Jetrader - November/December 2009 - 10

Aircraft Financing in 2009: A retrospective The gap that wasn’t and other reflections on a tumultuous year was that any industry gap likely would be on the order of zero to $5 billion, and that Boeing’s share of that could be around $1 billion. It was the result of us systematically working through a markets analysis—from the top down, looking carefully at what we knew about all the sources of ﬁnancing— and from the bottom up, accounting for the ﬁnancing plans for every airplane in our 2009 delivery stream. When we shared our view back in the January/February Jetrader and later at the ISTAT 26th Annual Conference in Phoenix in mid March, we were pretty much the industry lone wolf and clearly not howling a warning that “the sky is falling.” There was a lot of interchange and skepticism that Boeing’s position was too rosy. However, we stayed with our view and continued to reﬁne it. Fast forward to late third-quarter 2009 as this article is being written; airplanes are being delivered in large numbers as the manufacturers work down their record backlogs. At Boeing, deliveries aren’t being held up for the lack of ﬁnancing. Yes, we have had to do some modest ﬁnancing—our ﬁrst in nearly three years—to help out a few customers who didn’t have good alternatives in the commercial markets. Given what ﬁnancing we have done so far (less than $600 million) and what we expect for the remainder of the year, we will likely end 2009 at about half of our original expectation for new aircraft deliveries. And as we enter fourth quarter 2009, we think most in the industry would agree that the year will end up much as we predicted. Ringing True What happened? Once again, we believe that our industry was more fortunate than most and reaped some of the asset beneﬁts it’s worked hard to earn. At our ﬁnanciers’ events in various world regions, we continue to share our updated “stoplight” view of ﬁnancing sources (see chart) that we shared with you earlier. Compared to where we began 2009, the industry saw notable progress. First, we should appreciate that many of our traditional ﬁnancing sources have continued to show strength despite the market challenges. For example, commercial banks, particularly those in Europe that have been regular players, honored their outstanding customer commitments and most continue to be active, although they are signiﬁcantly more selective in choosing their opportunities for ﬁnancing. We have also seen continued growth by non traditional banking sources to enter or continue to participate in the space. As an example, the Chinese banks have been increasing their capacity to fund deliveries in their country, and spreads have dropped By Walt Skowronski, President, Boeing Capital Corp. By many measures, 2009 was a notable year for aviation ﬁnancing. It was preceded by a weakened credit environment brought on by the now-infamous sub prime mortgage crisis in the U.S. And it arrived amid the most signiﬁcant global economic disruption seen in 80 years. The uncertain market conditions early on contributed to a signiﬁcant difference of opinion over the availability of sufﬁcient ﬁnancing to support the industry’s planned aircraft deliveries for the year. There was no shortage of gloom-and-doom predictions of a signiﬁcant gap between what third-party sources could provide and what total commercial airline industry deliveries would require that would have to be bridged by the manufacturers—upwards of $20 billion in some cases. Boeing Capital’s research, however, did not support these dire forecasts. Our view 10 The ofﬁcial publication of the International Society of Transport Aircraft Trading

Jetrader - November/December 2009

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