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Financing a first aircraft for a start-up airline: what a credit committee checks

18 September 2026 · 6 min read

A start-up airline asks a lessor or a lender to commit an asset worth tens of millions of dollars to a company with no operating history and, usually, no air operator certificate yet. The committee that receives the file isn't judging the idea. It is judging whether the rent gets paid in month nineteen — and how the aircraft comes back if it doesn't.

Why a start-up is read differently

An established carrier is assessed on audited accounts and a payment record. A start-up has neither: the file is a projection. The committee therefore reads who stands behind it, what has been paid in, and what can be enforced.

What the committee actually reads

• Named sponsors, equity paid in. Shareholders identified up to the ultimate beneficial owners, and capital in a bank account, not in a letter of intent. Order of magnitude, as published in our market notes: 20–30% equity. An investor's term sheet is not equity; a bank statement is.
• The AOC path. Authorities certify a new operator in five phases aligned on ICAO practice: pre-application, formal application, document evaluation, demonstration and inspection, certification. The committee wants to know which phase the file is in, with the authority's correspondence behind it — not "AOC expected next summer".
• The regulator's own financial test. In the European Union, Regulation (EC) No 1008/2008 requires a first-time applicant to show it can meet its obligations for 24 months from the start of operations, and cover fixed and operational costs for three months with no income at all. A committee runs its own version of that test.
• Management. Post-holders who have held the same posts before, and a finance lead who has managed airline cash through a bad season.
• The plan under stress. The base case is read last. What matters is cash when the AOC slips by two quarters, load factors come in under plan, and fuel and the dollar move the wrong way together.

The security package

For a new credit, security is the price of entry, not a negotiating extra.

• Security deposit and maintenance reserves. A deposit counted in months of rent — more months for a young credit — and reserves paid monthly in cash rather than settled at lease end. A letter of credit can replace the cash deposit and, less often, the reserves: it preserves liquidity but consumes bank lines. For the lessor, its proceeds are also less exposed than cash to being pulled into the airline's estate in an insolvency.
• Jurisdiction and repossession. Where the aircraft will be registered, whether that state has ratified the Cape Town Convention and its Aircraft Protocol, and with which declarations: Alternative A, with a waiting period of no more than 60 calendar days, is the standard the OECD retained for its qualifying declarations. An IDERA recorded with the registry is expected. Many committees start from the Aviation Working Group's compliance index, updated twice a year. Outside the Convention, or where enforcement is untested: more deposit, a guarantee, or a no.
• Insurance. Hull all risks, hull war and liability, with the lessor and its financiers named as additional insureds under the market's standard finance/lease endorsement (AVN67B).
• Guarantees. When the operating company is thin, a parent or sponsor guarantee — worth the guarantor's balance sheet and its enforceability where the guarantor sits, no more.

Dry lease, finance lease, or an ACMI bridge

Dry lease. The aircraft flies under the lessee's own AOC — the definition European law gives it — so nothing starts before the certificate. A lessor will sign a letter of intent with the AOC as a condition precedent; the dates attached to it, and the fate of the deposit if they slip, deserve as much attention as the rent.

Finance lease or lease-purchase. The financier carries the credit of a company with no history and the residual value at once. It asks for more equity and, almost always, a guarantor. Rarely the structure of a first aircraft.

An ACMI bridge. Wet-leased capacity flies under the provider's AOC, so it can carry a first season while your own certificate matures — within what your licensing authority allows the selling entity to do. The block hour costs more, but there is no residual exposure, and it produces the operating data a committee will want for aircraft two and three.

Why files get declined

• Equity promised, not paid in.
• An AOC timeline with no correspondence from the authority behind it.
• One scenario, and it is the good one.
• Deposit and reserves treated as points to negotiate away.
• Ownership that can't be traced to identifiable individuals, or that doesn't pass sanctions screening — in which case there is no introduction at all.

What "bankability tested first" means here

Our first gate is qualification and NCNDA. For a start-up, it means reading the file the way a committee will: beneficial owners identified, sanctions screening, then the items above, one by one. If the file holds, we say which structure fits and on what terms — and only then does it reach lessors or lenders. If it doesn't, we say so in week one, with what would change the answer. With the few counterparties who fund start-ups, a first impression is only made once.

The rest is our usual discipline: deposits move through specialised escrow agents, and since the exit is negotiated at entry, the term sheet is read with its redelivery conditions.