Financing Aircraft in Canada

Acquiring an aircraft in Canada, whether for personal use, business operations, or commercial aviation, involves significant financial considerations. Understanding the available financing options and the intricacies of the Canadian aviation market is crucial for a successful acquisition.

Financing Options

Several financing avenues cater to aircraft purchases in Canada:

• Banks and Credit Unions: Traditional financial institutions offer aircraft loans, often requiring substantial down payments and strong credit histories. They assess the borrower’s financial stability and the aircraft’s value as collateral. Loan terms and interest rates are determined by market conditions and the borrower’s risk profile. Canadian banks like RBC, TD, and CIBC have specialized aviation finance divisions.
• Specialized Aviation Finance Companies: These companies focus exclusively on aircraft financing and leasing. They possess expertise in aircraft valuation, registration, and regulatory compliance. Leasing options, such as operating leases and finance leases, are common, offering flexibility and potential tax advantages. Companies like De Lage Landen and GE Capital Aviation Services (GECAS) (now part of AerCap) often operate in the Canadian market.
• Government Programs: While not direct financing, government programs like the Business Development Bank of Canada (BDC) can provide financing solutions that indirectly support aviation businesses through equipment financing or general business loans. These programs often prioritize small and medium-sized enterprises (SMEs).
• Private Investors: High-net-worth individuals and private equity firms may invest in aviation projects, including aircraft acquisitions. These investors may seek equity participation or offer alternative financing structures.

Considerations for Financing

Securing aircraft financing in Canada involves a rigorous evaluation process. Lenders consider:

• Creditworthiness: A strong credit history, stable income, and low debt-to-income ratio are essential.
• Aircraft Valuation: An independent appraisal determines the aircraft’s market value, influencing the loan amount. Factors include the aircraft’s age, condition, maintenance history, and market demand.
• Loan-to-Value Ratio (LTV): Lenders typically finance a percentage of the aircraft’s value, requiring a down payment from the borrower. LTV ratios vary depending on the lender and the aircraft type.
• Security and Collateral: The aircraft serves as collateral, and lenders require a registered security interest in the aircraft.
• Regulatory Compliance: Aircraft must meet Transport Canada’s regulations and certification requirements.

The Canadian Aviation Market

The Canadian aviation landscape presents unique characteristics that influence financing. Canada’s vast geography necessitates aircraft for transportation, resource exploration, and emergency services. However, the relatively small population and dispersed communities can create challenges for airline profitability. The strength of the Canadian dollar relative to the US dollar impacts aircraft pricing and financing costs, as many aircraft transactions are conducted in US dollars. The stringent regulatory environment overseen by Transport Canada adds complexity to aircraft ownership and operation.

Ultimately, successful aircraft financing in Canada requires careful planning, thorough research, and expert guidance. Working with experienced aviation finance professionals is crucial to navigate the intricacies of the market and secure the most favorable financing terms.