Corporate aircraft and helicopters: Is this sector set to grow?
Owen Geach, commercial director of the IBA Group in the UK, has predicted an upbeat mood in the build-up to the Corporate Jet & Helicopter Finance Conference in London, despite recent events that have affected this buoyant industry sector
Immediately following the credit crunch in 2008, corporate aircraft values fell and the secondary market in many traditionally strong regions slowed to a stall. IBA says ownership of a business jet became a dirty word – particularly in Europe and the US Banks found themselves in the cross hairs over corporate jet purchases, like Citi Private Bank with the Falcon 7X, and the Ford and GM Motor companies faced significant media backlash when they flew in their corporate jets to Washington DC to explain to the US Government why both businesses had such significant financial problems.
Lenders were faced with difficult decisions regarding loan-to-value defaults and many manufacturers did not sell enough aircraft to avoid a build-up of white tails, or to avoid laying-off production staff.
Yet, despite continued pressure from the White House to close tax loop holes for those owning corporate jets, it is hard to dispute the business credentials of many modern jets.
Driven by the ‘business tool’ aspect of ownership, IBA has seen a steady increase in lender appetite over the last two years. Some lenders will only finance corporate aircraft for existing clients whilst others are more open. Lenders’ views regarding loan-to-value are still guarded, but IBA is seeing data to support up to 85% loan-to-value ratios. Unfortunately although the secondary market does not seem to be recovering in Europe, North America appears further along the road to recovery.
The industry sectors for corporate jets are diverse, ranging from High Net Worth Individuals (HNWIs) to large corporations. Helicopters are operated by a similar spectrum but also the utility industries, search & rescue and military/police applications.
“Buyers’ needs are also varied” says Geach. “Many aircraft will be funded purely by cash but HNWIs and corporate giants often need considerable help in creating an aircraft to the right specification and then managing its operational aspects. Handing control of a prized possession to a third party is a very important decision, so choosing the right partner and then monitoring the on-going management is crucial to maximising asset value.”
Lenders who will consider corporate aircraft and helicopter financing include: Lloyds Banking Group, Société Géneral, Siemens, GE, Citibank, Credit Suisse, UBS, Lombard and Unicredit among others. “These lenders provide a range of options for corporate jet owners and that helps the manufacturers in their sales pitch” says Owen Geach. “Judging by the planned attendance at next weeks’ Corporate Jet & Helicopter Finance Conference in London where well over 250 delegates are expected, the mood is upbeat, despite the uncertainty still surrounding Hawker Beechcraft which is emerging from bankruptcy protection.”
IBA will be speaking about values and the banks’ appetite for lending in this sector at the Corporate Jet & Helicopter Finance Conference in London on February 11- 13