New option for ADS-B financing

Government-backed loans to be offered

January 16, 2014

Owners looking to equip their aircraft to meet the FAA’s 2020 deadline for Automatic Dependent Surveillance-Broadcast Out (ADS-B Out) have a new option to consider: NEXA Capital Partners and the Aircraft Electronics Association (AEA) announced a partnership Jan. 13 to accelerate the deployment of government-guaranteed loans for upgrades related to the ADS-B Out mandate.

The NextGen GA Fund  is being established to offer loans to finance ADS-B installations at more favorable terms than are otherwise available, said AEA President Paula Derks, though she noted that the rates have not yet been finalized.

“They will be, obviously, extremely attractive rates, below commercial bank rates,” Derks said. The rates, and other details, will be announced at the annual AEA convention in March.

AOPA Aviation Finance Co. President Adam Meredith said there are a variety of loan options currently available to owners seeking to finance an avionics upgrade with or without ADS-B, and determining whether the NextGen GA Fund is a good option for particular owners will depend in part on details not yet announced. (Meredith plans to meet with officials at NEXA Capital Partners, who did not immediately respond to a request for additional information from AOPA Online.)

Meredith said existing products typically provide interest rates around 6 percent, depending on the aircraft’s value, and other loans and liens that may exist.

An overview posted on the NextGen GA Fund website notes that upward of 200,000 aircraft will have to be equipped to meet the mandate, which will apply to aircraft operating in Class A, Class B, and Class C airspace, within a current Mode C ring, in most Class E airspace at or above 10,000 feet, and over much of the Gulf of Mexico. Aircraft operating in those areas after 2020, as the law and regulations now stand, will be required to use ADS-B Out equipment (various combinations of GPS and transceiver systems) to broadcast precise position information to controllers and other aircraft in real time. While many pilots are already using ADS-B In devices, which collect weather and traffic information, owners have been slower to adopt ADS-B Out capability, a key component to the FAA’s NextGen airspace modernization plan.

Derks said another detail that remains to be finalized is whether additional equipment not related to the ADS-B mandate can be installed on the same job, using the same loan. The program is specifically targeted for ADS-B installations, though Derks suspects that unrelated components, such as an intercom, may be financed under the same loan. Those details will be clarified in March, Derks said. The program will be limited to the installation of certified equipment in certificated aircraft.

Congress, in the 2012 FAA reauthorization bill, included a provision authorizing (but not requiring) the Department of Transportation to establish such a loan guarantee program, and, presumably, all the terms of such a program. Government loan guarantees are typically offered by other agencies, such as the Small Business Administration, to facilitate credit for businesses. They typically reduce the risk to lenders. Meredith said he hopes there will be significant benefit to consumers (and equipment manufacturers) once the actual rates and terms of the program are finalized.

Derks said that while she has not heard any reports of customers opting out of ADS-B because of financing difficulty, the new program should help.

“It bodes well for both the aircraft owner as well as the type of company that my association represents,” Derks said.