Boeing Sees Strong Demand For New Aircraft: U.S. Plane-maker Forecasts $124 Billion Needed to Fund Delivery of 1,300-plus Commercial Jetliners

The Wall Street Journal
By  Robert Wall
Dec. 9, 2014 7:10 a.m. ET


LONDON— Boeing Co. projects demand for $124 billion in jetliner financing next year as airlines need to fund more than 1,300 aircraft deliveries planned for 2015.

Airlines and lessors “will continue to have access to highly efficient financing,” said Tim Myers, vice president for aircraft financial services at Boeing Capital Corp., the financing arm of the world’s biggest plane maker. Demand for financing is expected to continue to grow through the decade and reach $156 billion in 2019.

Strong demand for more fuel-efficient jets has driven output at Boeing and rival Airbus Group NV to record levels. The two have combined to build more than 1,200 planes already this year.

“We are seeing a lot of diversity in the markets,” Mr. Myers said. Financing sources for plane deliveries is more global than historically, he added. China remains the largest source for global aircraft debt, ahead of Germany and Japan. U.S. lenders next year are poised to represent 9% of the market, Boeing projects.

Capital markets will finance 32% of deliveries, overtaking bank debt as the primary source of funding. That includes carriers issuing asset backed bonds as well as a surge in private placements, Mr. Myers said.

Even so, some areas of difficulty exist. Boeing is scheduled to deliver around $2 billion worth of aircraft to Russia next year at a time when sanctions over the country’s actions in Ukraine have limited capital access for local banks. Mr. Myers said Boeing is working with Chinese and Middle East institutions to help secure delivery financing.

An issue for the U.S. plane maker is that the U.S. Export-Impact Bank has ceased new dealings with Russia, Mr. Myer said. European export credit agencies are still open to backing Airbus Group NV deliveries to Russia.

Another concern for the Chicago-based plane maker is continued uncertainty over the fate of ExIm in the U.S.

Congress has battled over the future of the agency amid accusations by detractors it represents a market-distorting subsidy to industry.

The political uncertainty has caused some airlines to ask Boeing to backstop borrowing in case ExIm doesn't get reauthorized by Congress, Mr. Myers said. “We think it is going to get reauthorized,” he added. Eliminating ExIm would put Boeing at a competitive disadvantage over rivals that can still get national export credit backing, Mr. Myers said.

The agency is projected to be involved in delivery financing for around 13% of Boeing jets next year. The backing was much higher around 2009 when other funding sources had dried up amid the global financial crisis. Export credit agencies around the world are expected to back 15% of total plane deliveries next year, Boeing projects.

The recent drop in oil prices so far has had little impact on funding availability, Mr. Myers said, adding demand for replacement jets hasn't slowed. Even if oil remained at current low levels and pressure to field more fuel-efficient planes eases, it should not have a significant impact on delivery plans, he said.

- Source:  http://www.wsj.com