Mary Schwartz, Managing Director and Head of Global Aircraft Finance at Citi Private Bank, says that Citi has seen plenty of aircraft trading activity in the last few months. Jo Murray asks her what has been on Citi’s agenda since January 2011 and where the market for business aircraft financing is headed
“We’ve already done as much business this year as we did all of last year,” says Schwartz, speaking of the first quarter of 2011. “Last year was CHALLENGING. It appeared to us that there were a lot of cash deals – if deals were being done at all. There really were very few sales last year.”
She says this year has shown a definite improvement. “Regarding values though, it seems that the bigger, better, newer aircraft have improved in pricing. However, the older aircraft – even the bigger, better, older aircraft – seem to be doing not as well,” she says.
Citi focuses on high net worth individuals as a client base but Schwartz is nevertheless aware that there are a lot of corporate buyers coming back into the market too. She is also concerned primarily with whole aircraft although fractional shares are often on Citi’s agenda too.
In terms of client scrutiny, Schwartz says: “Of course we want to see their financials to make sure that they qualify for a loan. We want to build a relationship with them – it is truly a question of relationship banking. We’re a private bank and we want to have comprehensive relationships with clients where we’re able to provide the full range of Citi Private Bank’s services to manage their wealth –in addition to meeting their aircraft needs.”
When asked if Citi is putting in place complex financing structures, Schwartz responds: “The majority of our transactions are fairly standard. But if the client has a unique need or desire to do a different type of transaction or term we try to accommodate them.”
As for assets Citi simply will not finance, Schwartz says that if the aircraft are too small or too old then the bank may decline a financing. As for other criteria, Schwartz says: “We want to make sure that the asset is well maintained, that it is managed by a good management company, that it is hangared in a safe jurisdiction and we want to make sure that it is insured properly.”
As to the incessant aviation and economic cycles, where on the curve does Schwartz put us at present? She responds that realistic and stable aircraft values are still at least a year away – and perhaps even two years. Is this the point at which the manufacturers will be truly occupied with serious volumes of new orders? “Yes,” she responds.
Until the re-entry of the manufacturers as significant suppliers in the aircraft trading market, Schwartz says we will continue to see the pre-owned trading market increase its momentum. “I think the inventory that is currently being traded is pre-owned but it is nevertheless newer pre-owned inventory. However, there are definitely new aircraft orders for the bigger, better, newer planes and there even backlogs on certain models.”
While we wait for the halcyon days of 2008 to return we can at least be comforted by the upward change in fortunes the market is experiencing during 2011. Schwartz concludes: “The improvement since last year and the year before has been dramatic.”