Financing New Aircraft: Navigating Pre-Delivery Payments
Secure your new aircraft delivery slot with specialist Pre-Delivery Payment (PDP) financing solutions.
Acquiring a new aircraft, whether for commercial airline operations or private use, necessitates significant upfront investment long before the delivery date. These are known as Pre-Delivery Payments (PDPs), contractual instalments made to the Original Equipment Manufacturer (OEM) throughout the aircraft's production lifecycle. OEMs typically require PDPs to be paid directly by the buyer, or via a finance provider, to fund manufacturing costs and secure the delivery slot.
How it works
PDP financing bridges the financial gap between order placement and final delivery. Rather than depleting working capital, buyers can secure a loan or a specific PDP facility from a lender. These facilities are structured to match the OEM's payment schedule, which usually comprises a series of instalments (e.g., 5-15% at contract signing, followed by subsequent 5-10% tranches at key manufacturing milestones). The financier disburses funds directly to the OEM as payments fall due. Upon aircraft delivery, the PDP loan is either repaid in full, rolled into the main long-term aircraft financing (e.g., a term loan or operating lease), or paid off by equity.
Several entities offer PDP financing, including commercial banks, export credit agencies, and specialist aircraft finance houses. Often, the OEM's partner banks provide attractive terms, sometimes backed by the OEM itself, simplifying the process for the buyer.
Typical terms in 2026
While terms vary based on aircraft type, buyer creditworthiness, and market conditions, general trends for PDP financing in 2026 indicate:
| Metric | Commercial Aircraft | Business Aircraft |
| :--------------- | :----------------------- | :--------------------- |
| LTV Range | 65-80% of PDPs | 50-70% of PDPs |
| Tenor | 24-48 months | 18-36 months |
| Rate Range | SOFR + 200-400 bps | SOFR + 250-500 bps |
| Fees | 1.0-2.5% arrangement fee | 1.5-3.0% arrangement fee |
Security for PDP loans typically includes an assignment of the purchase agreement and a pledge over the aircraft at delivery. Some financiers may also require corporate guarantees or letters of credit.
Who it suits
PDP financing is ideal for airlines, corporate flight departments, and high-net-worth individuals purchasing new aircraft directly from an OEM. It enables buyers to preserve liquidity for core operations or other investments, rather than tying up substantial capital in a non-depreciating asset during its construction phase. For lessors, it facilitates the expansion of their portfolios without immediately deploying long-term capital.
Pitfalls to avoid
Careful consideration is paramount. Buyers must scrutinise the terms of the PDP facility alongside the purchase agreement. Key risks include: the OEM defaulting, leading to potential loss of PDPs (though often mitigated by security or guarantee structures); delays in delivery, which can extend financing costs; and changes in currency exchange rates if the PDPs are denominated in a foreign currency. Ensure that the PDP financing facility seamlessly transitions or integrates with the long-term delivery financing. A poorly aligned PDP facility can lead to a 'delivery bridge' funding gap, which can be costly to fill.
How Mega Aviation helps
Mega Aviation provides expert guidance in structuring and sourcing PDP financing solutions. Our team assists clients in navigating the complexities of OEM contracts and lender requirements. We introduce clients to a vetted network of specialist lenders and lessors with deep experience in PDP facilities, ensuring competitive terms tailored to specific requirements. Please note, Mega Aviation does not act as a regulated financial adviser; rather, we facilitate connections and provide strategic advisory services to optimise your aircraft acquisition strategy.