Jetrader - January/February 2012 - 7

Dreamliner Delivery – Boeing’s ﬁrst 787 Dreamliner destined for Japan’s All Nippon Airways (ANA) undergoes prep before its late September 2011 delivery. (Boeing photo)

Aircraft Financing Ahead
2013 conditions looking to arrive early looking n
In a “virtual” panel discussion, industry notables and fellow ISTAT members talk to Jetrader about their views on primary and secondary aircraft ﬁnancing in 2011, and how a good year will likely give way to more challenges as the industry deals with structural changes earlier than their planned 2013 arrival. We end the year with plenty to be mindful of and to work on. Europe’s sovereign debt crisis is limiting capacity of a number of key European aircraft banks. Anticipated implementation of Basel III, and higher export credit costs starting in 2013, will cause realignment in the sources of aircraft ﬁnance. However, these challenges will create opportunities. Shifting signiﬁcant bank capacity into the capital markets will facilitate an evolution of new structures and attract a new investor base to our industry. A more constrained bank credit environment will also increase demand for aircraft leasing, and this will drive growth of aircraft lessors.” affected the industry. One is the Eurozone’s sovereign debt issues. Given the percentage of liquidity provided by Eurozone-based institutions to the industry, that’s obviously of concern. Second, Eurozone institutions are naturally long euros whereas aviation is a dollar-based industry. Accessing long-term dollars has become both more challenging and expensive. A third issue is increasing regulation as we look to 2013 and the implications of Basel III. Prior to that is also the recently imposed move by regulators in Europe to increase core Tier 1 capital by June 2012. Looking at all of this, lenders are asking themselves, ‘How much capital can I afford to commit to this business going forward?’”

Tim Myers, Vice President, Aircraft Financial Services, Boeing Capital Corp.

On overall aircraft ﬁnancing conditions for 2011…
“Despite macro-economic pressures, 2011 was a good year for aircraft ﬁnance. All-in aircraft financing costs were at historical lows as a result of current low interest rate environment. Major aviation banks continued to expand their portfolios, and we welcomed a number of returning and new banks to aircraft ﬁnance. We saw continued expansion of regional banking in places like Russia, and Australian banks are transitioning from regional ﬁnanciers to global bankers. It was also a good year for manufacturers and airlines. Strong demand for air travel and good yields, translated into robust demand for new aircraft.

Richard Moody, Managing Director, Structured Aviation Finance, Deutsche Bank AG London

Boeing’s Myers on the banks’ contribution and the role of export credit…
“Commercial banks and export credit were the two primary sources for aircraft ﬁnancing in 2011. The reason we’re concerned is that we recognize that one of those sources will be under very severe pressure due to Europe’s bank crisis, and European banks have been the primary banks in aircraft ﬁnancing. While we don’t believe all of them will be exiting the space because it’s been attractive for that segment of banking, they’ll probably have a smaller footprint. That will translate in the future by making it difﬁcult for them to return to the role they’ve played in the Jetrader 7

On how the markets looked at 2011 year end …
“I don’t think anyone would have foreseen the last few months of market volatility. The aircraft ﬁnancing market was fairly robust at the beginning of the year, but it’s now starting to feel some strain. On the commercial side, several factors have really

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Jetrader - January/February 2012

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