Capital Markets, Banks to Underpin $127 Billion in Jet Funding

  • Airline earnings, traffic driving confidence in sector: Boeing
  • Capital markets, banks to make up 63% of financing needed

Boeing Co., the world’s largest aircraft maker, said capital markets and banks will account for almost two-thirds of the funding needed to finance the $127 billion in jet deliveries anticipated this year.

Capital markets will provide 36 percent of required financing, up two percentage points from 2015, while bank debt will account for 27 percent of funding, Boeing Capital Corp. President Tim Myers, said in London. The use of state-backed export credits will remain at historic lows, he said.

Airlines are set to reap a record $36.3 billion profit in 2016, aided by cheap fuel and an expanding U.S. economy, according to the International Air Transport Association. The jump in earnings, driven by growing passenger numbers and better aircraft utilization, underpins the confidence of commercial aircraft investors, opening up new options for financing, Myers said.

"That profitability is helping them to deleverage, which is something we think is very good and healthy for the industry over time," the executive said, adding that 24 percent of aircraft deliveries in 2016 will be paid for in cash.

Lessors will account for about 40 percent of deliveries this year, with 53 percent of their funding coming from capital markets, and will continue to sell all or part of the portfolios, Myers said. Asset-backed security deals, where funding is secured with aircraft, are drawing new investors and capital into the sector, he added.

With Boeing and Airbus SAS, the No. 2 planemaker, boosting output, the scale of annual financing is expected to continue to grow in the coming years and reach $172 billion in 2020.

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