Even if sales of new business aircraft are forecast to be relatively flat over the next few years, demand for financing and operating leases is projected to grow, according to new research from Global Jet Capital. Much of the growth will come from upward trends in operators' reluctance to use their own capital for aircraft acquisition in the current economic climate. The projections stem from surveys among a panel of 144 business aviation professionals conducted by the company in September.
Results from Global Jet's research indicate that more than 77 percent of business aviation professionals surveyed expect demand for business aviation finance to increase over the next five years, with more than one in six of those expecting the increase to be “dramatic.” Only 6 percent of respondents expect decreasing demand for business aircraft financing between now and 2022. Sixty-two percent of the professionals interviewed identified what the company called “a growing trend” for potential buyers to use less of their own capital. Meanwhile, 21 percent also pointed to operating leases as being attractively priced, making them a financing option more buyers are likely to consider.
In fact, rates on operating leases are now so competitive that 46 percent of business aviation professionals surveyed expect to use them for private jet acquisitions increase over the next 12 months, with one in twelve (8 percent) also expecting a “dramatic” increase. Falling prices on pre-owned corporate aircraft makes operating leases more attractive. Offsetting the risk of pre-owned aircraft residual values is expected to lead to greater use of operating leases by 43 percent of those surveyed.
Dave Labrozzi, chief operating officer at Global Jet Capital, said, “There is a growing appreciation and understanding by clients of the benefits of an operating lease, especially as it relates to the potential risks associated with aircraft residual values. In markets where aircraft valuations are continuing to move, an operating lease is a way to guarantee certainty, while still accruing most of the advantages of full ownership.”
“From our perspective, we experienced a solid increase in business over 2016 and see strong demand heading into 2018 for both new and used aircraft financing,” Shawn Vick, CEO for the company, commented. “We are seeing slow but steady improvement in market fundamentals, largely the result of the OEMs making difficult but necessary decisions related to production rates, and emerging strength in the global financial markets.”