Jetrader - Spring 2016 - 22

While airlines and lessors have access to
efficient commercial funding, export credit
continues to be accessed at historic lows.
fundamentals of the industry, not necessarily because they know about aircraft or
have a desire to run leasing businesses."
Weltman describes the evolving business arrangements between the new
equity firms and the leasing companies
as a win-win. "The leasing companies are
able to move their assets to free up their
balance sheet for new acquisitions while
at the same time developing new revenue
streams from continuing to manage the
assets, and the equity firms are able to
leverage the portfolios and the expertise
of the leasing companies to quickly get
to scale."
With this ongoing innovation, lessors
are continuing to secure the majority of
their leverage through the capital markets - more than 53 percent forecast for
2016 - where they have access to highly
efficient funding.

Another indicator of the strength
of capital markets funding for aircraft
financing can be seen in the growth in
Enhanced Equipment Trust Certificates
(EETCs) over the past two years. "Most
notable last year was the growth in the
number of international EETCs and the
entrance of new players in this space such
as LATAM and Turkish Airlines," Weltman
said. "With the continued momentum
behind the Cape Town Convention and
an expanding global investor base, we
see continued growth in non-U.S. airlines'
use of EETCs."
While the rise of capital markets funding has been the story for the past few
years, commercial banks continue to play
a vital role in aircraft financing. Boeing's
forecast sees bank debt accounting for 27
percent of delivery financing across the
industry in 2016. And as with the capital

markets, commercial bank participation in
aircraft financing is maintaining a healthy
geographic balance.
"One of the factors to note with bank
debt at the moment is that the majority of
it is going to tier one airlines and lessors;
in 2015, 90 percent of bank debt went to
tier ones," Weltman said. "That's driving
a lot of competition among the banks for
access to those customers. It also means
that airlines that aren't able to access bank
debt are turning to lessors as a source of
funding as the lessors continue to access
the capital markets."
Weltman says Boeing will continue
to watch the impact that tighter
global regulation and U.S. dollar pressures in certain markets will have on
commercial banks. Banks, he says, will
continue to play an important role in aircraft financing, but these measures may
start to put pressure on the volume of
bank business.
While airlines and lessors have access to
efficient commercial funding, export credit
continues to be accessed at historic lows.
Usage has continued to fall since 2012 as

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Jetrader - Spring 2016

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