Jetrader - March/April 2013 - 25

He went on to characterize the aircraft
finance market as diverse but with wellunderstood operating norms despite its
global reach. “It’s tried and true. If you
invest in it thoughtfully and with the benefit
of experience, you have a pretty predictable
outcome and predictable rates of return that
are commensurate with the risk, some might
say a little better than the low risk would
justify,” Cave said. “This is attractive to a
broad spectrum of investors, not a narrow
one. All that adds up to say aircraft finance
is a growth market that allows for new
entrants and structures without disruptions
or crowding out. It’s a good time to be in,
to grow portfolios or get involved.”

Elements of the Thesis
Boeing’s longtime message to financiers
and investors has been that commercial
aircraft are a great investment opportunity
and that the company’s airplane products
deliver better value at lower risk to buyers. In an effort to put hard data behind
that belief, the company is embarking on
a deep “dive” into what it sees as the four
key elements that drive aircraft investment
(see Chart 1: Aircraft Investment Thesis).

by higher fuel costs. “With the recent fuel
price spike, the aircraft replacement cycle
is accelerated, and the demand is genuine,”
Zolotusky said.

The Aircraft Finance Markets
As Boeing reported in its 2013 forecast
for global aircraft finance conditions (see
Jetrader January/February 2013 story,
Aircraft Financing in 2013), its view of the
major financing sources—commercial banks,
the capital markets, export credit agencies and leasing companies primarily—is
encouraging, with funding expected to
be sufficient for the increasing deliveries.
“The year is shaping up to be really
interesting,” said Myers. “The leasing
companies are continuing to build their
portfolios. Export credit will become more
expensive with the new global Aircraft
Sector Understanding taking full effect,
and export credit agencies won’t necessary
fund at the kinds of levels we’ve seen of
late, and the manufacturers don’t want to
be putting a lot of equity on the table. It
adds up to creating some great opportunities in the market,” Myers said.

Among the bright spots is commercial
banking. Despite concerns over Europe’s
continuing economic woes, the continent’s
major players expect to continue in a leading role in the space. Meanwhile, the company sees the best balance yet among the
global bank players (see Chart 2: Globally
Balanced Aircraft Debt Markets, page 26)
adding to the diversity the industry is
seeing as a result of other considerations.
While it’s historically played an instrumental industry stabilizing role, export credit
use is expected to decline as a result of their
higher costs. “We expect going forward that
export credit will provide less support than
it has historically,” Zolotusky said. “Most
of that capacity is likely to be financed in
the capital markets as their role in aircraft
finance has been expanding rapidly.”

Risk Management
While Boeing’s thesis purports that significant investment opportunity exists, what
about the inherent risks of any investment
and what suggests they might be reasonable
in the case of jetliners?
“We believe there are two crucial areas
that must be understood and be managed

Long-Term Demand

Chart 1: Aircraft Investment Thesis

Their story on the industry’s success
begins with the fundamental history behind
why customers buy airplanes—the demand
for air travel.
“Aviation is a foundation on which
the global economy is built,” said Kostya
Zolotusky, Boeing Capital’s managing director of capital market development and its
primary spokesman. “It is this integral
economic role that is driving demand for air
travel and, in turn, aircraft.” Boeing’s latest
current outlook on commercial aviation has
the market scoped at roughly $4.5 trillion
over the next 20 years. “What’s interesting
is that demand is nicely balanced between
North America, Europe, Asia and a combination of the Middle East, Africa and Latin
America,” Zolotusky said. In addition to this
regional balance of demand, he also notes
the diversification of airline business models
with maturation of low-cost carriers, and
the Sixth Freedom airlines, to complement
the established network operators.
The market, Zolotusky said, is an amalgam of demand for new airplanes to support
air travel growth as well as a significant
requirement for replacement aircraft driven

For 2013, Boeing is highlighting the opportunities associated with commercial aircraft assets in its
“investment thesis” that takes a factual approach to the four areas it’s identified as key considerations
for aircraft investors—demand for aircraft products, aircraft financing market factors, risk management
and the regulatory framework surrounding the industry. “Many of us intellectually understand the
investment attraction of the aviation space, but we need to share these insights with a whole new
set of constituents as our industry undergoes a significant realignment of where aircraft financing is
heading,” said Boeing executive Kostya Zolotusky of the manufacturer’s financing and leasing unit.
(Source: Boeing Capital)

Jetrader 25

Jetrader - March/April 2013

Table of Contents for the Digital Edition of Jetrader - March/April 2013

A Message from the President
ISTAT Honors Renowned Airline Executive
State of the Regions: North America
Q&A: Paul A. Jacobson
Investment Thesis: Why Airplanes are Great Assets?
Remarket or Dismantle: That is the Question
What's Going On?
Aircraft Appraisals
Letter of Intent: Crafting Road Maps for Success
ISTAT Members on the Move Index
Jetrader - March/April 2013 - Cover1
Jetrader - March/April 2013 - Cover2
Jetrader - March/April 2013 - 3
Jetrader - March/April 2013 - 4
Jetrader - March/April 2013 - A Message from the President
Jetrader - March/April 2013 - 6
Jetrader - March/April 2013 - 7
Jetrader - March/April 2013 - Calendar/News
Jetrader - March/April 2013 - 9
Jetrader - March/April 2013 - ISTAT Honors Renowned Airline Executive
Jetrader - March/April 2013 - 11
Jetrader - March/April 2013 - 12
Jetrader - March/April 2013 - 13
Jetrader - March/April 2013 - 14
Jetrader - March/April 2013 - 15
Jetrader - March/April 2013 - State of the Regions: North America
Jetrader - March/April 2013 - 17
Jetrader - March/April 2013 - 18
Jetrader - March/April 2013 - Q&A: Paul A. Jacobson
Jetrader - March/April 2013 - 20
Jetrader - March/April 2013 - 21
Jetrader - March/April 2013 - 22
Jetrader - March/April 2013 - 23
Jetrader - March/April 2013 - Investment Thesis: Why Airplanes are Great Assets?
Jetrader - March/April 2013 - 25
Jetrader - March/April 2013 - 26
Jetrader - March/April 2013 - 27
Jetrader - March/April 2013 - 28
Jetrader - March/April 2013 - Remarket or Dismantle: That is the Question
Jetrader - March/April 2013 - 30
Jetrader - March/April 2013 - 31
Jetrader - March/April 2013 - 32
Jetrader - March/April 2013 - What's Going On?
Jetrader - March/April 2013 - 34
Jetrader - March/April 2013 - Aircraft Appraisals
Jetrader - March/April 2013 - 36
Jetrader - March/April 2013 - 37
Jetrader - March/April 2013 - Letter of Intent: Crafting Road Maps for Success
Jetrader - March/April 2013 - 39
Jetrader - March/April 2013 - ISTAT Members on the Move
Jetrader - March/April 2013 - 41
Jetrader - March/April 2013 - Index
Jetrader - March/April 2013 - Cover3
Jetrader - March/April 2013 - Cover4