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Boeing to Leverage Commercial Finance Unit in Strategic Contests

Boeing Co. plans to make more use of its capital finance arm to help sell aircraft to carriers, particularly in the U.S., where lining up capital has become tougher, the head of Boeing’s commercial planemaking unit said.

“Our strategy will be that Boeing capital will be much more than a lessor of last resort,” Boeing Commercial Chief Executive Officer Jim Albaugh told a press briefing in Dubai. “We’ll make it much more strategic, because our customers want us to be more involved in helping secure financing.”

Boeing’s strategy to use its capital arm as a tool to gain an edge on strategic competitions was highlighted in July by an agreement with AMR Corp.’s American Airlines, where Boeing committed to providing 100 single-aisle jets to the airline on lease. That way, American didn’t have to commit any of its own capital to pay for the planes. The carrier is among other U.S. airlines seeking larger orders to modernize their fleets.

Albaugh declined to say if Boeing has set aside specific amounts of capital to assist customers whose balance sheets may prove less attractive to commercial banks or other financiers.

Boeing has already lined up third parties to purchase 25 of the 100 American jets for lease, lightening the load Boeing would have to assume on its own balance sheet, Randy Tinseth, Boeing’s vice president for marketing, said in Dubai. He said Boeing will continue to look for parties to buy the other jets. Airbus SAS, which split the jet order with Boeing, has also committed to lease 100 jets to American.

The U.S. planemaker has so far seen no indication that airline customers are struggling to secure financing as some European banks rein in funding to preserve capital, Tinseth said.

“There’s been a lot of concern in the market about the availability of capital, especially the situation with European banks,” Tinseth said today during an interview in a 787 Dreamliner plane parked on static display at the air show.

Tinseth said some European banks are pulling back on financing next year, and that they may end up financing $5 billion less than the $25 billion originally anticipated.

“Capital markets, leasing companies, and regional banks will step in to pick up that $5 billion, though the costs will be higher,” Tinseth said.

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