Martin Ormon is founder and president of Aircraft Finance Corporation. Ormon was previously with Greenwich Capital Markets and then started his own hedge fund before founding Aircraft Finance Corporation in 1998. Today, Aircraft Finance Corporation finances more pre-owned jet aircraft than anyone in the industry.
Martin Orman, founder and president of Aircraft Finance Corporation, says the private aviation industry is doing very well heading into 2022 and has the facts to back that claim.
The private aviation industry is on fire. The COVID 19 pandemic has caused a paradigm shift in how people with means approach air travel. Anyone who can afford to purchase a private jet is doing just that. The very thought of getting on a commercial flight with 150 of your closest friends who may or may not have cooties is not at all appealing. Not to mention the reduced airline schedules, overcrowded flights and the egregious behavior of some of those fellow travelers. “I love to fly commercial”, said no one ever.
I have been in the aviation finance business for over twenty-five years and 2021 was the busiest year my company has ever seen. To the tune of $242 million in closed loans. If a Gulfstream or a Falcon goes up for sale in the morning, it’s under contract by the end of the business day, often times for more than the asking price.
To that point, the finance side is frenzied, to say the least. As much as it is desired to purchase an aircraft in these unprecedented times, it becomes frustrating from a lending perspective for several reasons. One of those reasons is that the valuation of the aircraft is difficult because of the escalating prices. The comparables that are thirty days old, are in some cases, twenty percent below the sales price of the contracted aircraft. The appraisal then becomes pivotal in the process. Appraisers are having to spend extra time doing their due diligence in the market place which is causing extra days of work on their part and is also contributing to the increased turn around time to process a loan request.
Simple things like appraisals and underwriting that would normally take days, now take weeks, largely in part because of the overload of loan requests. Underwriters are all working overtime and there was one point, in December when everyone was trying to close before year end to take advantage of the tax incentives, where a banking colleague called me up and said, “we cannot take any more new loan requests. We cannot keep up. My underwriters and credit analysts are so stressed and overworked that I’m afraid they might all quit or have a nervous breakdown”. And it hasn’t stopped.
For the month that just ended, January 2022, our business is up 300% year over year. The phone rings non-stop. Indeed, a good problem to have. Not only is volume up, the average loan size is up from 3.2 million to 5.7 million. Crazy times.
Where and when does it stop? I don’t foresee this as a short term condition. People’s psyche has changed and so has their behavior. Flying private has become just another form of social distancing and feels strangely like a necessity in contrast to when it was more of a luxury. COVID has been very good to the private aviation industry.
About the author: Martin Ormon is founder and president of Aircraft Finance Corporation. Ormon was previously with Greenwich Capital Markets and then started his own hedge fund before founding Aircraft Finance Corporation in 1998. Today, Aircraft Finance Corporation finances more pre-owned jet aircraft than anyone in the industry.
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