By Dow Jones Business News,
May 08, 2014, 11:33:00 AM EDT
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
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.
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