Asset-based Finance
Canada’s Business Aviation Spreads its Wings T By Isabelle Lafond
aking an aerial view perspective at the business aviation sector, a subset of general aviation, it appears that the Canadian sector is a force for good, supporting hundreds of companies and vastly improving connectivity. There are 1,900 business aviation aircraft across Canada, with the majority based in Québec, Alberta, British Columbia and Ontario. From being an economic lifeline for a large number of communities, to helping businesses be efficient and productive, business aviation has earned a pristine status of contributing directly to employment and the general economy in Canada.
Beyond market access and strength While companies that depend on business aviation serve many different industries and locations, they all share a common ground. That is, in a competitive environment, companies must maximize the use of their two most important assets: people and time. Canadian companies are choosing to have their workforces fly privately to avoid long gate lines, transiting through congested delay-prone commercial airport hubs and flying in cramped airline cabins. They gain by reduced travel time and greater productivity by enabling their staff to truly spend their time working1. Thus, the benefits of business aviation to Canada are quite clear, as it: ◉◉ Contributes over $5.1 billion in total gross domestic product (GDP); ◉◉ Produces 43,200 in jobs: 66 per cent of which is higher than the average annual wage; and ◉◉ Generates over three-quarters of a billion dollars in taxes2.
Business air traffic drivers Rising GDP, and consequently, disposable income and living standards, result in an increased demand. This is also closely linked to the globalization of trade, where the average distance travelled tends to increase as people do business in countries which now have more favourable political and social environments.
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TOTAL FINANCE
The advantages of business aviation achieved domestically grows multifold on international journeys. These trends, combined with continued wealth creation in fast-growing markets, and coupled with aviation infrastructure development will accelerate the demand for business aircraft. Put differently, long-term indicators are pointing towards a robust outlook for the sector3.
Perks of financing According to the latest survey compiled by JETNET iQ, almost 45 per cent of respondents believed they would finance their next new or pre-owned aircraft purchase4. Aviation financing is often seen as complicated, expensive and restrictive. However, the main benefit that makes financing worth considering is that your capital is not tied up in a depreciating asset. Having such a large capital investment in an asset that depreciates in value over time makes financing an attractive option. Whether it entails the financing of a new aircraft or the refinancing of a pre-owned one, the lender is to provide the best financing structure on par with what the client wants. While developing financing solutions, a lender must be accessible, knowledgeable and wellresourced in order to act as a true financing partner, understanding the assets at stake and demonstrating the ability to recommend the most valid plan. With great expertise comes great flexibility in understanding what to consider when financing business aircraft, whether for corporate, individual or operating use, such as: ◉◉ Guarantees provided will impact the financing terms; ◉◉ Monthly payments including operation expenses; ◉◉ Annual usage that will impact frequency of inspections; ◉◉ Maintenance programmes needed to maximize residual value; and ◉◉ Decision to charter the aircraft may sway the risk ratio.
AUGUST 2019