Bringing buyers and aircraft together safely for viewings during lockdown has been a challenge, but it’s hard for clients to place a deposit on a multi-million-dollar private jet they haven’t seen in person. In some cases, we’ve used high-resolution photos and video to bring the viewing experience to the customer. In others, we’ve flown the aircraft directly to the buyer’s hometown for a viewing.

I’m proud to say that Jetcraft recently facilitated the closing of a US-based Embraer Legacy 450 aircraft in a record-breaking seven days.  This is not typical, though.  Every deal is different, and whatever logistical challenges we face, they can be overcome with a little imagination. A complex European sale of a Dassault Falcon 7X, which closed on April 1, is one such example.

NAVIGATING A COMPLEX CLOSING DURING COVID-19

Firstly, we needed to find crew who could drive to Geneva, where the 7X was located, and make the arrangements to ensure those pilots could enter Switzerland. The buyer also wanted to paint the aircraft after closing, so we had to find an FBO open and able to carry out the work.

Our initial plan to close the deal in Guernsey became impractical when coronavirus struck and a 14-day quarantine was imposed on anyone landing there. I’m not saying it’s not nice to spend two weeks on that beautiful island, but understandably the buyer didn’t want their new jet to be stuck there after closing.

We found a second possible location, which might have worked with clever manoeuvring of crew across international borders, but we needed a confirmed tax ruling from the authorities, who were shut down and wouldn’t respond.

By now, we were considering a bit of everything, including closing in international airspace, which would have been possible but not ideal from a tax perspective. Clients might want to use this option in future, though, especially if Covid-19 border restrictions remain in place

We finally found a closed airport in the buyer’s home country, so we had to arrange for the facility to open, and firefighters to be present, to be able to land the jet and complete the deal there.

We still faced the challenge of retrieving aircraft documents from an OEM service center in another country. With minimal staff working at the facility, even finding keys to the archive doors took longer than usual. I was so frustrated, I nearly jumped in my car and drove there to get the paperwork myself!

We were determined never to be beaten. At every stage of the transaction, our team persevered, and had the vision to find a creative solution.

NAVIGATING A SEVEN-DAY CLOSING DURING COVID-19

Considering the complexity of the Falcon 7X closing, how did our sales team move so quickly to close the Embraer Legacy 450 aircraft in seven days?

The aircraft (part of our owned inventory) was new, so no further inspections were needed ahead of the sale. We took the lead in flying the jet to the buyer in the US for initial viewing.

It always takes two parties to close a deal. Both our team and the cash buyer did everything promised to secure the sale quickly. This kind of mutual commitment is priceless.

Throughout the Covid-19 lockdown, demand to buy or upgrade private jets has remained. There are definitely challenges in meeting those requests – if we’re bringing a European aircraft to the US, for example, we need European pilots for the test flight after going through the ‘C’ check. But it’s easier to move aircraft around the US than Europe because there aren’t border closings between states, so we’re repositioning some of our jets there for viewings.

With an experienced and creative sales team in place, aircraft trading can continue wherever you are, even in a lockdown, while keeping all parties healthy and safe and following the guidance of authorities. Miracles take time, but we can usually manage the impossible within 24 hours.

In recent years, stability has been the overriding trend across all EMEA markets, despite geopolitical tensions in the Middle East; economic stagnation in parts of Europe; and a lack of progress on business aviation infrastructure in Africa.

This stability speaks to the strength of business aviation globally, and the value private aircraft bring to our customers. The challenges in each region have resulted in new areas of opportunity for Jetcraft.

In the Middle East, more jets are being sold out of the region overall than are being placed within it. These aircraft are finding willing buyers in Europe and particularly the US, which remains the world’s largest business aviation market.

In Europe, the traditionally strong markets of France, Germany, Austria and the UK continue to perform well; with bright spots in emerging markets such as Poland.

Buyer profiles vary between the EMEA regions, with corporate buyers making up the majority in Europe; individual buyers driving most purchase decisions in the Middle East; and a split between the two buyer types in Africa.

Nevertheless, all buyers are following the trend towards choosing larger models, with long-range and ultra-long-range jets leading the field due to a rise in global business travel. These aircraft types have always been popular in Africa due to a limited number of airports for private aviation, combined with the vast size of the continent.

Infrastructure challenges are not unique to younger markets such as Africa. In Europe, air traffic controllers and airports must balance the limited number of slots available with the growing demands of commercial aircraft and private jet users.

Ultimately, Europe, the Middle East and Africa remain strong and stable markets. In spite of their differences, we expect this trend to continue into 2020 and beyond.

The Show Daily publications touted the unveiling of Bombardier’s Global 5500 and 6500 aircraft as ‘business aviation’s best-kept secret’, bringing upgraded options to the super-large and ultra-long-range market segments. Concurrently, Rolls Royce announced its re-entry to business aviation with the Pearl engine that will power the two Bombardier business jets.

Embraer’s press conference saw the announcement that the OEM is to become the first business jet customer for ViaSat’s Ka-band in-flight connectivity service, delivering 16MBps to the aircraft, enabling passengers to stream content and live TV – a bonus for the longer journeys that passengers are making.

With these positive announcements at the start of the week, it was no wonder that the mood was upbeat. The topic that everyone kept coming back to is that Europe is a great place for business aviation at the moment and Gulfstream cemented this with the news at EBACE that it has chosen TAG Farnborough Airport in the UK as the location for its next service center.

This market confidence may be thanks to increasingly clear skies for the region’s economy. Europe is home to one of the world’s youngest fleets, with business jets averaging just 14.5 years old. Such a youthful group of aircraft is usually seen only in emerging markets like Asia or the Middle East, signaling a steadily expanding economy. The latest forecasts support this, with 2.3% GDP growth anticipated in the Euro Area for 2018.

Opportunities for investment are plentiful and varied, thanks to the way the market differs between Western, Central and Eastern Europe. A mature market in the West, bolstered by financial ‘alpha’ cities such as Paris, London, Brussels and Frankfurt, is counterbalanced by emerging markets across the border. Poland, Bulgaria and Slovakia are three such countries where business jet usage is starting to rise, giving OEMs room to grow across the continent.

The industry is set to see more action in the coming months. Summer spikes power Europe’s bizav market for the rest of the year, with travelers arriving from across the globe to enjoy the events that mark height of the season: Wimbledon in London; the Monaco Yacht Show; and this year, the 2018 FIFA World Cup in Russia. Despite the downpour at this year’s EBACE, the outlook is sunny for European business aviation.

As with any purchase, paying cash is the easiest way to close a transaction. Another option may be for owners to complete an aircraft trade-in transaction which can free up capital so the owner can move more quickly toward acquiring a model more suitable for their changing needs. Some experts, however, advise that even if an individual or corporation has enough cash available or an asset they can trade in, it may make more financial sense in certain instances to either finance or lease the aircraft.

Many aircraft financing institutions focus on the ability of the client to repay the financing. It does not mean they do not care about the aircraft itself, but rather focus on ensuring the best terms that will yield the most investment return. For buyers, their process begins with “buying right.” In other words, buyers should be responsible and do their due diligence during the financing selection process to ensure their terms reflect a reasonable price for the chosen aircraft. Generally, the newer the aircraft the more financing options there are. Many financing companies will be ready to bankroll an aircraft up to 10 years; some may even go up to 25.

Most lenders will insist on having a reputable management company take care of the aircraft. This is another way to preserve the value of the aircraft by making sure it is well looked after and that the documentation is impeccable. Lenders may also want the aircraft to be registered in jurisdictions that would make it possible for them to claim the asset in case of default.

There are caveats to consider when going the loan route, however. It is important to note that when establishing a loan for an aircraft like other high-value purchases, most lenders will require a significant penalty or breakage fee for early payoff (usually within the first few years).

If you want to lease the aircraft instead of taking out a loan for purchase, this route may afford you the ability to take advantage of substantial tax benefits. This is especially true for public corporations because leasing offers them the ability to not report the asset immediately on the company’s balance sheet. Financers can use the tax deductions against their leasing income. Corporations obtain this benefit in the form of lower financing costs. In addition, the bank assumes the depreciation risk—not the owner—over the lease term.

In all cases, keep these three key elements in mind during the financing process to help avoid surprises or delays:

• Credit-worthy – If the borrower is deemed less credit-worthy, backing from a third party or parties will be needed.
• Accurate Appraisal – It is paramount to assess the most appropriate value of the aircraft to be purchased. Lenders want to be sure that you do not pay too much for it, and to an extent will try to make sure that the value remains as stable as possible.
• Title – A title search is executed on the desired aircraft to ensure nothing is owed and it is cleared for purchase. Buyers also often take out an insurance policy to protect their transaction against any title issues that may not immediately be apparent.

As with any large capital expenditure, financing an aircraft will be complex and require numerous milestones that will need to be executed. It pays off to surround yourself with a team of trusted advisors to help you navigate financing, and the entire aircraft buying process.