Boeing Expects Number Of Companies Leasing Planes To Airlines To Grow -- Executive

By Dow Jones Business News, 
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By Robert Wall

Boeing Co. expects the number of companies leasing planes to airlines to grow as carriers increasingly turn to renting aircraft and investors seek to enter the lucrative market.

About half the global airliner fleet will eventually be on operating leases from around 41% today, Kostya Zolotusky, managing director of Boeing Capital Corp., said in London.

"That is so many airplanes that the current number of lessors will have difficult addressing that fleet," he said. "We probably need more lessors."

Institutional investors in China and Russia have an appetite to finance the aircraft leasing market and will spur growth in the size of existing lessors in those countries while also creating new entrants, Mr. Zolotusky said.

Chinese investors mounted a bid to buy International Lease Finance Corp. from U.S. insurer American International Group Inc. before AerCap Holdings NV in December agreed to acquire one of the world's largest lessors for $5.4 billion in cash and shares.

Lessors in Russia and China, while initially focused on satisfying domestic demand, will increasingly look to work with airlines in other countries, Mr. Zolotusky said. "It is very early days in both those markets," he said.

Global lease rates have been strong when accounting for the low interest rate environment, he Zolotusky said.

Around 70% of financiers and investors working in the aviation sector are looking to increase investments, he said citing a recent company survey.

Mr. Zolotusky said currency fluctuations, high oil prices and the expectation of rising interest rates have failed to dent supply for jet delivery financing that should reach $112 billion this year and grow about 11% next year.

Boeing and rival Airbus Group NV are on track to produce more than 1,200 airliners this year as both seek higher build rates for some of their most popular models. Financing demands are likely to increase as the plane makers boost production.

Airbus plans to build 46 A320 narrow-bodies a month starting in 2016. Boeing is exploring a build rate of 52 of its 737 single-airplanes a month while working to raising monthly output to 47 of the aircraft in 2017.

Financing for such planes is balanced, Mr. Zolotusky said, with banks debt, bond markets and cash purchases dominating. Government provided export credit financing, which was critical to plane makers during the financial crisis, has retrenched and been backfilled by other funding sources.

Aircraft makers have had to increase their financing backstop guarantees to compensate for some of the reduction in government export credit activity, he said.

Write to Robert Wall at robert.wall@wj.com

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