Mark Bearden is senior vice president, First American Equipment Finance.
Asset management specialist First American Equipment Finance has been in operation since 1994, but began serving the business aviation industry in 2013.
The company has been a subsidiary of City National Bank since 2012, which itself was acquired in 2015 by Royal Bank of Canada (RBC). This is important to note, because while aviation lending business is just one component of First American’s overall broader equipment finance business, it is amongst one of the most important to its parent company’s top clients, says Mark Bearden, senior vice president, First American Equipment Finance.
“As a private, entertainment, commercial and corporate bank, we serve clients with close ties to private aviation. It is both a substantial and growing part of our overall portfolio, especially in the last five years,” he explains.
Bearden puts that down to a mix of the Covid boom increasing new entrants into the market and First American’s business leaning more into the asset class. He says First American has also worked to establish relationships with leading fractional operators, as well as aircraft management companies and brokerages.
First American finances US-registered, new, pre-owned and fractional midsize to large aircraft aircraft from a manufacturer of their clients’ preference. The company can also finance aircraft for owners who choose to charter their planes to help offset costs but does not extend loans to businesses that depend entirely on charter revenue to repay the loan.
“Our clients charter their assets frequently because they want to keep the equipment running and help offset ownership costs,” says Bearden.
First American is one of a few lenders that finances fractional shares. The lender works with fractional aviation providers to assist clients with financing shares. Before the global financial crisis, many banks offered non-recourse fractional share financing, but few continued offering it after incurring losses during the downturn. In 2015, Bearden initiated the practice at First American, requiring guarantees, a down payment, amortisation to prevent large final payments and active loan management.
The lender also provides cash out financing. Bearden explains First American provides financing for used assets, even if the owner already owns them outright and later chooses to leverage those assets to access liquidity. However, this is subject to credit approval and acceptability of aircraft year, make and model.
Looking at the market more widely, Bearden says with the passage of the One Big Beautiful Bill Act and the return of 100% bonus depreciation, First American has seen an influx of potential buyers getting more serious about making a purchase prior to the end of the year.
“For many, bonus depreciation pulled them squarely off the fence and moved them into investing the time and energy to find the right asset and pair it up with financing through First American,” he explains. “The pipeline and conversations, while not at the same level as 2021-2022, has been noticeably different than the prior two years. Because of this promising activity, we expect the portfolio to grow in the quarters ahead.”
Looking ahead to 2030 and beyond, Bearden is confident the industry will continue to evolve.
“Product development over the last several years has been incredible, but we expect services to evolve as well with new innovators and disrupters entering the space,” he says.
Fractional is also a market that has Bearden has seen grow, and “we expect to see that segment continue to capture more market share as providers look to find different ways to better serve clients”.
Additionally, aircraft values have held for the most part and those that entered the market during the pandemic have not shown any signs of leaving. “With the great wealth transfer going on, we expect to see younger travellers enter the market and are optimistic about the next five years and beyond,” says Bearden.