2020 has been an unprecedented experience for all of us. High expectations followed by chaos, uncertainty and then more uncertainty followed by more chaos. The aircraft finance industry has followed along the same path, but mostly, it has been an excellent year with regards to rates, availability of cash and the lenders willingness to participate in the light Jet, Turbine and Piston lending markets. This has translated into growing aircraft finance activity in what should have been a slowing market.
Covid has proven to be a difficult problem to overcome, with conflicting information from the “scientists”, the politicians and the press. We are told that we need a mask mandate like in many European countries by the press and politicians that seem more interested in sowing division rather than providing useful information. We are currently going through a spike in cases, but so is Europe and in many areas, are far worse off than here in the states. Sweden on the other hand, is also suffering in this worldwide spike, but is one of the lesser impacted countries in Europe. If you remember, Sweden did not have any lockdowns, nor did they call for a mask mandate. Conflicting information and conflicting results.
Of course, the election is also following the same pattern; chaos, uncertainty followed by more uncertainty and more chaos. From the Russian hoax to the impeachment to fake polls to threats of violence and unrest to the “blue wave” to an election too close to call with allegations of fraud and malfeasance, to one candidate being selected by the press and hoisted upon us. “See you in court” appears to be the catch phrase. Hopefully, all this uncertainty will be resolved shortly. More conflicting information and more chaos.
The aircraft finance industry also followed this very same pattern. What started out as a very promising year with an exceptionally strong economy and aggressive rates became a quagmire of unpredictability as banks wrestled with the shutdown and the ensuing uncertainty of the impact of that shutdown. There was the specter of the economy crashing and across the board delinquencies and a stock market crash. The lenders’ concerns cannot be over emphasized. Banks responded with unsolicited offers of loan deferments in hopes of assisting borrowers through uncharted waters. The results were unspectacular, to say the least, as less than ½ of 1% of our current portfolio decided to take the underwriters up on their offer. Borrowers continued to pay their debts, the phones kept ringing and applications continued to come in. It was as if our clients and aircraft buyers, as a whole, decided that they simply did not choose to participate in the crises.
In the Dorr Aviation office, we observed the state mandate of working from home. The dire concerns of having enough business to sustain a small office were real, but the consequences remain unrealized. As soon as the mandate was amended, we initiated staffing up within the acceptable safety guidelines and in short order we were at full staff.
Historically, aircraft loan activity during presidential election years tends to drop off mid-summer as the campaigning season heats up. This year, with all the political unrest, the artificially depressed economy and the turbulent election season, we have benefitted from a robust aircraft sales market. The slow-down, long anticipated by the shutdown and resulting fall in GDP and rising unemployment simply failed to materialize in our market.
With slowing economy, coupled with the Covid environment, one would typically assume conventional wisdom for a slowing of demand, an increase in inventories and lower prices. This is exactly the opposite of what transpired. Low interest rates and increased demand were and are a huge driver in the market as well as a desire for normalcy. We found that the lenders, though cautious, were hungry for our business. As aircraft prices rose from the demand, interest rates have held steady. This has translated into a 20% increase in business so far this year and we still have the year end rush to look forward to.
Dorr Aviation is busy, very busy. So busy in fact that we have added to our staff and are looking to further expand. The banks remain solid players in the market and seem to be looking past the Covid and economic crises. At least for now.
As I sat down to write this on Veterans Day, I am brought back to the overwhelming gratitude I have for our Maker for the blessing of being born into the greatest country in history. A vaccine will soon be available, the Covid crises will pass, the election will be settled, and the sun will continue to rise in the morning. The aviation finance industry is healthy and robust. Rates are aggressive and GA pilots continue exercise their freedom and we are here, as always to assist.