Boeing

Resilient Aircraft Finance Market

While 2020 was a year of unprecedented challenges for the industry, Boeing Capital remains optimistic in aviation as its resilience, and its ability to rise from every crisis stronger, has proven itself time and time again. Though aircraft finance recessed at the onset of the pandemic, by the latter half of the year capital flowed back into the space in a significant way as the industry adapted and new investment opportunities emerged. We continue to believe that in the long run, the thesis for investing in aircraft remains intact. The 2021 Current Aircraft Finance Market Outlook recaps the trends seen in 2020 and explores financing developments and their potential impact on the market.

Export credit agencies

Chart for export credit agencies
By dollar volume, export credit agencies (ECA) accounted for 2.6% of Boeing delivery funding in 2020, up from 0.4% in 2019.

Institutional funds

The combination of steady cash flows, relatively higher yields, global diversification, strong industry fundamentals and the unique characteristics of mobile aircraft assets has continued to attract institutional investors and funds. Private equity, hedge funds, sovereign wealth funds, infrastructure funds and other types of funds all continued to seek aviation exposure in their deployment of capital.

In 2020, new institutional and fund capital stepped into the space as some in the bank market paused and as sector credit spreads widened relative to pre-pandemic levels.

Tax equity

Prior to the pandemic, the Japanese Operating Lease (JOL) and Japanese Operating Lease with Call Option (JOLCO) markets were evolving at a rapid pace, accepting new airline and lessor names and introducing innovative products. 2019 saw the closing of the first-ever credit enhanced-supported JOLCO and innovative ECA and enhanced equipment trust certificates (EETC) supported JOLCOs.

During the pandemic, the tax equity market, particularly JOLs and JOLCOs, effectively shut down to new deals while previously committed deals continued to close. The safe return to service of the 737 MAX has begun to attract Japanese investors. A gradual recovery, in line with Japanese economic growth and return of air travel demand, is expected.

Credit enhanced

Chart for export credit agencies
Between 2017 and 2020, 65 Boeing aircraft deliveries used this funding source. The credit enhanced space accounted for about 4% of the delivery-financing mix for Boeing deliveries in 2020.

Airframe and engine manufacturers

Commercial solutions, export credit and government support were available for new aircraft deliveries in 2020, and consequently, we saw no need for manufacturer funding support for Boeing deliveries.