Is the Market for Aircraft Lending Big Enough for CUs?

Tulsa Federal Employees Credit Union has offered airplane loans to its membership with great success for several decades. TFECU, which benefits from the proximity of several high profile flying schools, as well as the Cessna Aircraft Company, currently has approximately 100 loans on its books and has experienced virtually no problems with its aircraft loan portfolio.

 
 

Tulsa Federal Employees Credit Union has offered airplane loans to its membership with great success for several decades. TFECU, which benefits from the proximity of several high profile flying schools, as well as the Cessna Aircraft Company, currently has approximately 100 loans on its books and has experienced virtually no problems with its aircraft loan portfolio. According to Phil Hart, President of TFECU, the mechanics of making aircraft loans are actually much simpler than most credit unions believe. Any loan, Hart adds, should be done for a "provident, productive purpose."

In contrast to the enduring success of TFECU's aircraft lending program, the demise of TWA has prompted CommunityAmerica Credit Union (formerly TWA Club Credit Union) to consider dropping its aircraft financing operations entirely. With demand for aircraft loans dropping among its membership, CACU has witnessed not only lower aircraft loan origination levels, but, more importantly, diminished profitability of its aircraft lending practice as a whole.

Regardless of the varying success of their aircraft lending programs, credit unions universally concede that aircraft loan appraisal and underwriting requirements are more complex than automobile loans and other standard types. However, the degree of complexity and specialization required to make aircraft loans is a matter of contention among credit unions with well-established programs.

Is making a single loan worthwhile, or does profitability depend on achieving a critical mass of aircraft loans because of the extra time associated with their underwriting procedures? Do aircraft prove more or less valuable as collateral as they age? What degree of specialization must a credit union employee achieve in order to ensure that the aircraft loans he is making are provident, productive, and profitable? These are just some of the questions that credit unions must address when determining whether to terminate, implement or expand their aircraft lending programs.

For first-hand perspectives on these issues from credit unions with leading aircraft lending programs, please join Callahan's at 2 pm EST on Wednesday, April 7, for a webinar entitled "Opportunities in Aircraft Financing." Click here for additional details.

 

 

 

April 5, 2004


Comments

 
 
 
  • Some insights about the complexity of underwriting these loans would have been helpful.
    Anonymous
     
     
     
  • I operated Edwards Flying Service for over twenty years at Massena Int'l Airport, Massena , N.Y. and financed several aircraft at SeaComm FCU. In 1982 I purchased a 1979 Cessna U206G for $ 45,000. and the market value to-day is approximately $ 140.000 with a replacement value of $ 360,000. Suggest you contact A.O.P.A.(Aircraft Owners and Pilot Assoc. ) www.aopa.com . for more valuable information regarding purchasing selling and financing aircraft. Keith B. Edwards 2548 St.Rt. 95,Bombay, N.Y. 12914
    Anonymous
     
     
     
  • I operated Edwards Flying Service for over twenty years at Massena Int'l Airport, Massena , N.Y. and financed several aircraft at SeaComm FCU. In 1982 I purchased a 1979 Cessna U206G for $ 45,000. and the market value to-day is approximately $ 140.000 with a replacement value of $ 360,000. Suggest you contact A.O.P.A.(Aircraft Owners and Pilot Assoc. ) www.aopa.com . for more valuable information regarding purchasing selling and financing aircraft. Keith B. Edwards 2548 St.Rt. 95,Bombay, N.Y. 12914
    Anonymous