Airlines will avert a shortfall in aircraft financing next year by relying increasingly on capital markets and alternative sources as pressure grows on European banks, Boeing Co
The industry must find an extra $18 billion to pay for what could be another record production year in 2012, driven by demand in Asia.
Boeing expects deliveries to reach $95 billion in 2012 and $106 billion in 2013, up from $77 billion this year.
European banks, traditionally among the most important sources of financing for big jets, are reducing their exposure to the market or quitting it altogether in the face of Europe's debt crisis and Basel III restrictions on capital exposure.
But Boeing said new players are being attracted by the relatively good returns and robust demand, despite recent alarm signals over a shortage of bank liquidity in Europe.
We do not believe there will be a funding shortfall in 2012, said Kostya Zolotusky, managing director at Boeing Capital Corp, the U.S. planemaker's financing arm.
Capital markets are expected to more than double the funds they provide for aircraft purchases to $10 billion in 2012 from $4 billion this year, and the proportion of aviation financing through bond issuance is expected to double to 10 percent.
Commercial banks are expected to offer roughly the same amount of funds, but their share of the total will fall by 4 percentage points to 21 percent in 2012, Boeing said.
Export credit agencies such as the Export-Import Bank in the United States should see their share remain static at 30 percent.
Fees for guarantees have risen sharply in Europe as the region's debt crisis touches sovereign lending, reaching one percentage point over base rates, up from 0.2 point before the crisis.
That should be good for lessors that stand to see demand from airlines increase, but it could bring forth new types of lenders such as insurers and pension funds, Zolotusky said.
With banking becoming more difficult, insurance companies are likely to start participating in that market, he told a European news briefing on Boeing's financing forecasts.
Pension funds and sovereign wealth funds could also play a bigger role in providing both equity and debt.
The U.S. asset-backed market for aircraft is well developed.
In an effort to make international aircraft financing more attractive to bondholders, aircraft manufacturing nations and major importers drew up a treaty from 2006 designed to make it easier for lenders to recover aircraft in the event of default.
The Cape Town Convention seeks to widen a U.S. rule that makes recovery possible within 60 days of default, and seeks to make that the international norm. But the framework is only gradually being ratified and remains relatively untested.
Now, aviation experts say it is important to speed up application of the treaty to encourage bond issuers to step into the gap left by the shrinking role of commercial bank lending.
Zolotusky said Boeing had proposed that export credit agencies such as ExIm should, for a fee, cover bondholders for the political risk that a country would fail to apply the treaty, leaving them with the commercial credit and asset risk.
Such a guarantee would allow bondholders to get paid by the export credit agency, which would then take up the matter with the importing airline's government.
Now you have two countries talking about honoring an international treaty rather than two bondholders talking about honoring contracts, Zolotusky said.
ExIm was not available to comment.
Boeing is also talking to insurers about the possibility of providing similar types of insurance.
It all becomes more urgent because banking is under severe pressure and that will force people to look at other markets without question, Zolotusky said.
(Reporting by Tim Hepher; editing by John Wallace)
(This story corrects to Cape Town Convention from Chicago Convention in paragraph 16)