Ultra wealthy buyers are financing their private jets differently now — not through a bank, but against the aircraft itself. Joining me is Jasjit Kundi, Founder and CEO of Sky Blue Capital Partners. Jasjit, welcome to Wall Street to Mena.
Thank you.
Why do people actually buy business aircraft in the first place?
Business aircraft are primarily productivity tools — they are not luxury goods. They enable corporates and entrepreneurs to access operations and remote regions that are not actively served by regional carriers. It is a time saver and it allows them to leverage security, confidentiality, and time.
Why should an investor look at this as an asset?
It is an interesting asset because it has a number of qualities. Number one, it is global and mobile — meaning that in times of country-specific crisis, the aircraft can actually be moved to different geographies. The second aspect is that when required and when necessary, this asset can actually generate cash, which is done through chartering operations. The people who are actually buying these business aircraft have diversified businesses. But when they do come across financial difficulty, we can take comfort in the fact that the aircraft can generate the cash to actually service the loan.
What actually makes a business aircraft good collateral?
The first thing to look at is the actual downside protection. This is an asset that has over 40 years of transactional transparency — pricing is public, pricing is historical, and pricing is to a large extent known. We never finance 100% of the asset. We will finance up to 70% of the value of the asset, with the remaining 30% equity coming from the borrower. So already there is a 30% buffer built in between the asset value and what investors are putting in.
Walk us through the lending process from valuation to funding.
It all starts with KYC. We use independent third party KYC to check the client — that is the first step. The second thing is we rely on third party external valuations for the aircraft. In parallel, we perform our own evaluation — both from a valuation perspective and a technical perspective, looking at all the logbooks and maintenance history of the aircraft. Once we have gone through that process, we set up the SPV here in the UAE that holds the asset. And finally, when the deal is ready to be closed, we draw down through third party escrow funding to initiate the process.
How fast can a deal close with this process?
Deals can vary in length depending on the jurisdictions and complexities involved. But the approach we are taking — primarily focused around the asset — is much quicker than traditional lending processes.
How is your approach different from a bank or a private wealth lender?
Historically private wealth lenders have been the main supplier of capital for these loans. But the borrower has to have a banking relationship with the private bank — that means putting a lot of assets with the private bank and the bank using those assets as collateral. The big issue is the opportunity cost — a lot of entrepreneurs who are borrowing money have very profitable businesses themselves and would like to redeploy that capital back into the higher returns those businesses earn. That process is quite penalising for traditional borrowers. For us, we are focused primarily on the asset. We are not asking for a banking relationship. They do not have to put up additional collateral because we are taking our security on the aircraft itself.
Where do you see the market heading for Sky Blue and for aircraft-backed lending generally?
In the GCC region there has been tremendous growth of demand for business aircraft, especially the larger aircraft. In Saudi Arabia, they are trying to bring back a lot of the aircraft that have been based outside. And India is a very high growth market for business aircraft. These markets generally tend not to have as easy access to capital as you would in Europe or the US. So there is definitely a market for credit-based lending against these assets.
Where does business aviation stand on sustainability right now?
A lot of the innovation and sustainability initiatives have actually come from business aviation. The winglets you see at the end of commercial airline wings today were originally developed by Learjet to improve fuel economy by reducing drag. The industry has also targeted carbon neutrality from 2020 onwards, and there is an initiative to cut emissions by up to 50% by 2050 — which is actually on track to be achieved earlier than forecast. And sustainable aircraft fuel is commercially available today — it cuts emissions by up to 80% over traditional jet fuel. So investors looking at the ESG side of investing can take comfort that these initiatives are real and in place.
Thank you so much for being here with us.
Thank you so much.
