The year of the private jet lessor
In 2014, we could finally see a private jet lessor match the kind of success enjoyed by helicopter leasing companies over the past few years.
Leasing aircraft is common practice in the airline world, with many airlines choosing to lease aircraft rather the purchase them outright.
There are many reasons why airlines choose to do this – from a lack of start-up capital through to leasing new aircraft until ordered aircraft are delivered – but the one thing that ties all of these reasons together is that the airlines in question don’t have a costly asset on their books depreciating rapidly.
Leasing is also popular in the commercial helicopter market, where leasing companies like Lobo, Milestone and Waypoint have carved out a lucrative niche. “It’s a nice return in a low risk business,” says William Kelly, CEO of Milestone.
Aircraft leasing is not something we’ve really seen in the business jet world before, but the emergence of Thomas Flohr’s (founder of VistaJet) IALT SA might just have opened the floodgates.
IALT broke cover earlier in 2014 with the news that Aviation Finance Company had completed a $206 million pre-delivery payment for 10 Bombardier Challenger 605 business jets from a December 2013 order. As well as the Challenger 605s, the order also included 28 Global family business aircraft.
As well as IALT, ex-Embraer president Ernest Edwards and former Embraer colleague Colin Steven, are also starting a private jet lessor and Corporate Jet Investor is aware of another private jet lessor in its early stages.
The as yet unnamed company from the former Embraer employees should launch at EBACE 2014 and will concentrate initially on large aircraft in the EMEA region, with an initial fleet of three to five aircraft. Companies or individuals will approach the lessor to talk through their needs and the company would then set about acquiring the aircraft for onward lease.
Funding for the new private jet lessor will be via an established airline aircraft lessor, although nobody involved would name the lessor.
Finance leases have long been used in the private jet world as a way of funding jet purchases. Under a finance lease, the lender legally owns the asset until the terms of the financing have been completed.
Asset leasing on the other hand hasn’t been so common. Several aircraft manufacturers are known to be exploring joint deals with banks to be able to offer leasing facilities, but have yet to launch full lessor programs, as once the lease comes to an end, they will be responsible for finding new owners for the aircraft.
But the advantages for a customer leasing an aircraft rather than purchasing it outright are clear to see. As well as avoiding a large capital outlay for the purchase of the aircraft in the first place, it keeps a rapidly depreciating asset away from the balance books.