Financial lease of airplanes

Acquisition of aircraft (hereinafter airplanes) for personal use or for provision of air carriage services requires significant initial investment. Therefore, financial lease of an airplane could be seen as a sufficiently effective alternative permitting more optimal management of available cash flows.

Financial lease of airplanes is a transaction for special acquisition of a new or previously used airplane from a producer or a seller into ownership by a lease company for subsequent handover into a lessee’s possession and use for the duration of a lease contract, where upon the lease contract’s end, if all conditions resulting from the lease contract have been fulfilled, the title of the airplane is transferred to the lessee. Basic funding terms prescribe an initial down-payment of at least 30% of the airplane’s cost and then subsequent monthly lease instalments in amounts prescribed in a payment schedule. The lessee shall also cover all expenses related to the airplane’s use and maintenance. If agreed so with the lessee, the lessee has the right of premature purchase of the airplane at any time during the period of the financial lease.

The maximum duration of financial lease of an airplane is 10 years.

Financial lease is offered to companies having a principal activity of providing air carrier services (air carriers), and also to other legal persons wishing to acquire an airplane for personal use. If a company wishes to acquire an airplane for personal use, the requirement to present documents related to air carrier activities does not apply.

A priority condition for financial lease of an airplane is use of the company Panaviatic AS as the operator.

The lessee shall present the following information / data:

- the company’s (holding company’s) structure, stating all companies included in the consolidated group and listing all owners and directors, providing also their identity documents;

- the company’s financial reports for the past 2 financial years;

- the company’s financial reports for the past quarter of the current financial year;

- a confirmation of the company’s financial capacity (a forecast of cash flows, etc.) for successful payment of the lease amount;

- existence of a professionally prepared business plan for the company (primarily in case of air carriers);

- an initial technical audit of the airplane, confirming its compliance with requirements;

- an assessment to the airplane by an assessor accepted by the lease company;

- a list of all financial liabilities of the company.

Other necessary documents may be requested during reviewing the project.

An air carrier’s business plan and description of future activities, presented to the lease company, must contain the following information:

- when the commercial air carrier activities were started;

- airplanes that the company owns;

- airplanes that the company has via operating lease or financial lease;

- availability of a valid operator’s certificate;

- availability of trained pilots, and also technicians for maintenance of the airplanes;

- the company’s structure and personnel, their education and the number of employees;

- whether negotiations are being held or planned to be held with other companies for charter flights;

- whether there are contracts for performance of regular air trips;

- whether there is a contract for technical maintenance of the airplane by certified companies and where it will be performed;

- the air trips that the company is planning to perform (the route network);

- the number of monthly flight hours planned for the airplane;

- the airplane’s future country of registration;

- the organisation of advertising and promotion of the company in the air carriage market;

- an estimated budget plan of the air carrier company for 2-3 years in advance;

- whether the company’s personnel has any practical experience with that kind of operations or whether qualified management will be outsourced for that purpose;

- a description of trips and routes for the past 5 years, indicating the airplane types used;

- an outline of the air carrier company’s structure together with its departments and number of payroll employees.

If the airplane satisfies the lessee’s requirements then final conditions will be negotiated with the lessor and a contract will be signed. Thereafter, technical receipt of the airplane will be performed and the airplane will be inspected for its technical state and conformity to the data stated in its documents. The airplane will also be registered in the relevant register.