Attendees at the National Aircraft Financing Association annual meeting late last week in Savannah, Ga., largely agreed that aircraft financing is “thawing,” but new international banking rules that will start to be phased in next year might make things worse. In an attempt to prevent another financial meltdown like that seen in 2007-2008, the new Basel III global regulatory standards are expected to strengthen bank capital requirements and introduce new regulatory requirements on bank liquidity and bank leverage for all lending institutions, not just banks, with more than $50 billion in assets.
“As a result of the new rules,” Citi Private Bank director of global aircraft finance Ford von Weise told attendees, “banks will need to have more capital reserves, which means they’ll either need to raise cash or lend less.” While the new banking rules will not take full effect until 2019, four European business aircraft financiers, including Standard Corporate Jet Financing, have pulled out of the market because of Basel III, according to Corporate Jet Investor’s Alasdair Whyte.
Von Weise said “relationship banking” will be key for many aircraft operators that plan to finance an aircraft in the future. Fleet operators and those seeking long-term loans will be less likely to find aircraft financing under Basel III, he noted.