Nevada State Bank, Allegiant Air mark financing of new aircraft
May 23 was a big day for Las Vegas-based Allegiant Air.
But it was just as big for Nevada State Bank, the lender on a $34 million note for Allegiant to purchase its first-ever, fresh-from-the-factory aircraft.
Executives of the airline and the bank had planned to celebrate with a dinner that had to be postponed Wednesday night, weeks after the twin-engine Airbus A320 jet was ferried from the Airbus factory in Toulouse, France, to Orlando’s Sanford International Airport.
The jet entered service and is flying customers to and from Florida destinations.
“The employees were really excited,” said Nevada State Bank Senior Vice President Alan Fitzhugh, a relationship manager who has been with the bank for six years and flew to Sanford for the jet’s arrival. “It’s a big deal for them as well as us.”
Long-term relationship
Fitzhugh said for the bank, the secret is developing a long-term business relationship over time so that when a company is ready to outlay capital for a major transaction, everybody is comfortable and ready.
Nevada State Bank worked with Allegiant on the financing of its new Summerlin campus, opened in 2014.
“It’s a specialized industry, so when the opportunity presented itself, we were comfortable with our knowledge of them as a company and the (aviation) industry as well,” said Executive Vice President Shannon Peterson, Nevada State’s corporate banking manager and a 16-year veteran of the bank.
Peterson and Fitzhugh said the transaction wasn’t much different than the hundreds of deals they negotiate annually. The key players have to do their due diligence about the company and about the industry to fully understand the potential risks associated with a loan.
Because Allegiant is a home-grown company, the research was easier to complete. For years, the company purchased and leased used aircraft with plenty of potential flight hours ahead of them. In Allegiant’s early days, the twin-engine MD-80 jet was the aircraft of choice because of its ability to fly in and out of small-city airports with shorter-than-usual runways.
Airbus the answer
When Airbus’ more fuel-efficient jet with better performance features than the MD-80 began becoming available as new variants of the jet were produced, Allegiant’s corporate leadership decided to undertake the expensive transition to an all-Airbus fleet. That coincided with a rough patch of mechanical issues which led to numerous flight cancellations and delays, mostly on MD-80 jets, in 2015. The more economical — and newer — Airbuses seemed to be the answer.
The company started the same way it did with the MD-80s — picking off used jets on the open market, but eventually leaders decided to buy 12 new planes.
Allegiant issued a request for proposals on the first seven of the 12 in January and Nevada State Bank, which had kept continuous contact with the travel company, was approached about competing. Robert Neal, vice president of fleet planning and corporate finance for Allegiant, said the company contacted 30 banks and actively negotiated with about 20 of them. Ultimately, seven banks are expected to be a part of the financing of the 12 jets, but it was Nevada State alone that provided the financing for the first one.
Impressive competitor
“It was quite impressive that we have a local bank based in the U.S. that was as competitive as French banks, the German banks and some Japanese banks,” Neal said. “We’re having discussions with them now since the first RFP covered the first seven aircraft so we will certainly invite them to be a part of the remaining five.”
Peterson and Fitzhugh said the financing went smoothly — and it only took 60 days to close. The bankers attributed some of that to executives at Nevada State Bank, an affiliate of Salt Lake City-based Zions Bancorporation, having the autonomy to make its own lending decisions on a local level.
With more acquisitions on the horizon, Nevada State is ready to accommodate Allegiant’s needs, Peterson said, and the company also is prepared to finance aircraft for other companies if the opportunity presents itself.
Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.
New or used?
May’s acquisition of the first of 12 new Airbus A320 jets gave executives the opportunity to experience that new-jet smell — and Chairman and CEO Maurice Gallagher got a good whiff because it enabled the company to get new aircraft at a time when Airbus was switching out A320 production to a slightly different model.
But Gallagher was quick to note that Allegiant hasn’t departed from its strategy of acquiring less expensive used jets with lots of life left in them.
“The fact that these planes are new is notable, but should not be seen as a change in our fundamental strategy,” Gallagher said last year.
“We have always looked at building our fleet opportunistically and this agreement is no exception,” he said. “With Airbus preparing to transition production of its current-engine-option models to new-engine-option models, we were able to negotiate an order for 12 end-of-line slots.”
