Our other market outlook

Occasionally you see me write about aircraft financing. As an engineer by trade, it’s not an area where I spend much time. But I know that our ability to deliver products -as great as they are - is only as good as our customers’ ability to have their financing in hand at turnover time.

My colleagues at our financing and leasing unit, Boeing Capital Corporation, make sure our customers are aligned with financing for every airplane we deliver. It doesn’t hurt that they’re part of our sales team with every customer and they keep in close touch as each airplane moves through the factory to ensure dollars are in hand on delivery day.

Starting with the financial crisis that began in 2008, Boeing Capital began sharing publicly its extensive monitoring of financing conditions and related data gathered from its conversations with bankers, financiers and other sources in an annual forecast of expected aircraft financing conditions. Think of it like Boeing’s Current Market Outlook but written for a financial audience and shorter in its perspective - a year or two, as opposed to 20 years - to better fit the horizon of aircraft investors.

image/photo

From the dollar to the yen, financing plays a huge role in aviation.

Last year it predicted that our industry would find sufficient delivery financing in 2012 even as the major manufacturers were increasing production to meet what we believe is a real and stable demand. Fortunately, our predictions bore out.

What about the year ahead? According to our latest finance market outlook released this week, the global commercial aircraft builders in 2013 are expected to produce a record level of new airplanes, somewhere north of $100 billion. At the same time, we know that new global bank regulations taking effect will put more requirements on lenders which will affect borrowers. Also, airlines eligible for export credit financing— whether associated with sales by us or our competitors— will see higher prices for accessing those loan guarantees made by countries to benefit customers of their exporters.

Despite these challenges, BCC forecasts that airlines will be able to attract sufficient funding for deliveries in 2013. It really speaks to the health of aviation globally.

If you’re an airplane fan but not a financier, you can see a video summary of the new Current Aircraft Finance Market Outlook, or check out the entire report.

Comments (9)

Joe (Wichita, KS):

I believe you are stating that BCC forecasts that airlines will be able to attract sufficient funding for deliveries in 2013, not 2012.

..and that's great news!

Javier (Zamora):

Probably this is an excessive optomistic idea that there will be such a great demand of airplane. As many pilots( http://www.pilotwork.net/pilotresume) are unemployed due to a reduction in the number of people travelling there will not be sucha great or amazing request of aircraft. We know that the estimation of the 1st of January are always an optomistic mind excercise

Tim (Ont Can.):

It’s nice to see this optimism from Boeing, but the numbers that are being reported seem to say the opposite. In the aftermath of the global financial crisis, countries like Germany, China and Brazil were the engines that kept the global economy expanding, but evidence suggests that they are losing steam. The world is still trying to find it’s footing from the Sub Prime disaster that shook the global financial community to its core and it is still extremely fragile at best. There are many speed bumps ahead like the scary “Financial Cliff “ in America can derail and throw the entire world’s economy right back to the stone age in a heartbeat.
Both Boeing and Airbus have a record number of planes on order and obviously you want and need to believe the world’s financial situation is sound for production purposes, so perhaps you know something the rest of us don’t and I hope and prey that you are right.
The world needs some optimism right now and it’s nice to see that from a leading and driving manufacture like Boeing.

Edmund (Charlotte):

The aviation industry continues to be an economic leader, but obviously we are all walking a fine line. I believe Boeing is doing all it can to be prepared for future ups and downs in the business. Having a defense side of the business has to be a bit nerve-wracking these days. Best in the future,

Andrew Boydston (Boise, ID USA):

Randy:
I have a few questions about beating the financial trend analysis being affected by product influence.

1. Does buying a product that out preforms competitor aircraft affect an airline's ability to gain financing because of 20% fuel savings, 30% improvement on maintenance and a 94% flying customer satisfaction from ANA ticketed passengers?

2. Have, or how much has business models changed for affected airlines now owning the 787, when going forward with financing, while using the 787 as the Business case over other models?

I would think this has a great impact on company planning, marketing and financing when it comes to the total package of an airlines operations.

Fernando Grau (Beijing, China):

As usual, another excellent report from Boeing. No doubt 2013 will be a great year for the finance community, where we will see increased participation of Chinese banks and lending entities in the aviation industry.

Norman (Long Beach, CA):

I think the need for new airplanes for airlines will continue even if their is a slowing growth in developing countries, the continuation of the European sovereign debt crisis and fiscal-cliff comes to action. Boeing airplanes and other planes are continuing to sell well around the world because a lot of airlines are looking for replacements including many in here in the United States and some airlines including Emirates
Airline are still growing despite the significants of the economic crisis of late last decade and the wholesale cancellation of the construction of tall buildings in the country. The airlines of China will still order from Boeing even if they are developing passenger planes of their own. The sales have been good for Boeing with the 777-300ER selling almost weekly, nearly 1,000 737MAX orders and the delivery of the 787 which is likely to gain orders as deliveries speed up and yes Airbus has sold well too so I think some of the pessimism is not warranted at this time.

Paulo M (Johannesburg, RSA):

Great report, helps one understand where you guys are going in a turbulent financial environment across the spectrum of finance options. The decline of the lessors is an interesting facet of the report going forward.

John:

Many times it's supply and denmad. For example, many airlines fly the 757 only to smaller markets in Europe such as Continental flying them to cities such as Oslo or Birmingham, England. The larger planes go to bigger cities such as Paris or London-Heathrow. More people want to go to the bigger cities so they need bigger planes.

Post a comment

We welcome your comments. However all comments are moderated and may not post immediately. Offensive or off-topic comments will not be posted. We will not treat any comments you submit as confidential information. Please do not submit comments that contain any confidential information belonging to anyone else.

By submitting a comment to Randy's Journal, you agree to our site terms and privacy policy, and to having your name displayed with your comment. All or part of your comment may be posted or cited in the blog. Your name and personal information will not be used for any other purpose, and we will not publish your e-mail address.

 

More posts