Global Jet Capital Sees Increased Interest in Asia

Approximately 450 midsize to large-cabin private jets worth more than a combined $22 billion were delivered to the Asia Pacific region between 2012 and 2016, according to a new report from U.S.-based aircraft financier Global Jet Capital. The company noted that those aircraft each typically cost between $25 million and $75 million and up to 80 percent of the funding to purchase them came from external financing.

Over the past five years, China accounted for 57 percent of all aircraft deliveries in these categories to Asia Pacific. And as Global Jet Capital reports a growing number of financing inquiries from the region, it is increasing its local staff to meet demand, starting with the recent appointment of Violet Kwek as its sales director for Greater China.

“Over the next 10 years or so, as many as 90 private jets [in these categories] are set to be delivered to Asia every year, which is over 17 percent of the world’s total,” she said. “The region has been taking a bigger share of global deliveries and it is a key market for us where we are growing our team to help capitalize on the huge opportunities here.”

Seventy-one percent of China’s business jet fleet consists of midsize or larger business jets, while that number is even higher for Hong Kong (92 percent) and Singapore (75 percent). “A number of the Asian economies are currently some of the best performing in the world, and we expect this to contribute to strong growth in the business aviation sector here,” said Kwek. “This combined with the fact that the market has a high concentration on midsize to heavy jets makes this region very attractive for us, and we anticipate enjoying strong growth here over the next few years.”

With that growth, the company is anticipating an increased interest in operating leases in the region. The operating lease, which is still relatively uncommon in Asia, is a financing tool where clients can enter into a sale and leaseback agreement for their preowned aircraft, identify an aircraft for a lender to purchase, or assign the lender their purchase contract for their new, on-order aircraft.

In each situation, clients do not take ownership of the aircraft, but have full use of it as if they did. Instead of a large down payment, clients supply a more modest security deposit and return the aircraft to the lender at the end of the lease term.

According to Global Jet Capital, the benefits of the arrangement include better allocation of capital since the lender can fund up to 100 percent of the aircraft cost; no residual value risk as the aircraft ownership shifts to the lender, allowing the lessee to simply walk away at the end of the lease; certainty of cost, because the lessee will not have to worry about any additional costs incurred while waiting to sell the aircraft; flexibility in allowing a client to transition more easily between aircraft at the end of the lease; and possible accounting and tax benefits.