The corporate jet market
may be waking up, but repossessions are still rising. Claire Hack
reports.
Go deeper with GlobalData
Lessors are expecting a
strong year for corporate jet finance owing to an upturn in the
aviation sector, especially in emerging markets such as Brazil and
China.
Philippe Foulon, Société
Générale Equipment Finance (SGEF) global head of aviation, says:
“Those areas are developing quickly. In China for the last year
we’ve seen an opening up of that market, which was previously very
heavily regulated. There were measures from the government to
prevent ownership or operation of private jets.”
As regulations begin to relax
and wealth continues to grow, demand will increase. However caution
should be exercised, as there could still be issues caused by a
lack of in-depth knowledge of the market.
“There are ‘know your
customer’ issues, and that’s pretty important for banks and
financial institutions,” Foulon says.
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By GlobalData“There’s now a mushroom
effect of people applying for and ordering corporate jets, and
banks will have to struggle to determine what a good profile is and
what the right structures to implement are.”
China is expected to
represent a substantial portion of the market in years to come,
while the US market, currently the largest for SGEF, is returning
to health, after two difficult years. Foulon says: “In the US,
using corporate jets was seen as being politically
incorrect.”
“It was pointed out as being
luxurious-spending and the newspapers suddenly said it was
outrageous.” This is less the case now as developments in fuel
efficiency continue and as levels of wealth return to
normal.
Demand is increasing in
Brazil. Foulon says: “Brazil is a fast-growing economy and market
demand is s
teadily rising. There’s a high demand for
helicopters.”
In Europe, while the reversal
in the downward trend has been less strong than hoped for,
confidence is returning to the market.
“There’s been no miracle,
it’s just that we’re going back to normal,” Foulon says.
UK-based funder Lombard is
also expecting growth, at home and abroad. Wes Harfield, Lombard
head of specialist finance, says: “The company is looking forward
to healthy growth in new business volumes for 2011 from both
existing and new customers. Lombard is well positioned to expand in
both the domestic and international market.”
Lombard provides traditional
leasing facilities, as well as loans and mortgages. The company has
experienced customers having to correct loan-to-value ratios agreed
at the inception of deals during the crisis.
Recovery is now underway,
especially at the more expensive end of the market.
Harfield says: “Last year was relatively flat at the lower
end of the market (less than $5m), but Lombard saw a lot more
activity at the top end, part of which was sourced through RBS
Wealth (Coutts Bank) and Global Banking Markets (GBM).”
