US plane-maker Boeing on Thursday said commercial aircraft delivery funding has plunged 40 per cent to $59 billion. The aviation giant’s top resources of delivery financing were cash, bank debt and capital markets.
While banks shored up the aviation industry’s need for liquidity early in the pandemic, long-term bank debt became one of the less utilized forms of financing. “Financiers and investors understand the industry’s resilience and the long-term fundamentals that make aircraft a valuable asset class,” said Tim Myers, President of Boeing Capital Corporation.
“Despite the unprecedented impact of COVID-19 on the global aerospace industry, there generally continues to be liquidity in the market for our customers, and we expect it to further improve as travel begins to rebound.”
Boeing noted that institutional investors and funds continued to seek exposure to the aviation industry as some financiers paused and credit spreads widened, which indicates concerns over the ability of borrowers to service their debt.
Tap capital markets
Aviation-related funding from capital markets were 70 per cent higher, while credit-enhanced financing saw further progress as a complementary funding source, totalling 4 per cent of the financing mix for Boeing deliveries.
Aircraft lessors executed a significant volume of sale-leaseback transactions, as industry-wide leased fleet climbed to 46 per cent. In a sale and leaseback deal, a carrier buys an airplane and sells the aircraft to a lessor — ideally at a profit — and leases it back for its own use.
“Industry fundamentals continue to show varying degrees of strength in different markets depending on regional trends of the global pandemic,” Myers said. “We expect that capital will continue to be routed into the sector by established players and as new entrants seek opportunities during the industry’s recovery.”