Falling executive jet residuals present credit conundrum: Foley

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This story is sourced from Flight International
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Potential buyers of pre-owned executive jets are continuing to find financial obstacles in their path to purchasing their chosen aircraft, despite the apparent easing of the banking crisis.

That is the view of business aviation analyst and management adviser Brian Foley, who heads New Jersey-based Brian Foley Associates.

Foley, a former business jet manufacturer marketing executive, says financing such purchases of ageing business jets has changed radically, highlighting differences in how loans are evaluated, compared with the pre-crisis world. With aircraft residual values sharply down, loans are based much more heavily on a borrower's balance sheet than on the asset value of the equipment.

In addition, he says, most banks will no longer finance jets that are more than 20 - and in some cases, 10 - years old. They are also insisting on down payments of up to 20% of the value of the aircraft, where once they would be prepared to finance the entire cost. Previously, some would even provide a sum above the purchase price to allow the new owner to upgrade the aircraft.

While financing for pre-owned aircraft is still available, it is only being offered to purchasers who present a low credit risk and are prepared to buy young aircraft, suggests Foley.

And the situation seems unlikely to improve in the short term, he warns.