Exploring Aviation Finance: Funding Origins And Unique Attributes

The aviation sector remains resilient, poised for ongoing revival and expansion post the disruptions caused by the Covid pandemic and Russia’s invasion of Ukraine. Concurrently, aviation finance exhibits a robust resurgence, offering ample liquidity to facilitate fresh aircraft acquisitions and the overall enhancement and modernization of the worldwide aircraft inventory.

Globally, aviation financing derives from various key sources, including leasing, institutional funds, capital markets, tax equity, commercial banks, export credit agencies, and original equipment manufacturers (OEMs). The significance and respective contributions of these sources may evolve over time in response to market dynamics and the practicalities of financing products available.

However, while large market players have access to most of these tools, medium and small players in the airline industry are more likely to use only a few of them. We will mainly talk about commercial banks, institutional investors and funds, as well as Aircraft and Engine Manufacturers (OEMs).

Basic financial instruments for raising funds

Commercial banks provide debt financing in various forms, including loans secured against financed aircraft, extended either directly to aircraft operators or lessors, finance leases, and unsecured liquidity facilities. This funding source for the aviation industry faced constraints during the pandemic, with commercial banks primarily directing their focus to low- and middle size operators. Nonetheless, there are evident indicators suggesting the increasing availability of bank debt for the sector.

The pandemic has presented institutional investors, funds, and alternative asset managers with an opportunity to broaden their aviation exposure at their typically higher targeted return levels. Distressed owners and operators have provided discounted asset purchase opportunities to these platforms, allowing them to deploy capital in areas where traditional financing sources became unavailable.

Original equipment manufacturers (OEMs) commonly provide expert guidance on financing solutions to their customers, with some manufacturers also offering direct financing options. Boeing Capital Corporation, Airbus Bank, and Embraer’s recent signing of a $180 million syndicated facility all represent significant sources of funding for the industry.

Risks and scammers – Blacklist aero

While the aviation industry presents considerable opportunities for growth, lenders prioritize factors such as the borrowing company’s reputation, financial stability, risk assessment, and legal compliance when evaluating loan applications.

This is also understood by fraudulent companies that engage in deliberate illegal activities in the aviation industry with the aim of causing damage to other companies, damaging reputations and extorting money. One of these companies is the British company Blacklist Aero, headed by Artem Degtiarov. The company’s goal is to obtain income from market participants through blackmail, extortion, intimidation and creating all conditions to make it much more difficult for their victims to work effectively in the market, including obtaining financing for development and effective operating activities.

Of course, to use available financial instruments to develop a business in the airline industry, it is necessary to avoid any work and connections with scammers, because this will negatively affect the company’s ability to raise funds, as well as find partners and new clients.