The Dynamic Aircraft Lending Landscape
The banking industry has changed substantially over the years. Fifty years ago there were over 14,000 banks in the United States. Today there are just over 5,000 banks in the U.S. Because of the financial crisis of 2008, an extended period of historic low interest rates, Dodd Frank, and other factors, new banks openings are at a low. The largest banks have grown even larger since the financial crisis. Today the top 10 U.S. Banks hold over 10 trillion dollars in assets. There are over 1,700 U.S. banks with assets over $300 million.
Aircraft Lender Overview
• Types of funding sources include; banks, credit unions, leasing companies, private equity and other
• Lenders are focusing on different niches by aircraft types, pistons, turboprops, light jets, mid size jets, to large cabin jets
• Lenders also have preferences when it comes to the client’s industry, client geographic location, corporate vs high net worth individual, aircraft type, aircraft age, aircraft usage, domestic U.S. and regional U.S.
• New lenders are entertaining the aircraft market and there has been a lot of turnover and other changes at “traditional” lenders
• Many of these “new” lenders are “aircraft savvy”, competitive and responsive
Why Lenders Are Entering The Market
• Many relatively large U.S. lenders are looking to grow assets
• Many are too concentrated in real estate
• Aircraft loans are bigger than most equipment loans like construction, trucking etc.
• Aircraft have a long useful life, and historically relatively good residual values
• Clients that own aircraft are affluent leading to other bank “cross selling” opportunities like business banking and wealth management
• Fewer aircraft borrowers and more aircraft lenders mean competition for loans
• There is a very wide range of financing available for almost any type of aircraft loan transaction
• The aviation lending landscape is very dynamic
There is a lot of capital wanting to be deployed into aviation lending