BOCA RATON, FL. – The coming year could see a significant increase in the number of business aircraft acquired on operating leases as clients take advantage of very attractive rates. A study among business aviation professionals commissioned by Global Jet Capital, a global leader in financial solutions for corporate aircraft, has revealed that almost half of those surveyed expect to see growing demand for operating leases in corporate aircraft transactions over the next twelve months1.
The rates on operating leases are now so competitive that in research carried out for Global Jet Capital, 46% of business aviation professionals expect to see an increase in their use for private jet purchases over the next 12 months, with one in twelve (8%) expecting this increase to be “dramatic”. Only 13% think the percentage of transactions involving leases will fall over the same timeframe.
As well as low rates, falling prices on pre-owned corporate aircraft is also making operating leases more attractive as buyers look to offset this risk and not buy entirely with cash. 43% of those interviewed expect this issue to lead to a growing demand for operating leases when buying corporate aircraft.
Across the industry, one in six (17 per cent) of private aircraft transactions over the last twelve months have involved an operating lease. 13% of business aviation professionals said that over 30% of their aircraft transactions over the last twelve months involved an operating lease. Over 29% said all the sales or purchases they carried out in the last year were still entirely funded by cash but they expect more transactions to involve leases.
Dave Labrozzi, chief operating officer at Global Jet Capital, said: “This research supports the trend we are seeing in activity uptick. There is a growing appreciation and understanding by clients of the benefits of an operating lease, especially as it relates to the potential risks associated with aircraft residual values. In markets where aircraft valuations are continuing to move, an operating lease is a way to guarantee certainty, while still accruing most of the advantages of full ownership.
“This is an area where lenders who are not traditional banks have an advantage. Specialist lenders such as ourselves are keen to have a partnership with a client throughout the life of the financing, rather than seeing our role end once the check has been signed. Our unique mix of industry and financial expertise allows us to support the client in managing their asset throughout their lease period, and beyond, to ensure they get the best value from their aircraft.”
In an operating lease the private aircraft (new or pre-owned) is purchased by a third-party financial institution (the lessor) and then leased to the operator (the lessee) for a stated term and rent. The lease is documented as a contract between lessor and lessee with both parties having certain obligations to each other, primarily regarding the operation and care of the aircraft. Title to the aircraft resides with the lessor, and the lessee enjoys the use of the aircraft as if it were their own.
Global Jet Capital is capitalized by three global investment firms – GSO Capital Partners, a Blackstone company in partnership with Franklin Square Capital Partners; The Carlyle Group; and AE Industrial Partners. In January 2016, Global Jet Capital completed the purchase of GE’s corporate aircraft lease and loan book in the Americas.
Global Jet Capital currently has approximately $2.5 billion in assets under management.
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