Boeing

Overview

The 2016 Current Aircraft Finance Market Outlook projects continued strength in the primary aircraft finance sectors, with a growing number of market participants and a steady trend toward more funding options at attractive pricing for buyers of commercial aircraft. Underpinned by strong commercial aviation industry fundamentals, and bolstered by interest from both new and experienced financiers and investors, we believe the aircraft finance industry is well-positioned for another successful year.

Overall, the aircraft finance outlook for 2016 is a positive one. We expect the industry to continue developing new markets and structures, enabling even broader financier and investor participation in aviation and resulting in greater efficiency for airlines and lessors. In particular, we forecast increasing momentum behind lessor portfolio sell-down into the capital markets and the development of regional private placement markets. Standardizing these structures to enable their use by a broader set of borrowers, financiers, and investors should be an important area of focus for all market participants.

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Healthy aircraft financing environment

Growing delivery finance requirements

Balanced funding for Boeing deliveries

Lessors

The role of leasing companies in supporting new commercial airplane deliveries—both through direct purchases and sale leasebacks—is again expected to be significant. We anticipate that lessors will continue securing most of their leverage through the capital markets, including issuances by parent companies, unsecured borrowing, and ABS transactions.

The emerging trend of lessor portfolio sell-down into the capital markets took flight in 2015. Leasing companies joined with investors to establish a number of joint ventures and other structures designed to enable the transfer of aircraft portfolio ownership to the capital markets. In 2016, we project this lessor portfolio sell-down trend to continue gaining momentum.

Efficient capital market funding for lessors

Balanced leverage for lessors

A balanced portfolio approach enables predictable lessor growth

Capital Markets

Last year was a blockbuster year for capital market funding of commercial aircraft, and we anticipate that 2016 will bring more of the same. Innovative structures and new funding sources continue to emerge, with the growth in private placement activity and non-U.S. enhanced equipment trust certificates being notable examples. The strongest credits are expected to keep tapping unsecured funding while interest rates remain low. U.S. airlines should continue using the capital markets for their new delivery and refinancing needs. And with momentum behind the Cape Town Convention and an expanding global investor base, we forecast continued growth in non-U.S. airlines’ use of the capital markets.

Capital markets usage well balanced

EETC market resurgence in 2015

Cape Town Convention with Aircraft Protocol

Unsecured funding reflects confidence in airline industry

Commercial Bank Debt

Commercial banks are expected to provide a steady level of aircraft financing liquidity in 2016, with a diverse group of experienced and new lenders helping to maintain a healthy geographic balance. While bank debt will continue to play a vital role in aircraft finance, we anticipate that tighter global regulations and U.S. dollar pressures (in certain markets) may constrain the sector’s volume. For the more experienced aircraft finance banks, predelivery payment financing offers an opportunity to grow at higher yields.

Balance in global aircraft debt markets

Commercial banks focused on top-tier customers

Export Credit Agencies

Given the ample liquidity available from commercial markets, we forecast that global export credit use will remain at historically low levels in 2016. The primary users of export credit are projected to be emerging market airlines and regional jet buyers.

Ex-Im usage has fallen sharply since 2012

Commercial markets are more efficient than export credit

Methodology

We created the Current Aircraft Finance Market Outlook (CAFMO) to provide a forecast of the sources of financing for new commercial airplane deliveries in the coming year and the industry’s total delivery financing requirements over the next five years. Each year, we strive to improve the CAFMO, with the aim of enhancing its utility.

What is the Current Aircraft Finance Market Outlook (CAFMO)?

Methodology and definitions

Sources of industry delivery financing

Sources of Boeing delivery financing