Jetrader - March/April 2013 - 26

Chart 2: Globally Balanced Aircraft Debt Markets

Boeing Capital’s research into global commercial bank debt in 2013 shows that support for commercial
aircraft investment is well balanced among the major global regions with banks in China and elsewhere
increasing their activity as Europe’s commercial banks, recently the major players in bank debt, rebalance
their activity. (Source: Boeing Capital)

Chart 3: Age Aircraft Lease Service is Stable

well for a healthy aircraft ﬁnance market. One
is whether the global market is balanced, the
other is the economic lives as the assets,”
Zolotusky said.
The ﬁnancing executive said the discussion
with new investors typically begins with the
credit status of the airlines, not typically
known to be robust. “There’s some good news
on that front as we’ve seen airlines increasingly doing an exceptional job of deleveraging
ﬁnancially and operationally. This had led to
some very good behavior. They now seem
to be more closely coupled with the market
movements and manage the cycles better by
aggressively cutting capacity when demand
softens,” Zolotusky said.
As for supply and demand and the lingering discussions of whether the market
currently has too many or not enough
airplanes, Zolotusky said the company has
relied on facts and data to have conﬁdence
in its production plans.
“Utilization. Are people ﬂying ﬂeets hard
or are aircraft parked? Load factors. Are planes
ﬂying full or not? Are exogenous events occurring that are posing problems? How are new
deliveries progressing versus market growth?
What about residual values and lease rates? By
every measure, what we see today is that the
market is in balance or a little tight,” he said.
Boeing said another preponderant volatility driver around aircraft investment is that
of economic lives.
Brad Till, Boeing Capital’s director for
airplane programs and valuations, acknowledged current industry concerns over whether
aircraft lives have signiﬁcantly changed but
said the company sees no evidence of a
permanent shift (see Chart 3: Age Aircraft
Lease Service is Stable).
“The data shows that however you measure
it, aircraft lives haven’t materially changed,”
Till said. “Today’s ﬁgures remain in the range
of historical levels and have been fairly
stable for the last decade or so. So to draw
any other conclusion for the long term is
premature. There’s no evidence we’re seeing
a fundamental shift towards shorter lives.”

Regulatory Framework
Boeing closely monitors and continually analyzes the issue of commercial aircraft economic lives and
has a vested interest in fully understanding the issue and any long-term change to the trend. “What
is an airplane’s economic life? There’s no standard deﬁnition of what that means. It depends on how
you measure it, and there are a variety of ways to do that,” said Brad Till, Boeing Capital’s director of
airplanes programs and valuations. Till points to two of them shown here—looking at the number of
years at which point 50 percent of a given cohort of airplanes has been retired (upper) and the average
age of aircraft leaving service (lower). “The data show that there’s no evidence suggesting a signiﬁcant
shift in aircraft lives from what we’ve seen historically,” Till said. (Source: Boeing Capital)

26 The ofﬁcial publication of the International Society of Transport Aircraft Trading

Among factors contributing to more investor assurance about the aircraft sector is the
progress being made in regard to the global
regulatory environment for aircraft ﬁnancing.
Most notable is the ratiﬁcation process for
the Cape Town Convention on Mobile Assets,

http://naylornetwork.com/ist-nxt/

Jetrader - March/April 2013

Table of Contents for the Digital Edition of Jetrader - March/April 2013