Boeing expressed optimism about improvements in the financing available to jet buyers to take deliveries as air travel demand recovers from Covid-19.
Capital markets continued to play a key role in shoring up liquidity for the aviation sector, with the market close to pre-pandemic levels for most issuers as spreads tightened throughout the year, the US planemaker said in its 2022 Commercial Aircraft Financing Market Outlook on Thursday.
“Financiers and investors remain committed to the long-term fundamentals that continue to make aircraft a valuable asset class,” said Tim Myers, president of Boeing Capital Corporation.
“Despite the changing landscape since the emergence of the Covid-19 pandemic, the industry remains resilient and there continues to be sufficient liquidity in the market for our customers with increasing opportunities as traffic recovers.”
The report, which reflects Boeing’s near-term view of market dynamics and assesses financing sources for new commercial plane deliveries, showed improving financing stability as the industry recovers from the impact of Covid-19, which brought air travel to a near-standstill.
Boeing has raised its 20-year forecast for commercial aeroplane demand, citing signs of recovery from the pandemic. The US planemaker forecast demand for 43,610 new planes valued at $7.2 trillion by 2040, an increase of about 500 planes over last year’s forecast, it said in its latest market outlook.
The commercial aviation industry required about $64 billion in jet delivery financing during 2021, up from $59bn in 2020, the aviation finance report showed.
Lessors shifted from negotiating lease deferrals to bidding for new business, while capital markets provided most issuers with pricing near pre-pandemic levels, Boeing said. Export credit and institutional investors also filled the gaps in providing the necessary financing to support airlines.
In 2021, lessors were responsible for over half of delivery financing volume and as a result, the total leased fleet grew to 47 per cent.
Last year, capital market issuances stacked up comparably to 2020’s highs, flagging another year of strong performance, Boeing said.
However, the planemaker raised a yellow flag over airline access to commercial bank loans.
“Commercial bank debt for aircraft deliveries remained constrained, with varied access across regions. Broad-based bank appetite for aviation continued to be cautionary, with loans extended mainly to stronger credits and strategic customers in their respective home markets,” Boeing said.
“That said, there are signs that bank debt availability is improving.”
Supporting about nine per cent of funding for the industry and nearly five per cent of Boeing deliveries in 2021, export credit-backed financing played a crucial role to instill confidence in times of market turbulence, Boeing said.
“Industry fundamentals continue to show varying degrees of strength in different markets that reflect the regional trends of the global pandemic,” Mr Myers said.
In the Middle East, jet delivery finance was dominated by cash payments, which made up 40 per cent of delivery funding, Boeing said. That was followed by sale and leaseback deals (34 per cent), bank debt (15 per cent) and capital markets (11 per cent).