Boeing predicts that the world’s airlines and lessors will continue to benefit from increased competition among lenders and historically low interest rates as manufacturers deliver $124 billion in new airplanes next year. In a new aircraft finance market outlook issued on Tuesday, Boeing added that decades of predictable, attractive returns have led to “unprecedented” diversity, efficiency and volume of financing for commercial airplanes. According to Boeing, next year’s financing will come mainly from capital markets, cash and commercial bank debt, while export credit agency exposure continues to wane.
“The strength we’re seeing in aircraft finance is largely the result of a healthy and balanced global demand for new aircraft, which is being driven by anticipated growth in passenger traffic, record airline profitability and the continuation of a replacement cycle to improve the fuel and performance efficiency of the global fleet,” said Boeing Capital Corporation vice president of aircraft financial services Tim Myers.
"The stable performance of aircraft finance and investment over the past few years—particularly through the global financial crisisis attracting new participants and is driving diversification both geographically and in terms of funding sources. That's good news for airlines and lessors who will continue to have access to highly efficient financing," said the report.
If Boeing’s delivery projection for 2015 proves accurate, the value of the airplanes in need of financing would amount to double that of 2010. Although Boeing sees growth moderating over the next five years, by 2019 the financing requirement will amount to about $156 billion, it said.
According to the report, lessors will continue to drive innovation in aircraft finance and fund about 40 percent of all deliveries. Meanwhile, capital markets will support nearly a third of the delivery value, bank loans some 29 percent and cash roughly a quarter, while export credit usage continues as historically low levels, accounting for some 13 percent of all financial backing. Finally, investor demand and lessor portfolio “sell-down initiatives” should support continued interest and investment in the used aircraft market, it concluded.
In addition to the forecast for the coming year and projections of five years of financing requirements, the 2015 report made adjustments for two notable trends over the past three years: bank debt liquidity proved higher than expected, and export credit usage declined faster than previously forecast.