Finance FEB20.qxp_Finance 18/03/2020 16:22 Page 1
FINANCE With a focused approach on global excellence and creativity, Andre Fodor has managed flight operations for the U.N. and Flight Options as well as being a senior demonstration pilot and instructor for Embraer Aircraft. He is the Aviation Director for his current employer.
Buying a Jet? Defining Cash, Finance and Lease What are the methods available to those wanting a full business aircraft ownership experience? Andre Fodor reviews the options, with a particular focus on traditional and operating leases… he secret to a successful business transaction is to aim to satisfy both parties. This will trigger a relationship based on goodwill and mutual interests, lasting far beyond any one-off transaction. When your counterpart understands your commitment to do ‘good business’, they, too, become stewards of your best interests. As an example, a well-respected aircraft broker once stepped out of a major sale he could make when he realized the airplane he represented was poorly suited to our mission needs. Seeing our commitment to doing good business, the broker refused to let us have anything less than what would provide us with an excellent ownership experience. In turn, his action was rewarded with our trust, several referrals to our peers, and the opportunity to participate in future deals over the years that have ensued. Recently, I utilized these same principals to advise a new client on the best way to acquire his
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12 Vol 24 Issue 5 2020 AVBUYER MAGAZINE
first airplane. Until recently, all aircraft transactions which I’d participated in were cash transactions or financed. Cash Transactions: These are relatively straightforward. A purchase price is agreed, money exchanges hands between buyer and seller, and title transfers prior to the physical delivery of the asset. Financed Transactions: These are modified cash transactions that include a third party; a creditor. Here the buyer secures financing, either through a fixed-value loan or line of credit and uses it for the aircraft’s acquisition. The buyer is responsible for paying up a percentage of the purchase price (which may vary depending on the aircraft type, year, rate of devaluation and several other metrics). The asset’s title is held as collateral and, at times, the lender will be required to provide additional collateral security, especially if the www.AVBUYER.com
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