As an indication of the growing resurgence in the business aviation market, aircraft finance solution provider Global Jet Capital reports it has seen a strong increase in enquiries regarding financing options for midsize to heavy business jets. During the just ended third quarter, such inquiries were up by 59 percent over the second quarter, and 240 percent higher than the same period last year.
“There are some tremendous values out there in this marketplace today,” said company executive director and chairman of the executive committee, Shawn Vick. “I think, when you look at marketplace activity, there are buyers that are beginning to take action because they look at some of these price points and realize there’s such significant value proposition in mission capability.”
The Boca-Raton, Fla.-based, company predicts that as much as $17.5 billion will be required to cover 2017’s new business jet deliveries. It estimates that approximately one-quarter of that amount will be raised by high-net-worth individuals, with the remainder being split evenly between private and publicly-listed lending institutions.
Global Jet Capital (Booth 2253 and Static S-34), backed by GSO Capital Partners, The Carlyle Group and AE Industrial Partners, was founded in 2014 and made significant inroads in the aircraft finance community when it finalized its purchase of the bulk of GE Capital’s business aircraft portfolio at the beginning of this year. It has also grown significantly since then. “We went from 12 folks, and by the end of the first quarter we had approximately 25 people, by the end of the second quarter, that was around 50 people. Now as we have exited the third quarter, we’re at what we consider the ongoing status of the business from a personnel capability standpoint -- around 63,” Vick told AIN. “That’s [starting up] a field sales organization, which includes Mexico, Brazil, Europe, Australia, Indonesia, Pan Asia and China. We’re also servicing the Middle East and Africa out of Europe.” In addition, the company has added a full-staff legal team to help conduct transactions in all of those locales. “Combined, our management team has over 200 years of service to the private aircraft industry. Between us, we have completed over 3,500 aircraft transactions,” Vick noted.
One of the products the company offers is straight purchase financing, whereby it advances a large portion of the aircraft purchase price (typically between 50 and 85 percent) to the buyer as a loan. Another option is a finance lease, in which the lender buys the aircraft and holds the title while the borrower makes scheduled lease payments, until the final balloon payment when the title transfers to the borrower. Lastly there’s an operating lease, where ownership of the aircraft remains with the lender at the end of the lease. Presently, Global Jet revealed, approximately 67 percent of its transactions are operating leases, while the remaining third are loans and finance leases.
“We see many of the same competitors when we go out and transact,” explained Vick. “What we don’t see, however, is the appetite that we have for the operating lease product among many of the other providers. We’re very focused on the assets; we want to build the portfolio and add to the net-earning asset count within it. So I think that uniquely positions Global Jet Capital for growth.”
That growth could come with some questions in a period marked by declining aircraft values. “Unquestionably, this last cycle, tied to what most people refer to as the great recession, has been deeper and longer than any prior to it,” Vick acknowledged. He noted that virtually all of the OEMs have recently downsized their production rates in an effort to curb the current oversupply. “The answer over the last several years has been to not deliver more hardware, so you’re seeing production rate decreases, and you’re also seeing some of the older models being taken out of production. All of that will ultimately have a positive impact on supply. We’re probably 12-to-24 months away from that having the kind of impact we would expect.”