By Jon Ostrower And Robert Wall
Boeing Co. projected strong demand for jetliner financing to
fund airlines' appetite for new planes, while also acknowledging
that demand continues to dwindle for its storied 747 jumbo jet.
The aerospace giant projects demand for $124 billion in jetliner
financing next year as airlines need to fund more than 1,300
aircraft deliveries planned for 2015. It expects that to grow
through the decade, reaching $156 billion in 2019.
Airlines and lessors "will continue to have access to highly
efficient financing," said Tim Myers, vice president for aircraft
financial services at Boeing Capital Corp., the financing arm of
the world's biggest plane maker.
Separately, Boeing said it would reduce monthly production of
its 747-8 jetliner to 1.3 aircraft a month from 1.5 in September
2015, bringing annual deliveries to approximately 16 from 18.
The four-engine 747, with its distinctive hump, has long been an
icon of international jet travel, but demand has dwindled as
airlines have opted for smaller, twin-engine jetliners and the need
for big cargo freighters has ebbed. Boeing last year said it was
cutting 747 output to 1.5 aircraft a month from 1.75.
Boeing said it is "making this minor adjustment because the
near-term recovery in the cargo market has not been as robust as
expected" and it continues to believe in the "long-term strength of
the freighter market." The new planned cut enables "us to continue
to run a healthy business," it said.
The 747-8 version of the freighter, which Boeing first delivered
in 2011, was intended to refresh the jumbo jet with a longer body,
new General Electric Co. engines and a reshaped wing. A 747-8
passenger model, capable of holding 467 passengers, followed in
early 2012 and is operated today by Deutsche Lufthansa AG and Air
China Ltd. Both versions list for about $368 million, before
discounts.
But Boeing this year hasn't managed to grow sales of the 747-8,
with two cancellations negating two new orders. The company has a
remaining backlog of 39 aircraft through November, including 26
passenger and 13 freighter aircraft.
Despite weakening demand for the largest jumbo jets, s trong
demand for more fuel-efficient twin-engine planes has driven output
to record levels at Boeing and rival Airbus Group NV. The two have
combined to build more than 1,200 planes already this year.
Mr. Myers said financing sources for plane deliveries are more
global than historically. China remains the largest source for
global aircraft debt, ahead of Germany and Japan. U.S. lenders next
year are poised to represent 9% of the market, Boeing projects.
Capital markets will finance 32% of deliveries, overtaking bank
debt as the primary source of funding. That includes carriers
issuing asset-backed bonds as well as a surge in private
placements, Mr. Myers said.
Even so, some areas of difficulty exist. Boeing is scheduled to
deliver around $2 billion worth of aircraft to Russia next year at
a time when sanctions over the country's actions in Ukraine have
limited capital access for local banks. Mr. Myers said Boeing is
working with Chinese and Middle East institutions to help secure
delivery financing.
An issue for the U.S. plane maker is that the U.S. Export-Impact
Bank has ceased new dealings with Russia, Mr. Myers said. European
export credit agencies are still open to backing Airbus deliveries
to Russia.
Another concern for the Chicago-based plane maker is continued
uncertainty over the fate of Ex-Im Bank in the U.S.
Congress has battled over the future of the agency amid
accusations by detractors it represents a market-distorting subsidy
to industry.
The political uncertainty has caused some airlines to ask Boeing
to backstop borrowing in case Ex-Im Bank doesn't get reauthorized
by Congress, Mr. Myers said.
"We think it is going to get reauthorized," he added.
Eliminating Ex-Im Bank would put Boeing at a competitive
disadvantage over rivals that can still get national export credit
backing, Mr. Myers said.
The agency is projected to be involved in delivery financing for
around 13% of Boeing jets next year. The backing was much higher
around 2009 when other funding sources had dried up amid the global
financial crisis. Export credit agencies around the world are
expected to back 15% of total plane deliveries next year, Boeing
projects.
The recent drop in oil prices so far has had little impact on
funding availability, Mr. Myers said, adding demand for replacement
jets hasn't slowed. Even if oil remained at current low levels and
pressure to field more fuel-efficient planes eases, it should not
have a significant impact on delivery plans, he said.
Write to Jon Ostrower at jon.ostrower@wsj.com and Robert Wall at
robert.wall@wsj.com
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