The Lease Alternative
An airplane seller who was acting as his own broker told me that he’d been abandoned at the sales altar on three recent occasions, each time because of issues with buyer financing. “Welcome to the club,” I thought. “If selling airplanes were easy, everyone would be doing it.” Indeed, many deals fall apart due to a lack of funding options, creditworthiness issues, cold feet or some other impediment. That’s been particularly true in the last few years. Even the deals that are getting done seem to be taking an inordinate amount of time.
The lease option is just another arrow in the quiver of owners who may not be in a position to sell for a host of reasons. For example, they may be upside down in the aircraft financially, which would make a lease attractive because it would allow them to avoid the lump-sum seller payout that would be incurred in an outright sale. Some may also view a lease as a way to ride out the storm that has hit aircraft values and tread water until a recovery happens.
Leasing terms and conditions vary widely. Some owners offer short-term arrangements; others prefer long term. Some don’t allow the aircraft to be chartered and many, if not most, have monthly or annual flight-hour restrictions, or have built-in price premiums if maximum allowable hours are exceeded. [For more on leasing, see “The Changing Face of Aircraft Lending” on page 26. –Ed.]
Buyers and sellers need to weigh such variables carefully, but they shouldn’t ignore the lease option. In a down market, it can offer a noteworthy alternative in the preowned arena.