Twin Cities-based attorney Bob Fafinski discusses the business of flight
How would you describe your work?
Fafinski: I am a business attorney, but I spend half of my time in commercial transactions within the commercial aviation industry. My firm, Fafinski Mark & Johnson, also represents a lot of local companies that buy, sell, or trade aircraft.
We have 30 attorneys here, and about seven lawyers that do nothing but aviation work. It certainly isn’t a majority of what we do, but it is a substantial portion.
Who are some of your clients?
We do work for airlines, leasing companies, hedge funds, private equity funds, investors, and we also do financing work, representing banks that lend in the aviation market. Locally, we probably represent about 15 pretty substantial companies like airlines, investors, and hedge funds. These deals are not always based in the Twin Cities. We may do a transaction where we are representing hedge funds that are buying 10 to 15 airplanes that are leased to a Chinese airline. The work may be based here, but the companies can be in other parts of the world. There isn’t much competition in the [local] market; it’s all over the world in places like New York, Los Angeles, London, Tokyo, and Ireland.
What is the state of the local aviation market and how is it evolving?
Five airlines flew about a million or so passengers through MSP -- Sun Country, United, Southwest, US Airways, and American Airlines -- but Delta still absolutely dominates our market. In 2011, 33 million passengers flew to or through MSP, and 75 percent flew on a Delta flight, or roughly 25 million people.
The single largest impact on our local market over the last few years has been the Northwest-Delta merger. That merger itself was indicative of a larger consolidation in the industry, and it has impacted our Twin Cities community pretty heavily, partially because over 3,000 jobs were lost and moved to other parts of the country.
What we are also seeing presently is a permanent shift to smaller airplanes for shorter flights. Eleven percent more passengers in 2011 flew on regional jets than large carriers, whereas arrivals and departures for small aircraft were up seven percent and for big aircraft were down seven percent [according to the metropolitan airport commission’s operations records]. So as a result, flights are more crowded, and that’s a common complaint you hear from people.
How did you get started in this business?
When I was a young attorney, I was introduced to Sun Country. I did some airplane leasing work. They liked what I did and kept asking me to do more and more. [Fafinski is now a board member of Sun Country.]
Since there are so few lawyers that do this kind of work on a global basis, I’d meet other parties from all over the world. They were impressed and would say, ‘How about you represent us the next time in a similar transaction?’ So it has basically been by word of mouth for over 25 years. It is just brick-and-mortar, doing hard work and trying to build a good reputation.
How has the economy affected your business?
Back in 2008 when the economy was falling apart, there were many companies that sold their airplanes. Think of those congressional hearings where business executives were criticized for owning fancy airplanes. Those companies quickly sold their airplanes, and as a result, the market really fell apart. But now, the market is back.
Some companies are more politically astute and don’t think it is a good idea to have airplanes to tour their executives around. It’s like being in a country club - you may not be able to justify it, but it makes a lot of sense when you are talking about incredibly busy executives that want to fly in and out of incredibly remote areas to their factories in different part of the country.
How does MSP rank now as an international hub?
It is still a Delta hub, so it’s a good place to fly to the Far East. When Northwest dominated this market, they had long-time legacy routes to the Far East, and Delta absorbed those in the merger. It is a very attractive hub to fly out of, especially if you are going west; it is getting better if you are flying east as well. If you are going south -- South America or Central America -- you are still going to have to fly through Atlanta, Houston or Dallas.
Story and Photo: http://www.minnesotabusiness.com
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