Boeing Forecasts Balanced, Healthy Market for Aircraft Financing in 2014

By Marietta Cauchi

Boeing Co. (BA) on Tuesday said that there had been a massive diversification in the aircraft financing markets and there would be enough funding at reasonable prices to finance bulging order books as airlines worldwide look to replace fleets with new fuel-efficient planes.

Boeing and its French rival manufacturer Airbus, unit of European Aeronautic Defence & Space Co. (EAD.FR), will deliver new aircraft worth a total $112 billion in 2014. The U.S. giant said bank debt will continue to account for the largest proportion of aircraft finance in 2014 but that capital markets will grow their share significantly, to 22% from 14% this year, as export credit financing declines in importance.

"I am seeing more diversity in lenders than ever," said Kostya Zolotusky, managing director of capital markets development and leasing at Boeing Capital Corp., the company's financing and leasing unit. "There is an almost even balance among the primary financing sources including aircraft leasing companies, commercial banks in China and Japan, Germany and France, the capital markets and export credit agencies."

Mr. Zolotusky said increased capital market activity included more direct purchases by lessors and the increase in international enhanced equipment trust certificates, or EETCs, such as those issued by International Consolidated Airlines Group, Virgin Australia and Air Canada. Private equity and hedge funds are also investing in airline financing deals, he said.

Rising interest rates were not a worry, Mr. Zolotusky said. "Airline financing is more correlated to GDP and the demand for new aircraft."

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