Boeing sees green for 2016 financing sources

Dec. 8, 2015: Boeing Capital Corp. sees a robust financing market next year for an estimated $127bn in new airplane deliveries.

The forecast is for the global picture, and not just Boeing Commercial Airplanes (BCA) deliveries.

In its new Current Aircraft Finance Market Outlook 2016, BCC paints a picture of financing that is the most optimistic in years. In its annual Green/Yellow/Red assessment of various financing sources, there are no Reds for the first time since 2011, although there are two Yellows—the Export financing credit agencies and the aircraft and engine OEMs themselves, which don’t like to do direct financing. All other sources are Green (Figure 1).

BCC 2016 GYR Forecast

Figure 1. Boeing Capital Corp’s Green/Yellow/Red chart assessing the availability of financing from a variety of sources. BCC Chart. Click on image to enlarge.

Capital markets and banks are forecast to account for two-thirds of the financing next year, BCC says.

“Much of the funding should flow to lessors, who are expected to support around 40% of new airplane deliveries,” BCC writes.

The broad availability of capital will reduce the reliance on export credit agencies, BCC says. Renewal of the US ExIm Bank authority came last week after Republicans in the US Congress killed renewal last summer. The Republicans, normally self-branded pro-business politicians, characterized the ExIm Bank as corporate welfare and specifically pointed to Boeing’s overwhelming beneficiary of ExIm guarantees while ignoring the hundreds of other companies that use ExIm for export financing.

BCC, echoing the Current Market Outlook issued annually by BCA, reports that despite a prolonged decline in cargo demand, “the long-term outlook for air cargo demand remains strong due to faster growth among developed economies and the expanding network of Sixth Freedom carriers. These trends should help drive a return to capacity balance and boost demand for new, fuel-efficient freighters.”

BCC projects that new aircraft deliveries will grow to $172bn by 2020.

5 Comments on “Boeing sees green for 2016 financing sources

  1. Since Boeing is the country’s largest exporter, it should come as no surprise that the company is an “overwhelming beneficiary of Exim guarantees.” But keep in mind also that thousands of smaller companies are in Boeing’s supply chain; everything from mom-and-pops to the engine OEMs All of them are beneficiaries and all of them represent high-tech, well-paying jobs..

  2. Introducing “the bubble”.

    The graphic will be epic in a couple of years when aircraft finance becomes an notorious money destruction program. We’ve seen some early indicators with residual values hitting the bottom.

    • Schorsch is correct. We are in a bubble of bubbles. Not just aircraft financing, but in equities, and government spending.

      Governments are now operating largely on debt, and it’s increasing. Numerous attempts to cause inflation and higher interest rates, allowing governments to pay back sovereign debt with inflated currencies are failing.

      What cannot continue will not.

      Now you have low residual values and low oil offsetting cheap financing for customers, many of whom are extremely marginal operators in the first place, and the weak will be the first to be sifted out.

      At taxpayer expense.

      • Schorsch + Raoul

        +2

        But how can the small investor protect himself? No safe heavens seem to be left…

  3. Boeing’s excuse for needing Ex-Im support is “The competition does it”.

    So whats the excuse of these “hundreds” of other businesses, and why should they be subsidized?

    Jobs? Jobs are hardly a reason. If that were so we would be subsidizing American oil drillers in the bakken right now.

    Ex-Im is about the same thing it was always about. Power politics and profits, not jobs.

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