5-Nov-2013 10:07 AM

Avolon forecasts airline industry will need up to USD125b p/a to finance aircraft deliveries

Avolon announced (04-Nov-2013) it has completed an analysis of airline industry’s financing requirements. Avolon found that the aviation industry will take delivery of USD3.5 trillion of new commercial jets aircraft over the next 20 years, with an average of USD125 billion of funding required over the next decade alone. The current level of new aircraft deliveries creates a requirement for USD100 billion annually, more than 75% of which is, and will continue to be, financed by a combination of commercial banks, aircraft lessors and export credit agency support. Despite large parts of the commercial banking sector facing regulatory and budgetary constraints since the financial crisis, secured lending remains a core part of the overall aircraft financing mix, with new lenders in emerging markets playing an increasingly significant role. Avolon expects commercial debt to account for around USD40 billion a year of new aircraft delivery finance over the coming decade. The export credit agencies, which provided essential market support through the financial crisis, have subsequently remained extremely active, however, despite the development of new structured products to support them, ECA activity is expected to decline over the coming years to less than 15% of total delivery funding. Conversely, the lessor channel is forecast to increase its top-line share of new aircraft financing from around 40% to close to 50% within ten years, with up to 50% of total lessor liquidity being sourced internally, from their own balance sheets or “true” shareholder equity. Lessors will become more reliant on external funding channels in order to achieve their future growth potential and new sources of liquidity will be required. [more - original PR]

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