifteenth Town Hall meeting’s 300 delegates. “Buyers assume that because they have been banking with a bank for a number of years, they can get a straight bank loan to close the purchase of their aircraft,” said Larue, whose company sponsored this week’s Town Hall. “Then, last minute, their deal gets declined or the bank pushes back on allowing the utilisation of the bank loan. That’s where we are called upon to come in at the last minute when everyone is struggling and eager to close.”
But the deal cannot close until Echo Aviation has conducted due diligence, he said, emphasising that “KYC [Know Your Customer] is ruling everything we do”. The advice to ‘be prepared’ means prospective clients should expect “a deep dive” into their business and financial arrangements.
Larue advised business aircraft buyers to look beyond their long-term banking relationships to assess what other facilities may be open to them. “Go outside your traditional lenders to see what’s available out there and be prepared to collaborate with these people.”
‘Acquisition or financing’
It was advice the many first-time business jet buyers contacting Echo Leasing would find useful, said Larue. “As the commercial airlines scale down their operations, business travel might become an issue for some of these folks,” he told Town Hall delegates. “So, we are looking at alternatives and are happy to assist them getting into the corporate jet space – either the acquisition or the financing side.”
While many new prospective clients have been chartering aircraft or have been in partnerships with other businesses, they are now looking to fly “almost exclusively” on corporate jets because of Covid-19. Larue reported that about a dozen aircraft trades – or new Canadian owners had received aircraft– during the past 30 days, which he thought “a good sign”.
Less positively, the US/Canadian border remained closed, which was continuing to depress business aviation in Canada. Also, the political party that triumphed in last year’s election had planned to introduce a new luxury tax of 10% for jet owners. Since nothing more has been heard about the proposed tax, Larue hoped it will become “a non-realised promise from the election”.
‘A big game-changer’
While the Covid-19 global pandemic is having a big impact on business aviation, it was also creating new opportunities for firms such as Echo Leasing. The company recently purchased four Boeing 767 freighters that are currently leased to a global overnight carrier. The lessor had wanted to exit the contract. “That’s a big game-changer that probably would not have happened if it wasn’t for the events of the past few months,” said Larue.
Also Echo Leasing recently signed a multi-aircraft servicing mandate with a Canadian EMS operator for both aircraft acquisition and financing. The client wanted to increase its fleet to service a last-minute emergency contract with public health authorities.
Meanwhile, three top trends in business aviation since the advent of Covid-19 were identified by Suzanne Meiners-Levy, managing partner, with Advocate Consulting Legal Group. The first trend was business aircraft carrying more passengers. Read the other two trends here.
You can watch the free-access, hour-long online meeting here.
Frederic Larue: “Never assume and be prepared”, when buying business jets.