Exploring Aircraft Financing Options for Your Next Purchase

Securing the right finance structure for your next aircraft acquisition is as critical as selecting the asset itself. Identifying the ideal approach among numerous global options presents a significant challenge, where the optimal path isn’t always obvious and missteps can have long-term financial implications.

This article brings clarity to the intricacies of aircraft financing. We guide you through the key factors and available sources, enabling you to make strategically sound decisions for your purchase. Professional teams can assist in navigating the complexities of specific aircraft financing needs.

Here’s what we will cover:

• Critical factors influencing corporate aircraft financing: lender requirements, asset type, airline profile, and country specifics.
• Exploring diverse financing sources: aircraft lessors, commercial banks, capital markets, non-bank lenders, and Export Credit Agencies (ECAs).

Handling this process successfully requires specialist knowledge. ACC Aviation’s consultancy team provides impartial expertise, helping clients worldwide structure and secure optimal financing arrangements tailored precisely to their operational and financial needs.

Aviation Financing Explained

Aviation financing is a specialised field that caters to the unique needs of aircraft owners, including high-net-worth individuals and corporate entities. Business aircraft finance companies offer a range of financing solutions, from traditional aircraft loans to asset-based financing, to help clients achieve their aircraft ownership goals.

Whether you’re an established airline or a first-time buyer, understanding the ins and outs of aviation financing is crucial to making informed decisions about your aircraft purchase. With competitive rates and flexible terms, aircraft financing can be a viable option for those looking to acquire a business jet, general aviation aircraft, or other types of aircraft.

Lender Considerations

Understanding how prospective financiers evaluate aircraft transactions is fundamental to identifying suitable partners. Lenders meticulously assess requests based on several core risk categories, though their specific appetites and focus areas differ considerably.

Lenders also consider the borrower’s balance sheet as part of their financial assessment. At its core, a lender’s analysis centres on three primary pillars: the asset itself, the borrower’s creditworthiness, and the jurisdictional environment.

Asset Risk

The specific aircraft or engine being financed forms a key part of the assessment. Lenders often specialise:

• Asset Class: Some prefer commercial jets (narrow-body, wide-body), others focus on regional aircraft, turboprops, business jets, or even engines exclusively.
• Age and Technology: The aircraft’s age, model, market acceptance, and residual value forecast heavily influence a lender’s interest and the proposed terms. Financing newer, in-demand assets typically presents fewer hurdles.

Amortisation schedules can significantly impact the financing terms for different types of aircraft. Long amortisation schedules are often available to optimise cash flow, especially in the aviation finance sector, where the usage and type of aircraft can affect these rates.

Credit Risk (Airline Profile)

The financial health and operational profile of the borrower (often an airline) is intensely scrutinised. Key factors include:

• Operational Model: Is the operator scheduled or non-scheduled? What is its market share and competitive positioning?
• Financial Performance: Lenders examine historical results, current financial standing, projected performance, and revenue currency (local vs. hard currency).
• Risk Tolerance: Financiers’ attitudes towards credit risk vary. Some institutions possess greater flexibility for airlines perceived as higher risk, while others maintain very conservative thresholds.

Equity in an aircraft can significantly affect loan opportunities and financing decisions, as it represents the borrower’s ownership stake and can influence the terms and availability of credit.

Country and Jurisdictional Risk

The borrower’s home country introduces another layer of evaluation:

• Legal Framework: Adherence to international standards, particularly the Cape Town Convention regarding aircraft repossession rights, is a significant factor.
• Economic & Political Stability: The country’s overall economic health, currency convertibility or transferability issues, and political climate affect perceived risk.
• Local vs. Foreign Lenders: Regional financiers may possess a deeper understanding and tolerance for risks within challenging jurisdictions compared to international lenders less familiar with the local context.

Aligning your financing needs with institutions whose expertise and risk parameters match your specific situation is critical for success. Matching requirements to the right financial institution for credit approval requires deep market insight. ACC Aviation assists clients in identifying and approaching lenders whose risk appetite and specialisation align with the specific transaction profile, enhancing the probability of securing favourable terms.

Principal Sources of Aircraft Finance

The aviation sector offers several distinct avenues for financing aircraft assets. Each source presents different structures, risk appetites, and suitability depending on the borrower’s profile and the nature of the transaction.

Owners also have the option to refinance their existing aircraft as part of their financing strategy.

Aircraft Lessors

Operating lessors are dominant players, owning approximately half of the world’s commercial fleet. Their significant asset management acumen and portfolio diversification often allow them greater flexibility, making them well-suited for more intricate or higher-risk transactions.

While typically providing aircraft via operating leases, many lessors also offer finance lease structures that allow airlines eventual ownership. In operating leases, payments are made to the lessor and are not tied directly to ownership, which can be a more flexible option compared to traditional loans or down payments required for ownership.

Commercial Banks

Direct bank lending remains a cornerstone of aviation finance, funding around 20% of new aircraft deliveries in 2022, according to industry estimates. Banks offer both secured and unsecured loans.

Their focus varies widely; some concentrate on top-tier airlines and brand-new aircraft, while others develop regional specialisations or cater to transactions across a broader credit spectrum. Commercial banks provide various payment options and terms related to loans and leases, which can influence the approval process and the overall cost of financing.

Capital Markets

Financing through capital markets involves issuing bonds or securities, such as Enhanced Equipment Trust Certificates (EETCs) or Asset-Backed Securities (ABS). This segment accounted for roughly 14% of new delivery financing in 2022. Access, however, is generally restricted to larger, well-established borrowers with strong credit ratings operating in mature markets.

Non-Bank Lenders

This category includes institutional investors and specialised debt funds. These lenders typically face higher capital costs compared to traditional banks, which often results in higher interest rates for borrowers. Consequently, they frequently engage in more challenging transactions, providing funding solutions for situations or borrowers that fall outside the standard criteria of commercial banks or capital markets.

Export Credit Agencies (ECAs)

Government-backed ECAs exist to support exports from their respective home countries (e.g., financing aircraft manufactured by Boeing, Airbus, Embraer). They achieve this through direct loans to airlines or by providing guarantees that encourage commercial bank lending. A key point is that ECA support is almost exclusively available for financing new aircraft deliveries directly from the manufacturer.

Strategic Alignment

Larger airlines with strong credit profiles frequently secure the most cost-effective financing from aircraft lessors, commercial banks, and the capital markets. Smaller operators, start-ups, or those based in regions with higher perceived jurisdictional risk often turn to aircraft lessors, specialised or local commercial banks, non-bank lenders, or ECAs where available.

Selecting the most advantageous source requires careful consideration of the borrower’s profile and the specific asset in question. ACC Aviation leverages its extensive market relationships and expertise to guide clients toward the most suitable financing avenues, assisting them throughout the transaction lifecycle, from structuring to closure.

Secure Your Ideal Aircraft Finance Structure with ACC Aviation

Choosing the right aircraft financing path demands careful evaluation of lenders and funding sources. Success hinges on understanding the critical factors involved and aligning your needs appropriately. Contact ACC Aviation for personalised assistance.

Here are the essential points to remember:

• Lenders assess transactions based on asset risk, credit risk (borrower profile), and country/jurisdictional risk.
• Financier specialisation and risk appetite vary significantly, impacting their suitability for different deals.
• Principal financing sources include aircraft lessors, commercial banks, capital markets, non-bank lenders, and Export Credit Agencies (ECAs).
• Each funding source comes with distinct structures, costs, and typical borrower criteria.
• Matching the specific transaction and borrower profile to the most appropriate funding source is key.

Finding the optimal financing solution amidst these options can be complex. ACC Aviation provides independent, expert advice, helping structure transactions and connect you with the most suitable financial partners globally to achieve your acquisition goals effectively. Discuss your financing options with ACC Aviation experts.

Frequently Asked Questions

What are the financing options for a plane?

Key options include operating or finance leases from aircraft lessors, secured or unsecured loans from commercial banks and non-bank lenders, ECA-supported financing (typically for new aircraft), and capital markets instruments like bonds or EETCs for eligible borrowers.

Is it hard to get aeroplane financing?

Securing finance depends heavily on your creditworthiness, the specific aircraft (age, type, value), its intended use, and the deal structure. While complex, thorough preparation and approaching suitable lenders significantly improve success chances.

What are the typical aircraft financing terms?

Terms vary widely but often involve Loan-to-Value (LTV) ratios between 70% and 85%. Expect specific loan durations, amortisation schedules, fixed or floating interest rates, security requirements (liens on the aircraft), and financial covenants.

How does aircraft financing work?

Generally, you assess needs, identify suitable financiers, and submit detailed financial and asset information. The financier performs due diligence. This leads to negotiation of terms, legal documentation, and finally, funding and closing the transaction.

How long can you finance an aircraft for?

Loan durations typically range from 3 to 10 years. Longer amortisation periods (up to 15-20 years) are sometimes used, potentially requiring a balloon payment. The maximum length depends on the aircraft’s age, type, value, and lender policy.