More private planes are being repossessed

USA Today:

In the past few weeks, Ken Cage, who specializes in repossessing private planes, says he's recovered two jets worth a combined $7.1 million.

And while business has ebbed a bit compared with last year, it remains four times what Cage saw before the recession.

"I think we picked up 15 (planes) that were $1 million or more, including one $20 million jet," says Cage, president of International Recovery & Remarketing Group in Orlando, reflecting on the past 12 months. "We'd never picked up anything close to that before."

It shouldn't come as a surprise that the nation's steepest economic downturn since the Great Depression has also struck the rich. One indicator has been the number of private planes repossessed from owners who can no longer pay the notes or who are buried under liens stemming from unpaid maintenance and fuel bills.

"The small, single-engine Cessnas and Pipers are being repossessed all the way on up to 747s," says Terence Haglund, founder of the Aviation Law Center in Williamsburg, Va., who represents many lenders. "It's definitely recession-related, and it's been increasing for the last couple of years."

He doesn't see the repossessions dipping significantly any time soon. "I think it'll continue," he says. "It has not slowed down yet."

The beleaguered owners include businesses that have acquired corporate jets, affluent professionals who may choose to cruise the skies in small Pipers, and the fabulously wealthy who once had their pick among all of the above.

"A lot of what we're seeing is ... their aircraft are no longer worth what they were when they paid for them (and), they can no longer afford to operate and maintain them," Haglund says. Some owners, he says, also get into trouble when they lease their planes to charter companies that then fail to pay what they owe for fuel, airport access and other services. That leads to liens on the aircraft.

"Banks can repossess the airplanes because some third party didn't pay the bills," he says. "The owner is stuck with either paying the bills someone else incurred or letting the bank take it back. It's a bad situation."

Cage says he repossessed roughly 350 planes in 2009 and a little more than 100 so far this year. Business Aircraft Sales' Ken Hill, who specializes in general aviation aircraft and whose recent recoveries include a Gulfstream IV, says he worked on nearly 100 cases last year. He's wrapped 45 cases so far in 2010 and has 22 more that are open.

It's impossible to determine how many private planes are at risk of being repossessed, how many owners are delinquent on payments and what effect that's had on values.

But Brian Foley, a general aviation management adviser who follows the market closely, says that of all the business jets flying a year ago this month, 18% were for sale. That's a "phenomenal" percentage, he says, because the norm is 12%.