Boeing Says Financiers Should Embrace Shifts as Aircraft Financing Rises
12-Mar-2013 - Expected $100 billion plus in deliveries creates opportunities, need to adjust - Long-term payoffs will be positive, financing unit tells industry conference
Boeing BA said that as worldwide commercial aircraft production expects to surge past $100 billion in 2013, the business of providing airlines with delivery financing is shifting significantly, providing greater opportunity and requiring the need to adjust.
"Aircraft financing finds itself in an enviable position where interest in investing is high as is the flow of new dollars into financing. At the same time, we're seeing significant shifts in the financing strategies for how airlines pay for their airplanes," said Tim Myers, vice president/general manager for Aircraft Financial Services at Boeing Capital Corp., the aircraft builder's financing and leasing unit.
Myers spoke on an aircraft financiers' panel at the annual ISTAT Americas conference for global professionals working to connect commercial aircraft financing needs with those seeking aircraft investments.
"Most of these shifts in the long term are very positive for the industry. However, in the near term, we should expect the need to adjust to ensure that the financing transition for airlines occurs smoothly. That means all of us have to roll up our sleeves and prepare to embrace this new world," Myers said.
Traditional sources for jetliner financing include Europe's commercial banks recently as well as government-backed export credit agencies like the Export-Import Bank in the U.S. Going forward, Boeing expects more geographic diversity in banking investments, and continued strong interest by bond investors seeking aircraft-backed assets. Meanwhile, airlines increasingly are leasing new airplanes to lower ownership costs and help cash flows.
"We can expect to see a much greater role for capital markets as they increase their scope. The shift toward the public market will require an adjustment of how the industry manages delivery financing, including partnering with new constituents like the rating agencies and fund managers. It also means recognizing that commercial bank debt is going to be coming from more diverse places like Japan, Australia and the US. It means, as well, recognizing that airlines will be leasing airplanes more than buying," Myers said.
Boeing responded positively to comments by conference speakers about new opportunities associated with wide-bodied aircraft leasing.
"The penetration of wide bodies has got deeper with more operators flying them than any time in the last 40 years. Today's wide bodies have liquidity value that is attracting smart money and is made possible by their ubiquity and a strong global appetite for the assets. Also, tighter competition in the narrow body sector is requiring some lessors to look at the less crowded widebody market. We expect a lot more lessor investment in wide bodies over the next decade," said Myers.