PNC Aviation Finance continues to be bullish on the outlook for business aviation financing. “We have made more business aircraft loans than any other firm each year since 2009,” said Alex Overstrom, head of PNC Aviation Finance. “We think there is room to grow our market share given the strength of our platform.” Overstrom thinks there is lots of room for optimism.
“This business is a strategic priority for the firm, and we are executing well. Our originations in the first half of 2017 are 40 percent higher than they were in the first half of 2016. We're clearly seeing a pick up in demand for corporate aircraft supported by a stronger macro economy, higher confidence, record high asset prices, and a more business-friendly administration that has taken the taboo away from ownership of aviation assets. Aircraft utilization is up and business jet transactions are increasing, with a record 1,100 business jets trading hands in the first half of the year, and up 9 percent year over year,” he said. “We've been hiring this year in order to maintain quality of execution against greater transaction volumes.”
PNC (Booth N1513) makes non-disclosure, non-recourse, asset-based financing to more traditional loans and leases to clients in the United States and Canada. “We work with bank clients as well as non-clients. In fact, the majority of our clients didn’t have an existing relationship with PNC when we began the aviation financing relationship,” Overstrom said. He added that PNC is the only bank able to offer non-disclosure, non-recourse asset-based lending, which he calls “great for clients with very complex financials, for example, hedge fund, private equity or real estate investment owners/partners, or those desiring a very high degree of privacy” to finance aircraft. “We're one of the few players in the market right now with the expertise and willingness to do tax leases,” he said.
Overstrom said PNC's team consists of almost 40 people dedicated to aviation finance with an average of 13 years' experience. PNC has teams that can handle all sides of the transaction from sales, underwriting, credit, documentation, servicing and asset management. The company finances a broad spectrum of business aircraft types from single-engine turboprops to large cabin, long-range business jets. Currently more than 500 aircraft are in the company's portfolio. Of that number, 70 percent are in an asset-based structure and 30 percent are in a credit/lease structure with loan sizes ranging from single digit millions to more than $50 million. Overstrom said PNC is focused on maintaining industry relationships and regularly hosts aviation events that draw industry participants including brokers, OEMs, aircraft owners and prospects. Those events include September's Evening in Aviation event in Washington, D.C., that drew 11 aircraft and more than 100 participants and Partner In Aviation events in California, Florida and Texas.
While optimistic, Overstrom said that OEMs are still “in a tough spot, as [used aircraft] price declines have made new aircraft less competitive with preowned. That said, we are still financing a decent number of new aircraft, particularly with large corporate clients who are often leasing. I expect that the used aircraft market will remain robust while new aircraft will be challenged over the next 12 to 24 months. As used aircraft inventory declines and prices rise, and OEMs bring production to lower levels, [the industry] should begin to get back closer to an equilibrium state.”
Going forward, Overstrom said that PNC intends to focus on financing more large-cabin aircraft. “Asset-based transactions had historically skewed toward mid-cabin aircraft,” he said. “We're also making a big push across our franchise to work with our corporate bankers to ensure we are financing the aircraft of our large corporate and middle market clients and prospects.” He said PNC intends to enhance its leasing capability to “take advantage of pull-back at our competitors” and maintain excellence in its asset-backed originations, which Overstrom called PNC's “bread and butter capability.”