Business jet and helicopter finance report 2012
The business jet finance market is generally pretty strong. It has not returned to pre-2008 levels (and, possibly, may never) but there is no new aircraft credit crunch in most countries.
The last six months has not seen many significant new lenders start offering business jet finance, but neither has it seen any large financiers formally leave. This is in contrast with commercial aircraft finance which has seen several large European banks exit from financing airlines.
At EBACE, the US Ex-Im Bank made a commitment to finance business jets and helicopter worth more than $1 billion in the next two years. This is not reflected in the survey yet but could change the outlook for fleet operators and corporates outside the US significantly.
Ex-Im has approved Airfinance – run by Kirsten Bartok, former vice president of structured finance and corporate development, and Tom Low, former president of Cessna Finance – as its first qualified adviser. The qualified adviser programme is a new Ex-Im initiative to speed up deal approvals. Airfinance also hopes to be able to provide financing for smaller aircraft which would be a big help to this market. However, Ex-Im finance is not really suited to pre-owned business jets.
In the first quarter there were some signs that corporate buyers were returning and this could help the global market to recover. Brokers and bankers still hope this will happen, but anecdotally many feel demand has fallen in the last few weeks. There are signs that Chinese buyers are also slowing down orders.
This report is based on interviews and discussions with more than 50 market participants between April 2012 and June 2012.
Key to tables
Green: Finance easily available and competitive.
Orange: available but less sources available
Red: Finance may be available but significantly fewer choices of lenders.
+ Market strengthening
– Market weakening
The large jet market in South Africa continues to be competitive with both local banks and international lenders competing for aircraft. Guggenheim has just closed its first deal in the country, but there is less appetite for smaller aircraft.
West Africa, particularly Nigeria, is seeing a lot of demand. However, this is still a challenging region for financiers. One of the region’s largest business aviation companies is looking to announce a finance joint venture in the next few months.
International lenders like Bank of America, Credit Suisse, Citi Private Bank, Deutsche Private Bank, GE Corporate Aircraft Finance, Guggenheim, UBS and others are now firmly established in the region and there is no shortage of financing for aircraft that are not on local registries.
In China there is no obvious shortage of finance but we have heard rumours that Minsheng has started looking to sell positions. International banks are still getting to grips with India although the planned launch of a credible management firm in the country should help.
Australia and Oceania
Similarly to the US, Australian institutions and international financiers are looking for deals in this region.
Several local institutions are still sorting out problems with existing portfolios. However, depending on the country, foreign lenders like SG Equipment Finance are still active and European private banks are happy to compete for deals with individuals.
New deliveries to this region are relatively quiet but there is no shortage of international financiers looking for deals. This includes many of the same banks competition in Asia, as well as others like GE Mubadala, Lombard and Barclays.
Brazil and Mexico are relatively easy countries to find finance. In Brazil local banks are competing with US and European ones for transactions. Other countries – including Argentina – are still more challenging.
The US is showing some signs of recovery with large corporates buying aircraft. However, some of these are still using cash. Whilst pricing and volume are not at pre-peak levels US banks are keen to do more deals. Financiers talk of the market quietening down in the second quarter.
Element Capital, which hired a number of GE Corporate Aircraft Finance business jet specialists, is a significant new entrant in
European private banks like Credit Suisse and UBS are still active with Russian clients but only for foreign registered aircraft. There is still a shortage of local lenders.
The on-going Eurozone crisis has not yet impacted on business jet financing. But demand for new aircraft finance has fallen significantly.
One worrying sign is that French and German banks are re-evaluating commercial aircraft lending. They are doing this due to a combination of Basel III, lack of dollar funding and the Eurozone crisis. So far this has not impacted on corporate jets and helicopters.
Despite not being in the Euro, most UK banks have also scaled down their corporate jet financing. One notable exception is Royal Bank of Scotland which despite selling RBS Aviation Capital, its commercial aviation business, is still active as Lombard in the UK and RBS Asset Finance in the US.