EXPANDING FINANCING IN ASIA - Alexander Tang, Associate Sales Director for Asia; Global Jet Capital
GLOBAL JET CAPITAL IS A NON-BANK FINANCIER THAT SPECIALIZES IN FINANCIAL SOLUTIONS EXCLUSIVELY FOR BUSINESS AIRCRAFT, PROVIDING LENDING AND LEASING SOLUTIONS FOR A VARIETY OF FIXED-WING BUSINESS JETS. AS A BUSINESS AIRCRAFT FINANCIER, GLOBAL JET CAPITAL UNDERSTANDS THAT TIME IS THE MOST IMPORTANT ASSET FOR ITS CUSTOMERS AND STRIVES TO PROVIDE SIMPLE, STRAIGHTFORWARD FINANCING SOLUTIONS THAT FIT EACH CLIENT’S NEEDS WHILE MINIMIZING UNNECESSARY COMPLEXITY.
Tell me about Global Jet Capital’s recent expansions.
To meet growing demand in Europe and Asia, Global Jet Capital decided to open regional offices in Hong Kong and Zurich.
The Asia-Pacific market, including North Asia, Greater China, Southeast Asia and Oceania, is the fastest-growing and most promising market for business and private aviation. Over the past 15 years, these economies have experienced a substantial increase in the number of UHNWIs. As the number of UHNWIs grows in Asia Pacific, the demand for private jets will also increase and the surrounding infrastructure will develop to cater to the demand. We believe that having a local presence will help us better meet our customer’s requirements and support the growth of the entire business aviation ecosystem.
Today, to show our commitments to the market, we have established a permanent office strategically located in Hong Kong. The Hong Kong office is a self-sustaining, fully-functional office with sales and origination, legal, and underwriting capabilities. We believe in the long-term development of this region and potential in this market.
Are there any misconceptions about financing in Asia?
One of the common misconceptions is that customers tend to think they cannot choose their desired aircraft and interiors if Global Jet Capital is offering them an operating lease solution. This is incorrect because for business jet operating leases, the client is typically the party that selects the aircraft (whether new or pre-owned) that they want to acquire. An operating lease is just another type of financing option.
Another misconception is that customers may have the impression that they do not need to provide as much due diligence information to Global Jet Capital as required by a bank. Even though we are a non-bank financial institution, we require similar due diligence and KYC information that a regulated bank would seek. Having the aircraft as security is only part of the equation. We must ensure that the lessee and guarantor(s) have adequate financial metrics to maintain the financial obligations.
What are the benefits of leasing an asset rather than purchasing?
An operating lease is a popular financing tool that can provide the customer with the benefits of a private aircraft without the traditional risks of aircraft ownership.
The first benefit of an operating lease is that instead of a large down payment, customers can put down a modest security deposit to start using the aircraft. An operating lease can allow the customer to maximize their cash for alternative investments or investments for their businesses. Under an operating lease, the monthly repayment is also predictable; therefore, customer can effectively budget for their use of the aircraft.
A second benefit is that there is no re-financing risk or complexity around the eventual disposition of the aircraft. At the end of lease term, the customer can simply return the aircraft in accordance with the lease documentation. Perhaps, the customer can start looking for new aircraft prior to when the lease is coming to an end. However, one of the drawbacks of the operating lease is that if the customer wishes to early terminate the lease, the penalty can be hefty as they will need to compensate the lessor for lost rents.
Is it possible to finance a pre-owned aircraft?
For the last 10 years, many customers were buying new aircraft without financing. Owners are now more open to consider pre-owned business aircraft and willing to finance these assets. This is a result of business aviation becoming more mature in the region. Typically, a younger aircraft could be easier to finance than an older aircraft. It is usually harder to obtain financing for aircraft that are over 10 years old. That being said, if the aircraft has been properly maintained and managed, and was operating in an ideal environment, even an aircraft that is above 15 years old can be financed. However, the possibility of being able to obtain financing ultimately still depends on the creditworthiness of the lessee and the guarantor(s).
What are your expectations for financing within Asia?
Business aviation is a rapidly growing industry amongst many others in Asia Pacific, with the Greater China regions contributing most of the growth. Although we continue to hear news reporting that the regional economy is going to have a weaker performance due to the on-going trade dispute with the US, we are still seeing aircraft being purchased by first-time jet owners. We are also seeing demand for refinancing from jet owners due to the tighter credit availability for individuals and corporations in China.
As the business jet market and supporting infrastructure mature, I expect there will be more competitors in the aircraft financing business. Aside from the two biggest traditional means of financing: Private Banks and Commercial Banks, I believe more non-bank financiers will come to Asia in search of financing opportunities. I expect that, in the next phase of business jet financing, financiers can capture market share by providing more flexible payment structures, higher advance rates or accepting a creative guarantee package. Ultimately, the customers will be beneficiaries of the growing competition, which is a positive result.