Jetrader - November/December 2009 - 11

signiﬁcantly as part of the Chinese stimulus package that was introduced at the end of last year. We have also seen a number of leasing companies that until recently played a modest role evolve into a premier role by attracting new capital to the industry. At the same time, however, several of the major leasing ﬁrms—not through their portfolio performance but as a result of their parents’ difﬁculties—have been severely impacted. We were among those expecting their restructurings to be positively sorted out in 2009, but that has not been the case, and it is likely that some of these uncertainties will continue into 2010. As a result, many lessors, who traditionally have been capital sources to airlines, are now competing with carriers for the same capital to support deliveries. This is a new wrinkle on the leasing model and one that we will be watching carefully to see how it evolves. Another key development was the return of capital markets. We didn’t anticipate that in our forecast; in fact, we expected it to take longer for them to recover. But, they have returned on a selective basis, with a number of transactions completed for several U.S. carriers ﬁnancing new and used aircraft, as well as spare parts. We also can’t say enough how important export credit ﬁnance has been in the current environment. The world’s ECAs, notably in our case the U.S. Export-Import Bank’s very capable transport group, have done a superb job in buffeting their respective country’s exporter base against the challenges posed by the difﬁcult ﬁnancial markets. In Ex-Im’s case, it expects to double its support for commercial aircraft for FY 2009 over the same last year. Cash is King Cash is a ﬁnancing component that market analysts often overlook. Historically, there have been strong airlines that pay in cash for airplanes and reﬁnance them later. We have continued to see this in the current cycle. Carriers went into this round with some of the strongest cash positions they’ve seen in years. Like other businesses, they want to preserve cash in times like these, but with planes enabling their business, they are willing to use it to support deliveries. Looking forward to 2010, we ﬁnd ourselves in the curious position of having a market with somewhat less volatility but one with a high degree of uncertainty, mostly over how the global economy will be impacted by what is expected to be a difﬁcult winter. We are seeing continued improvement in most segments of the ﬁnancial markets. The question we are asking ourselves is can this continuing progress withstand the potential frost of winter if the economy remains moribund. In addition, market conditions are truncating the time between when ﬁnancing deals are committed and airplanes delivered from the typical past—from many months, in some cases, to weeks or even days. It makes it harder to predict for the longer term. We are in the midst of renewing our topdown and bottoms-up analysis for 2010. It’s still a bit early to predict a speciﬁc range for any potential funding shortfall; however, we believe overall it should turn out to be quite manageable. At the same time, conditions remain dynamic and volatile. We remain cautious, yet reasonably optimistic, about what lies ahead. The Financing Environment in 2009 Boeing continues to monitor the health of global aviation ﬁnance in a “stoplight” format that it regularly shares with industry audiences. Its 2009 view beneﬁted from both a bottom up and top down analysis of all major ﬁnancing sources seen here, as well as each of its customers’ planned 2009 deliveries. Continued bank support, unexpected capital markets contributions and strong export credit lending during the year contributed to the market’s health improving somewhat over the year, while negative impacts were few. Performance through the year’s third quarter supported Boeing’s forecast that ﬁnancing conditions would be sufﬁcient for delivery needs, and any resulting ﬁnancing gaps to be ﬁlled by the manufacturers’ manageable. COURTESY OF BOEING CAPITAL CORP. Jetrader 11

Jetrader - November/December 2009

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