“A lot of selling is about getting ready to sell,” the Masterclass host Jay Mesinger, CEO and president of the company told attendees. It was timely advice for many new owners. “In the past pandemic years, we had so many buyers come in, that there’s bound to be a whole host of people who were first-time buyers but are now becoming first-time sellers. And first-time sellers are going to need the programming of how to do a sale correctly”

A good starting point is planning the sale and recruiting the right quality and type of advisers to conclude the sale successfully. In addition to selecting a broker, sellers needed to choose a specialist aviation lawyer, maintenance facility to complete a pre-purchase inspection (PPI) and specialist financial help. Plus allow enough time to conduct due diligence.

‘Not as excited about the idea of selling’

Fully engaging first-time sellers in the sale of their jet is the primary mission of Sue Carriere, partner with business aviation law firm Carriere, Little & Leach. “One of the things I find with sellers – especially first-time sellers – is that they are not as excited about the idea of selling as they are about the idea of buying. So, getting them engaged to provide the information I need is my first goal,” said Carriere.

Focusing only on aviation law, Carriere works with clients’ advisers to ensure liability protection, tax mitigation, and FAA compliance. “Tax planning is as important on the selling side as well as the buying side,” she said. “They may have fully depreciated the plane by taking advantage of bonus depreciation or, in rare cases, keeping them for a long time. Now they need to engage an aviation savvy tax planner because it’s a very specific area of taxes.”

Sellers need to ask: is there recapture of the depreciation? “A lot of people never hear those words until it’s too late,” said Carriere. So, It’s important to plan the tax ramifications for the sale of the old plane, as they are planning a replacement strategy for the new plane.  Also sellers needed to engage specialist help weeks if not months before closing the deal.

Mesinger highlighted the need to seek specialist advice and for buyers to keep their advisers “in their own swim lane”. He told delegates: “To think your broker is going to be your tax consultant … is wrong and not a fair position for what should be a winning team.”

‘Eleventh-hour hold up’

Another plea for early action by first-time sellers came from Luci Johnson, operations, documentation and servicing manager with PNC Aviation Finance. “A lot of times when selling an aircraft, the lender is the last party that is brough to the table,” said Johnson. “But, in reality, we should be one of the first as soon as the seller is marketing the aircraft. Reach out to your lender with regard to what the pay off may be. There may be a shortfall that arises and we don’t want there to be an eleventh-hour hold up for the closing.”

As a regulated bank, PNC Aviation Finance has laws and regulations which it must adher to and protocols in place to ensure compliance. Providng PNC with the information it needs sooner rather than later is an important means of concluding a successful sale as soon as possible, said Johnson. “Do not reach out to your lender two days before closing. We need plenty of time,” she said. “We can respond very quickly but we want that to be the exception and not the norm.”

For Todd Duncan, chairman, Duncan Aviation, it is all about closing the deal and mitigating risks by bringing together a team of experts. That is particularly important with the recent shift in the balance of power in transactions. “This has gone from a sellers’ market to a much more balanced market in terms of aircraft sales,” said Duncan. “That’s why it’s especially important to talk about the team you [sellers] need and what their duties are.”

With specialist advice, sellers can gain true insight into the value of their assets and eliminate surprises within the pre-purchase inspection. PPIs are a critical part of aircraft transactions and one that has been overlooked in recent years, he said.

‘Difficult to schedule PPIs’

While finding slots had proved challenging, Duncan said availability had improved for some categories of aircraft. “For the past year, it’s been difficult to schedule PPIs,” he said. “We, and others, have tried to carve time out of our schedules. Within a two-to-four-week period we can take in small to medium-sized projects, depending on the scope of that pre-buy.” Larger aircraft are more difficult to get in and can take a month or two months.

His final advice to sellers, like his fellow speakers, was about the importance of planning. “The more they plan before hand, the better off they will be.”

Meanwhile, Mesinger, from Mesinger Jet Sales explained the need for the new Masterclass series like this: “What is usual and customary in aviation is always changing. What was usual and customary during the pandemic is not necessarily so today. So, we thought we would capture the new usual and customary in this new Masterclass series.”

The next free, one-hour CJI Masterclass – How to have the perfect ownership experience – takes place on May 22nd, 2024. You can listen to the first Masterclass here.

The more sellers plan their transactions, the more successful they will be, according to panelists.

The post CJI Masterclass: What first-time sellers need to know appeared first on Corporate Jet Investor.

Inside, there was heat too, but this was confined to descriptions of the high-demand market for private jets. The key themes running through the 28 different sessions all touched on strong demand, supply chain issues and talent shortages, sustainability and a new influx of capital coming into the industry.

While everyone expects the US economy to worsen, almost all delegates were confident there will be no big fall in the next 12 months at least, with 33% of attendees very optimistic and 66% fairly optimistic. Brokers, too, were confident demand will remain strong into 2023.

Bankers shared their cautious optimism, with business expected to stay strong over the next year. “Senior executives do anticipate some level of recession, but the number one takeaway is that the banks are still open for business,” said Keith Hayes, senior vice president of PNC Aviation Finance. He added: “We’re not in fear of recession, we’re lending very prudently and we’re still doing business.”Global Jet Capital’s CEO Vivek Kaushal agreed:“We’re doing probably 50% more volume this year than we did last year, so we’re still very much in business.”

Another reason for optimism was OEMs’ strict supply chain management – aided by supply chain disruptions. However, keeping up with the demand was a worry for many. Maintenance was a particular concern. Speaking about backlogs in the sector, Christopher Jordan, Operations director, Global Engine Service Sales, Honeywell said: “Have you ever played whackamole? That’s what it’s like right now. It’s triage.”

Hiring (and keeping) the right people also dominated lots of conversations. Many attributed this to the industry’s image and commercial airlines’ polished recruitment campaigns. “Let’s be honest, we’re getting our tails kicked by the airlines,” said Andy Priester, chairman and CEO, Priester Aviation. “That’s where [the students’] mentality is. As an industry, we need to figure out how to engage and recruit people to get them involved in our organisations at the high school and university levels. If we do it together, we’re going to be able to make a difference, if we all do it separately it’s going to be really hard to fix.”

FAA staff shortages are also delaying some jet sales. Chris Rocheleau, chief operating officer, NBAA said the challenge is that companies in business aviation are “trying to move at the speed of Silicon Valley versus moving at the speed of government”. He said: “There’s always a little bit more work to do than there is the time and resources to do it, and the FAA faces the same challenges.

“As you have a lot of people rotating in the senior positions, it’s challenging for the agency to pick a path, there’s a lot of competing interests. Permanent leadership in a direction that’s important to the industry is going to make a difference.”

Sustainability offered both a challenge and an opportunity. While it remains the focus of industry criticism, Eve Laurier, vice president of Communications, Marketing and Public Affairs, Bombardier said it could be key to recruiting more talent. The same young people who are critical of aviation could be attracted by the promised opportunities to make it more sustainable. “They can test the solutions[to sustainability]with us. They can’t test them with commercial aviation”, she said.  

More than half (58%) of the 500 delegates thought the industry has seen a permanent shift in demand. The remaining 42% thought the industry was experiencing cyclical changes. So, even if demand dips in the short term, it will come back around.

The post CJI Miami 2022: Is the heat wave cooling? appeared first on Corporate Jet Investor.

For the last few years one of Alex Overstrom’s favourite vacation activities has been taking his kids to Vero Beach Airport to watch aircraft take-off and land. Now, as head of PNC Aviation Finance, he gets to do this at work as well.

“I’ve always loved planes, so it is fantastic to combine a passion for aircraft with my background in finance,” said Overstrom.

At PNC since 2014, Overstrom has moved to head of PNC Aviation Finance after serving as chief operating officer for PNC Corporate and Institutional Banking, where he was responsible for a broad range of areas across the bank’s wholesale banking teams. Before PNC, Overstrom spent eight years with Goldman Sachs in investment banking and strategy.

Overstrom was joined in January 2017 by Keith Hayes, a new hire to PNC who formerly led GE’s Corporate Aircraft Finance sales team. Hayes replaces Wayne Starling as Head of National Sales; Starling retired in May after 40 years in finance (his farewell letter is below).

“It is an honour to have worked with Wayne. He is a legend in this industry, and there is no better way to learn than from a real expert,” says Overstrom. “Wayne was an incredibly gracious teacher to me and has been a fantastic partner to all of us.”

All financial institutions market themselves as being different to their competitors, but PNC Aviation has a bigger claim than most. The bank offers genuine asset-based finance. All aircraft finance is asset-based, but PNC Aviation Finance does not require corporate or personal guarantees for its asset-based product (although some borrowers do this in return for a lower interest rate).

PNC Aviation Finance has a simple process and is prepared to underwrite loans purely based on the asset – so some deals have no or very little financial disclosure. It is also prepared to offer loans or leases covering 100% of the aircraft’s value for clients that provide guarantees.

Borrowers love these products.  Just as importantly, PNC Aviation Finance – which is a subsidiary of the fifth largest US bank based on deposits – has also been able to demonstrate the strength of its portfolio to regulators.

“Because it is a true asset lender, PNC had a much better downturn than many of us,” says one competitor. “We would love to be able to offer these products but I don’t see us getting approval for years.”

PNC’s advantage is that it has been offering this asset-based product since the late 1990s, and so it has the data. The bank still had customers in trouble in 2009, but the portfolio performed as expected, and the bank stayed open for business, rapidly growing  its portfolio (corporate aircraft is the biggest asset class for PNC Equipment Finance).

“We have been the Number One lender in business aviation each year since 2009 – funding more aircraft loans in the US than anyone else – and we are proud of that,” says Overstrom. “But our market share is just 9% or 10%. So we think there is lots of room to grow.”

Historically, PNC’s polo-shirt wearing sales team (another differentiator from most banks) has targeted smaller aircraft buyers, with many customers calling the bank after being referred by their friends. Now it also wants to finance larger aircraft.

“The nature of the asset-based product meant our originations tended to skew toward smaller and mid-size cabin aircraft,” says Overstrom. “One of the key strategic shifts we are making is leveraging our full product set – including traditional loans and leases – to grow our penetration among larger cabin aircraft. “

The hiring of  Hayes and Jeff Dunn, a new dedicated head of aviation asset management, are part of that strategy.

“Keith – with his long-time experience at GE – brings significant experience in leasing and large cabin aircraft finance, while Jeff gives us an even greater technical expertise in valuation and residual setting,” said Overstrom.

He stresses that the bank is not looking to slow down its financing of smaller aircraft buyers. Instead, it just wants to add to its business. “We want to be there for people buying turboprops as well as others buying ultra-long range aircraft, and be there for everyone in between,” says Overstrom.  “We think our mix of non-recourse, asset-based loans, as well as more traditional loans and leases can allow us to do that.  This product combination is unique, and we plan to take advantage of it.”

Finance is a team game

Overstrom stresses that PNC Aviation Finance’s success comes from its experienced team of over 35 people dedicated exclusively to aviation finance.

“We’re very fortunate to have a parent in PNC that recognizes the value of this business and has allowed us to build such a large and experienced team. Having a team of dedicated folks across the transaction lifecycle – from sales to underwriting, asset management, documentation and servicing –  which is really the secret sauce of the franchise, giving us the ability to execute quickly  and reliably for our clients,” says Overstrom. “Importantly, we are 100% committed to maintaining this level of excellence, and so have added several people across our team this year to handle the increasing number of transactions we have been seeing.”

PNC is not expecting the new business jet market to improve, but Overstrom says that the expansion of this business towards larger jets means that the division will keep growing.

“New aircraft deliveries may not be rising, but we are seeing a lot of pre-owned opportunities,” says Overstrom. “It is a cyclical business and we want to be there for our customers throughout the cycle. We are building a franchise for the long term and you do that by being there in the tough times. We want to be number one throughout the cycle.”

The larger it grows, the more likely his kids will be spotting aircraft financed by his bank.

Starling’s farewell message to customers in May 2017

As I get ready to bid farewell to PNC Aviation Finance, I am often asked the secret to my success. I always give credit to my industry relationships, beginning way back to my time when we were Aviation Finance Group.

When I started in the aviation business, there were 10 well-known lenders in the industry.

As a start-up, we were definitely not one of them. We had a great product, but it was unique and people were hesitant to change. It was difficult to hire experienced loan officers and I was certainly naïve as to how long it would take to get accepted in the industry. However, if I had learned one thing from my previous career, it was that anything worth having would be worth working for!

So, plain and simple, we had to earn our business the old fashioned way…we had to hustle for it. The first tradeshow we ever attended, we created a large poster board showing who we were and what we offered. Afterwards, a loan officer told me he thought we looked like we were “working out of the back of a pickup truck.”

Our big break came when PNC bought our loan portfolio, truly opening the doors of opportunity. Still though, it was going to take time to earn our wings, build relationships and again prove our place in the industry. We still had strong and very formidable competition.

Then the market crash of 2008. It felt as though the air had been sucked out of the room, signaling the beginning of the end for some lenders. Out of this horrible time came prime opportunity for PNC Aviation Finance, thanks primarily to our strong credit and operations teams. They held our entire sales team to strict lending standards and the industry quickly learned we were still open for business and had money we were willing and able to lend. As a result, in 2009, PNC Aviation took the title of leader in the number of corporate aircraft loans funded in the U.S. and never looked back.

I take great pride in the accomplishments PNC Aviation Finance has made. I am humbled by the fact that I was just one person within this great team. Many have played critical roles in our achievements and I sincerely thank each and every single one of them.

One of my core beliefs has always been that if you are going to be in the game, be in the game totally – don’t leave anything on the table. Get out of the bleachers and onto the playing field. In the end, it is all about the relationships that you build in this great aviation industry. Instead of worrying about how to slice up the pie, let’s work together to bake a bigger pie.

The post The new man at PNC targets larger aircraft appeared first on Corporate Jet Investor.

Recognising excellence in business jet finance across 11 specialist categories, the awards were judged by a panel of finance specialists at aircraft manufacturers and leading pre-owned aircraft brokers.

The judging panel selected over 30 different institutions out of a shortlist of 50. To see which financiers narrowly missed out on winning an award, click here.

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The winners of the 2013 Corporate Jet Investor Awards were as follows:

> Global Business Jet Financier of the Year 2013
Bank of America Merrill Lynch

> Best Private Bank for Business Jet Finance 2013
Credit Suisse

> Most Innovative Business Jet Financier 2013
Export-Import Bank of the United States and Airfinance

> Business Jet Deal of the Year 2013
ICBC Leasing financing of VistaJet guaranteed by Export Development Canada

> African and Middle Eastern Business Jet Financier 2013
Investec

> Asia-Pacific Business Jet Financier 2013
CIT Aerospace

> Chinese Business Jet Financier 2013
Minsheng Financial Leasing Corporation

> European Business Jet Financier 2013
UBS

> Latin American Business Jet Financier 2013
1^st Source Bank

> North American Business Jet Financier 2013
PNC Aviation Finance

> Global Business Jet Financier 2013 and Pre-Owned Business Jet Financier 2013
Bank of America Merrill Lynch

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Global Business Jet Financier of the Year 2013: Bank of America Merrill Lynch

Bank of America Merrill Lynch was the clear winner in Corporate Jet Investor’s 2013 Awards retaining the Global Bank of the Year title for the second year running. The bank also won the pre-owned award and, as befits the global award, scored highly in every regional category.

“They have always been strong in the US but the international team really know what it is doing as well,” says one manufacturer. “They have really got it working well and filled the gap created by others exiting from various regions.”

Although they do advise the banks own private clients, Bank of America is at heart an asset lender in the world.

“I prefer Bank of America as they are looking to do a deal rather than just support their own clients,” says one panelist. “This year they really cracked it.”

Best Private Bank for Business Jet Finance 2013: Credit Suisse

Credit Suisse scored even more highly than in 2011, when it was also the winner of this category.

The bank has closed a lot of deals for European and Russian clients for a number of year but in the past few years it has expanded and now offers finance throughout the world apart from in North America.

As one of Europe’s largest private banks, Credit Suisse’s network of private bankers creates many opportunities to bid on a wide range of transactions for the bank’s clients. It is also willing to offer business jet finance to individuals with whom the bank would like to have a relationship.

“I rank them as absolutely the finest at dealing with ultrahigh net worth individuals,” said one panellist. “They really understand them and the transactions.”

Most Innovative Financier 2013: Export-Import Bank of the United States and Airfinance

The Export-Import Bank of the United States (US Ex-Im) is sometimes dubbed “Bank of Boeing” because of its strong support of commercial aircraft exports. However, for several years it has been looking for ways to support business aircraft exports and the related jobs at American aircraft factories.

It partly achieved this with two facilities for Cessna Finance Corporation. But it was hard for its already stretched transportation team to do more, because demand for support for Boeing also increased at the same time.

Single business jet deals took the same time to structure as large commercial aircraft deliveries that could easily be 10 times larger.  And the credits were more complicated.

In May 2012 at the European Business Aviation Convention and Exhibition (EBACE) Fred Hochberg, chairman and president of US Ex-Im announced the launch of the Qualified Adviser Scheme. Private sector organisations would outsource due diligence and credit analysis for the bank speeding up the approval process – one of the biggest criticisms of business jet export credit deals.

“We want to offer government at the speed of the business,” said Hochberg. “We want to provide financing in a real time way.”

The first qualified adviser was Airfinance, a specialist firm run by Kirsten Bartok (pictured above), former vice president of structured finance and corporate development at Hawker Beechcraft, and Tom Low, former president of Textron Financial and Cessna Finance Corporation. Low has seen the value of Ex-Im whilst at Cessna. Having worked at Hawker, Bartok was desperately aware of what a difference Ex-Im could make for other manufacturers. They worked closely with Ex-Im to conceive the idea.

Low and Bartok also hired senior people from Cessna Finance, including Brent Cox, formerly the chief operating officer, to strengthen Airfinance.

Airfinance works with buyers to prepare applications with Apple Bank providing guaranteed loans once deals are approved by Ex-Im. The first deal under the scheme was approved in 2012 and Airfiannce is now working on other deals.

Ex-Im is also talking with at least two other companies that are likely to join the scheme.

Business Jet Deal of the Year 2013: ICBC Leasing financing of five Global 6000s for VistaJet

Any deal involving a Canadian export credit agency providing debt to a Chinese leasing company’s Irish subsidiary, to finance Maltese registered aircraft, for a Swiss company, deserves credit for simply closing.

The complicated deal involved more than five countries and took over a year to structure. Export Development Canada provided debt to ICBC Leasing’s Irish subsidiary. ICBC Leasing Ireland then leases the aircraft on to VistaJet a Swiss company with the aircraft listed on the Malta aircraft registry.

Because the aircraft were financed through Dublin, ICBC Leasing did not need to get approval from the State Administration of Foreign Exchange of the People’s Republic of China. It can take months for a leasing company to get SAFE approval to lend dollars.

It is also the first time a Chinese financial institution has obtained export credit support under the new OECD Aircraft Sector Understanding rules.

ICBC Leasing, which is regarded as one of the most innovative Chinese leasing companies, signed a memorandum of understanding with Bombardier to provide funding support to the buyers of Bombardier aircraft and rail products in 2011. It was the first Chinese leasing company to finance a business jet in China and recently placed an order for 10 Legacy 650 aircraft.

Several other Chinese leasing companies are looking to replicate the deal using Hong Kong and Irish subsidiaries and it may be repeated for some of the aircraft on VistaJet’s  2012 order for 56 Global jets – worth approximately $3.1 billion. The biggest business jet order ever placed.

African and Middle Eastern Business Jet Financier 2013: Investec

Although now a global bank, Investec started out as a South African leasing company in 1974 and is still very committed to the African continent.

The bank has four aircraft specialists in Johannesburg that focus on deals and it closes transactions all over Africa. The group has close relationships with manufacturers and operators and is seen as a particularly valuable partner as it is prepared to consider countries that many other banks might not. The South African team has closed deals all over Africa including Nigeria, Ethiopia, Madagascar, Mauritius and its home market of South Africa.

“We don’t have a list of countries that we will not consider,” says Humphries. “That is not our approach. We don’t have a checklist of things we are looking for, instead we like to find ways of doing deals.”

Asia-Pacific Business Jet Financier 2013: CIT Aerospace

CIT has a great track record in business jet finance and in 2012 it firmly re-established itself as an important global lender.

Like many financial institutions, CIT had a tough credit crunch and was even forced to seek Chapter 11 protection for one month in 2009. But is has remained committed to both commercial and business aircraft.

In 2011 and 2012 the bank firmly returned to business aviation under the leadership of Mike Kahman. “I would have voted for them last year,” says one manufacturer, “but I was also trying to keep them secret.” 

It was by far the highest riser in this year’s poll. Although it won in Asia the bank also scored highly in Europe – where it was active on a large number of Russian and Central European deals – and in its home US market.

“CIT is doing a very good job,” says one rival lender. “They have a smart strategy and are aggressive in their niche. In fact, they are beginning to become a nuisance by winning mandates from us.”

Chinese Business Jet Financier 2013: Minsheng Financial Leasing Corporation

Business jet manufacturers should be grateful that the Chinese government approved bank owned leasing companies just in time for the growth in business jet deliveries into mainland China. In 2008, Minsheng Financial Leasing was one of the first leasing companies approved by China’s financial regulator.

It now has ordered over 100 business jets and helicopters which it then leases to its private bank and corporate clients. Minsheng’s approach is different to other banks. It places bulk orders for aircraft and finds customers – who are usually already customers of the bank to take them. Although this is common with commercial aircraft leasing companies, few business jet financiers are prepared to take the risk of owning an aircraft without a customer in place.

“This strategy would probably not work anywhere else in the world but Minsheng is making it work in China,” says one financier.

The other benefit of Minsheng importing the aircraft is that it allows the bank to defer import duty and VAT – up to 22.85% of the aircraft’s value – over the term of the lease making its product attractive to owners.

European Business Jet Financier 2013: UBS

“Some banks are clearly just in deals for themselves,” says one manufacturer. “With UBS, you feel there is a real three-way relationship between the client, them and us. They do an excellent job and are a real partner with us.”

Focused on existing clients of UBS Private Bank, the team’s portfolio includes clients from Eastern Europe, Asia and the Middle East. UBS also scored highly in the Middle East category.

It specialises in larger aircraft, with deals ranging from $10 million up to Airbus corporate jets and Boeing business Jets.

“As well as being good, they are also nice guys to deal with,” added one on the judging panel.

Latin American Business Jet Financier 2013: 1^st Source Bank

South Bend, Indiana is 5,147 miles from Sao Paulo. But despite this distance, 1st Source Bank, headquartered near the border with Canada, wins the Latin American category for the second year running.

The banks has been financing business aircraft for more than 20 years and has a portfolio of over 600. It also scored well in the pre-owned and North American categories.

Focusing on loans between $2 million and $15 million it has a distinct niche in South America where other international lenders tend to focus on larger transactions.

And in 2012, the bank’s aircraft finance team moved 1,344 miles closer to the region, with some of the team now in Miami.

North American Business Jet Financier: PNC Aircraft Finance

In their distinctive polo shirts, PNC Aircraft Finance’s team stand out from suited bankers at trade shows. PNC’s products are also very different. With non-recourse loans that can be arranged in a few days without extensive credit checks the bank keeps things simple. Part of the leasing subsidiary of PNC Bank, the sixth largest US bank by total assets, PNC Aviation Finance offers customers aircraft loans that do not require customer financial disclosure or personal guarantees.

“PNC likes to present itself as very simple and earthy – and it is a clever marketing strategy –but Wayne Starling [the head of PNC Aviation Finance] is as dumb as a fox,” says one rival banker. “It is a very smart bank.”

PNC Aviation Finance closed more transactions in the US than any other bank in 2012. It is also about to take the same product to Canada.

PNC Aircraft Finance is not afraid of being different to other banks. “We are very comfortable with what we offer,” says Starling. “We had a big portfolio going into the downturn and our customer base performed very, very well compared to others that were more credit based. We have been doing this for more than 10 years and we know it works.”

Most of PNC’s aircraft loans are for between $1 million and $15 million, but it will make some exceptions – particularly for existing clients of the bank – and has financed aircraft as large as Falcon 7Xs.

PNC Aviation has an old-fashioned approach to finance. Its loan officers look customers in the eye and then trust them to both repay loans and to look after their aircraft.

“Because our customers are buying aircraft they have the pride of true ownership. They have equity in their aircraft and they look after them,” says Starling. “We underwrite based on character; not financials.”

The post Corporate Jet Investor Awards 2013 appeared first on Corporate Jet Investor.

Our guide

Part of the leasing subsidiary of PNC Bank, the sixth largest US bank by total assets, PNC Aviation Finance offers customers aircraft loans that do not require customer financial disclosure or personal guarantees.

This flexibility means that it is not surprising that PNC believes it closed more US aircraft finance transactions in 2011 than other lender – although some closed a greater dollar amount.

Wayne Starling, senior vice president of PNC Aviation Finance and his team launched Air Finance Group in 1998 to fund deals through securitisation. In 2004 it was acquired by PNC Bank giving it a balance sheet. During the tough years of 2007 to 2011 it grew its aviation portfolio by 70%. “We have never been given a limitation on growth,” says Starling.

PNC Aircraft Finance is not afraid of being different to other banks. “We are very comfortable with what we offer,” says Starling. “We had a big portfolio going into the downturn and our customer base performed very, very well compared to others that were more credit based. We have been doing this for more than 10 years and we know it works.”

PNC Aviation Finance will only finance aircraft in the US and Canada and will not finance piston aircraft or commercial aircraft. Most of PNC’s aircraft loans are for between $1 million and $15 million, but it will make some exceptions – particularly for existing clients of the bank – and has financed aircraft as large as Falcon 7Xs.

PNC Aviation Finance is keen to support PNC Bank clients but it is a transactional lender and does not expect aircraft finance clients to use its parent bank for other products. “Most of our customers come through referrals,” says Starling.

The bank commonly finances aircraft that are up to 15 years old at the end of transactions and it will also finance aircraft that are up to 20 years old at the end of the loan, admittedly with lower advance rates. This is more flexible than some banks, which have a policy of making sure that aircraft are not over 12 years old at the end of a loan (as an example, the maximum term for an eight year old jet would be a four years loan).

No credit approval

PNC Aviation Finance’s most popular product is what it calls an asset-based loan, where customers do not need to provide any financial disclosure.

“We have found over the years that if we have the right amount of equity and the right type of aircraft, we can offer these terms,” says Starling. “Underwriting is the biggest problem for buyers. Most entrepreneurs have a down year for every one of the last four years and so their financial statements are not as good as they once looked. They may have struggled but still done OK, but they won’t get credit approval. We look beyond this.”

Rather than forcing buyers to prepare statements, PNC insists on meeting borrowers face-to-face to understand them. As a subsidiary of a bank it also complies with all Know-Your-Customer regulations.

“Our loan officers go out and build relationships with customers and underwrite based on character rather than financials,” says Starling. “We only work with the type of people that we and the bank want as customers.”

Whilst it does not ask for financial data it does conduct internet searches on customers. “You can find a lot about someone just using a computer in Boise, Idaho [where the bank is based],” says Starling.

No guarantees

Unlike many other banks, PNC does not require personal guarantees provided customers put in 40% of equity (a 60% loan-to-value).

If they wish to have a higher loan-to-value of 70% they are asked for a 10% guarantee. So, for example, on a $10 million aircraft, the bank would lend $7 million and ask the borrower to guarantee $1 million.

Starling’s advice to aircraft buyers looking for finance is to be flexible on advance rates. “The more money you are willing to put down, the easier it is to find a lender,” he says. “You can get attractive rates at the moment if you are flexible.”

The bank only finances customers looking to buy aircraft for their own use. They are happy for owners to charter their aircraft out but they will not lend to people looking make money from business aviation.

They also make quick decisions. PNC says it typically takes10 days to approve an application. This far faster than the two or three months that many banks now require to approve deals.

Although they are asset-based lenders, they do not require customers to use power-by-the-hour maintenance programmes (“We like to see them and we encourage them,” says Starling) or management companies. In fact many of their customers are owner pilots.

Despite its innovative product, PNC Aviation has an old-fashioned approach to finance. Its loan officers look customers in the eye and then trust them to repay loans and to look after their aircraft.

“Because our customers are buying aircraft they have the pride of true ownership. They have equity in their aircraft and they look after them,”” says Starling. “After all, we underwrite based on character; not financials.”

Key people

Brad Hill, Marketing Manager, PNC Aviation Finance
(208) 472-1564
brad.hill@pnc.com

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