Boeing Co. (NYSE: BA) on Tuesday morning released its 2015 aircraft finance market outlook. The headline number is $124 billion and the forecast amount for new commercial deliveries in 2015, up from $115 billion in 2014. The company’s Boeing Capital Corporation also forecasts deliveries totaling $156 billion in 2019. How all these airplanes will be paid for is the subject of Tuesday’s release.
Boeing expects bank debt and capital markets to fund about 60% of all 2015 deliveries, with cash accounting for another 23% of funding and export credit to cover another 15%. Aircraft leasing companies are expected to use bank debt and capital market financing to acquire about 40% of all deliveries next year. Here is Boeing overview of the market:
[M]any of the commercial banks in aviation are relatively new players who are still developing their aircraft finance expertise. Along with a tighter regulatory environment, this is expected to concentrate competition for new commercial bank loans at first-tier airlines, boosting demand for aircraft leasing among second-tier carriers.
Boeing also thinks there is an unsatisfied appetite for aircraft-secured debt that the global airlines will be able to fill if they are able efficiently to access the capital markets and that lessors can help meet through innovative portfolio sell-down structures.
The availability of export credit, though expected to remain steady, remains in doubt. The charter for the U.S. Export-Import (Ex-Im) Bank expired at the end of September and was temporarily extended for nine months. Boeing is the Ex-Im Bank’s largest beneficiary, and the call on the company to meet the financing needs of its customers could increase by $3.5 billion to $5.5 billion, according to a review by Standard & Poor’s.
Boeing downplays the importance of export credit, which it says will remain at historically low levels:
Export credit usage will likely be limited to emerging market players, new lessor platforms, and a modest amount of funding needed for diversification by established carriers.
In the first three quarters of 2014, Boeing’s commercial aircraft revenues total $43.15 billion, and if the company meets its forecast sales for the fourth quarter, it should close the year with nearly $60 billion in commercial aircraft sales. That is more than half the total of $115 billion that the company estimates will be spent on 2014 deliveries and nearly half the total $124 billion that Boeing expects as a global total next year.
As we noted in our look at what could make Boeing the best Dow stock of 2015 a lot of things have to go right for Boeing next year, and an expected dividend hike would help too.
Boeing’s shares were trading down about 0.8% in Tuesday’s premarket, at $129.26 in a 52-week range of $116.32 to $144.57.