As Fall presses onward towards winter, it is an opportune time to look back at how this year has fared and where we think the GA finance market for prop driven aircraft will go in the near future. One would think that with interest rates at historic lows and fuel prices stable, this market would be having a resurgence.
However, based on the data that we see in our office, the prices on prop driven aircraft have remained steady. It appears to continue to be a buyers’ market, with business being stable, no dramatic upswings in pricing and no down swings in dealer inventory. The number of transactions we are experiencing is about the same as last year and slightly up from the 2013 levels. Our rates and terms have remained steady with little upward or downward pressures since well before the beginning of the year.
It seems that whenever I turn on Fox Business News, I am being told that the Fed has again stated emphatically that interest rates will be rising at the very next Fed meeting. It is telegraphed by the Fed Chairwoman Janet Yellen that the economy is strong enough to raise interest rates to “normal” levels. Yet after each Fed meeting one of the “Governors” dutifully trots out and says “we really think that at the next meeting we will raise rates because the economy is so strong”…
The Fed usually uses rate adjustment as its first tool in fighting inflation. When the economy heats up, prices go up and the value of money goes down. By raising rates (the cost of money) the Fed hopes to damper demand and slow the economy to acceptable levels of inflation.
In 2008, the Fed put the “Benchmark Interest Rate” at near zero to stimulate the economy. After 7 years, we see that the labor participation rates are at 38 year lows, the economy is slouching along in the slowest recovery recorded and GDP for third quarter is at “the new norm” of 1.5% annual growth rate. All the while, inflation is floating around 1.7%. The Fed gambles that raising the rate, even slightly could pour cold water on the luke warm recovery.
I am no economist and I could very well be misreading the tea leaves, but I believe there will be no rise in interest rates until well after the New Year. I also believe that with a federal government that is bent on recasting our economy to one that is more centrally controlled through regulatory expansion and tax policy, we will continue to slouch forward at anemic intervals for the next year and a half.
What this translates to our customers and potential customers is simple… It will continue to be a buyers’ market with stable prices and low rates. So get ’m while they’re hot!
“To the American People: Christmas is not a time or a season but a state of mind. To cherish peace and good will, to be plenteous in mercy, is to have the real spirit of Christmas. If we think on these things, there will be born in us a Savior and over us will shine a star sending its gleam of hope to the world.” ~Calvin Coolidge
It is also the season when many look back and reflect on the blessing of the past year and offer thanks to our creator. From a business perspective, the year has had many ups and downs. We continue to see that the economy is performing in fits and starts. One quarter up, the next down. The aviation market seems to be holding its own, with many sectors finally appearing to recover. The aircraft lending market is also showing signs of life as interest rates remain low. However, as the economy improves and the Fed has discontinued "quantitative easing" look for rates to start to creep up over the next several months.
All in all, this has been a good year here at Dorr Aviation. We have added a wonderful new employee to our team, one of our long-standing employees is semi-retiring to Florida within the week, and we have redesigned our website, to name a few of the highlights from 2014. We are thankful for all of our blessings and particularly for our customers. We are truly appreciative for the opportunities you have given us and the confidence you have shown in us. We look ahead with optimism for a prosperous 2015.
"Welcome to the updated Dorr Aviation website! We have needed a face lift for some time now. We wanted the new look to reflect not only an evolving market, but also our core beliefs and CEO & Founder, Mel Dorr’s love of aviation. It was this passion for aviation that drove Mel into this business as a teenager in the 1950’s.
Mel started flying for the “Nantucket Flying Service” as a charter pilot at the age of 17. After graduating from Brown University, Mel was commissioned an officer in the Air Force and was stationed in Montana at an early warning radar station. During his time in Montana he bought and sold aircraft across the country. Upon his retirement from the service, Mel came home and opened “Dorr Aviation” at the Marlboro Airport in Massachusetts. Mel continued to buy and sell used aircraft and along the way became a Cessna, Piper and Bellanca dealer. In 1963, through an affiliation with the Framingham Trust Company, Mel set up the financing for a client’s purchase and started financing the sales of his aircraft. In 1973, with Framingham Trust’s profitable and growing portfolio of aircraft paper, Mel started financing other aircraft dealers’ sales as well. In 1983, Mel stopped selling aircraft and Dorr Aviation became strictly an aircraft finance company.
In 1988, I joined Dorr Aviation as a loan officer and we grew from a single office at the Marlboro Airport (9B1), to offices in Texas, Minnesota, South Carolina, California, Florida and eventually we built our current office space in Oxford, Massachusetts. With the crash of 2008-2009, we down-sized to stay ahead of the power curve and survive as an organization in the tumultuous market. Currently we operate out of a single location in Oxford with a lean crew of 5 aviation professionals.
Over the years, Dorr Aviation has originated well over 10,000 aircraft loans in 49 states. We have financed Cubs, King Airs and Citations. All of our loans are closed through bonded escrow agents to ensure that there are no title or paperwork glitches so you can be confident that at the end of the day, the aircraft is properly documented and registered. We concentrate not only on fine customer service, but aggressive pricing and terms.
Take a look around our new website. We hope you enjoy it and come back to it often for updates and news. We look forward to a bright future in General Aviation and continuing to work with pilots to make their airplane ownership dreams a reality. We hope our passion for aviation is reflected in every communication you have with us, after all it’s the backbone of the 50 year history of Dorr Aviation. If you have any questions, please give us a call and find out why we continue to be the most experienced and most trusted name in aircraft financing.”