There are many other issues to consider as well.
Will your company be able to utilize the tax benefits
associated with loan financing, or might a lease be
more beneficial? Are you comfortable absorbing the
asset’s residual value risk? Could leasing the aircraft
improve your Alternative Minimum Tax situation?
The lesson here is that any aircraft financing deal
has a variety of elements that need to be considered
— beyond the interest rate — to create the optimum
financing solution for your company.
Bring in Expertise
Not surprisingly, there is little in-house expertise given
how infrequently aircraft financing deals occur at most
companies. That’s one reason why teaming up with
an experienced financier — with staying power — is
so important. Today, many companies that financed
aircraft during the boom years now find they must
establish new relationships, as their previous financial
services provider is no longer in business.
A company should start by asking a potential
financing partner what it offers besides a competitive
interest rate. Can it propose and explain the benefits
and drawbacks of various financing options? Does it
understand the client’s business and needs? Does it
have tools, resources and expertise available — beyond
the deal — to help your business succeed?
For example, it’s important that your company
understands the pros and cons of enrolling in an Hourly
Cost Maintenance Program (HCMP). The biggest
wildcard when owning an aircraft is maintenance
expense. Should an engine require major maintenance
or replacement, an aircraft’s enrollment in a HCMP
can turn a major expense into a minor inconvenience.
Not only do such programs provide financial security
and replacement parts when needed, they can also be
used by experienced lessors to enhance leasing transactions. For instance, it may improve the residual value
of the aircraft.
Crafting a favorable aircraft financing deal takes
time and attention. But by keeping three simple
guidelines in mind — start early, think beyond rates
and bring in expertise — executives will enjoy their
future flights all the more, confident they’ve negotiated
smarter aircraft financing for the company. m
DAVE LABROZZI is president of GE Capital, Corporate
Aircraft Finance, providing clients with structured
loans, leases and access to GE know-how for more
than 30 years. Labrozzi can be reached by e-mail at
firstname.lastname@example.org. For more information, visit
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