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The President's Corner

Dorr's President, Robert Howe, shares his viewpoint on everything related to General Aviation. Working with industry leaders, aviation lenders and pilots, he has a unique perspective on aircraft lending and the aviation market.

January 2017

The last several years have not been kind to the aircraft finance market.  The number of aircraft loan opportunities had declined drastically as borrowers were feeling the pinch of a contracted economy.  With historically low consumer confidence, high taxes and burdensome regulations, small businesses and consumers had taken a hiatus from aviation financing.  Consequently, the months following the economic collapse and its fall out were painful for many in the aviation finance industry.   The comeback has been very slow.  Historically speaking, the recovery is the flattest in history.  We have seen the average growth rate at an anemic 2.1% in the last 8 years.   There were several managers in the market that would remark to me “We are having a great year!”  I would smile and think to myself, “compared to what?”   Sure, 2014 was better than 2013 and 2015 was better still… Last year was a good year for my company as well; if you compare it to the production of years 2010 through 2015.  In fact, 2016 was a great year, unless you compare it to the production of each of the years from 1997 through 2009!

As Alexander Pope’s poem “An Essay on Man” proclaims “Hope springs eternal in the human breast!”  We have seen a market increase in activity since November 8.  It is clear to me that the activity is directly related to the outcome of the very contentious and raucous election.   Small businesses and consumers are confident that the new administration will be addressing three of the big drags on the economy; Obamacare, taxes and regulation.  This confidence translates into economic activity.

With this new confidence in the economy, there has been another result that consumers who are looking for financing may not like as much.  The inevitable rise in interest rates has arrived.  Since November 8, mortgage rates have climbed as much as 70 basis points.  Historically, these rates are still extremely low.  But if you are interested in taking advantage of these rates, the time may have arrived that you should consider moving forward with your purchase, refinance or upgrade.  Fed Chairman Yellen has announced that she expects 3 quarter point rate hikes in 2017.  Kiplinger’s forecast calls for 30 year mortgage rates to rise to 4.60% in 2017. 

The lending environment is good and the banks are anxious to grow their consumer portfolios.  There is still some “economic collapse hangover” carrying forward with some senior lenders.  As we have all seen, post collapse regulations, lenders’ fear of recriminations and over caution has many lenders buried in indecision and regulatory paperwork.  This translates into a slower approval process and sometimes gratuitous and redundant paperwork.  But in the end, the good deals get done.

I am looking forward to another “good” year with the hope that production levels approach that of the early 2000’s.  Our underwriters are all looking to expand their portfolios and some have promised to beef up their departments in anticipation of increased activity.  Some have even promised to try to streamline some of the burdensome paperwork.   I look forward to the time when my friends exclaim “We had a great year!” and know that truly it was a great year!

January 2016

Having been in aviation for almost 30 years, I have been asked on occasion to comment on the current “state of the market”.

  The market I participate in is the piston, turbine and small jet finance market.  If I would have been asked to comment on the market in 1993, 2000, or 2007, I am confident that I would have given a concise and accurate summary and aptly described how specific factors impacted day to day lending.  Sadly, since 2008, the hard lessons learned don’t seem to apply and the last several years have been ones of steady, yet lackluster growth.   This year promises to be more of the same, more of the “new normal”.

In the “good old days”, low fuel prices, low interest rates and low unemployment would mean that the economy was healthy and business was good.   As the economy would heat up, the interest rates would climb, fuel prices remained stable and business would start to slow.  The inverse would happen once the economy turned sluggish and business would happily continue on that course with the net effect of healthy sustained growth and profitability.   Those same basic rules no longer apply in today’s feeble economy. 

It is rather obvious that a strong economy is the key to most every industry’s success.  Very few industries find refuge in a sluggish economy.  My business is similarly dependent on a strong and vibrant economy.  More directly, a large portion of my clients and a large portion of aircraft owners are small business owners, entrepreneurs whose livelihoods are a microcosm of the economy as a whole.  When they struggle, the aviation market struggles. 

What normally would help accelerate the economy, low interest rates & low fuel costs, seem to have no perceptible impact.  Our current economic malaise is reflected in a sub 2% annual growth rate. Our economy is suffering through the lowest labor participation rates since the late 70’s, and median incomes are down approximately 4% in just the last 8 years.  Quantitative easing may have stopped the economy from slipping into a depression, but it has also stalled the lively expansion that historically comes after a serious recession. 

All of the economic activity that has yet to unfold has the Federal Reserve Chairman tinkering with rates as her “confidence” in the economy has  given way to concerns of “no inflation” according to the minutes of the Fed's December meeting, which were recently released.  The confidence remarks were made at the press conference after the decision to raise its benchmark rate by .25%.  The notes of this meeting appear to bring into question the wisdom of the Feds decision to act.  The monetary policy seems to have had little effect and has run their course. 

Concerns that China, the world’s second largest economy, is sliding into recession have the markets jittery.  How this will impact the economy is yet to be seen.  Of greater concern is the strong dollar, which makes US products more expensive for our trading partners to import.  With the dollar at a 12 year high, economists at the Fed estimate that this alone has cost our GDP .5% growth.

It is apparent that the current administration does not have any fresh ideas to help unleash the markets.  Fiscal policy has had a record, on occasion of igniting economic activity.  It would make sense to some to unleash the drivers of our market, the US consumer.  In the past, lowering marginal tax rates and cutting corporate tax rates have had the beneficial effect of accelerating the economy.  Putting money into the pockets of the wage earners and giving business confidence would certainty improve the market.  The down side of course is that it also drives the debt as our elected officials have very little political courage to curb spending.  For the next year at least, don’t count on the economy rebounding, median incomes going up or labor participation rates improving…

Given these circumstances, the state of the aircraft finance market is as strong as can be expected.  We anticipate continued measured expansion with rates staying relatively low, employment markets continuing to grow, the energy market and aircraft prices remaining flat.  This guarded optimism is driven by a stable yet slow economic growth.   The one element which  seems to be the constant regardless of the economy, interest rates and fuel costs is the passion that aviation rouses. There will always be people who are motivated by the liberty and adventure that comes with flight.  These are the people who are the heart and soul of this industry and the state of their passion is unwavering.

November 2015

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!

December 2014

“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.

October 2014

"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.”

"Everything went great...made it back safe and sound.  Thanks for your excellent service."- Bryn E. - Bonanza owner
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