Boeing Capital sees tough times for aircraft financing in 2010

Boeing Capital has unveiled its forecast for the 2010 aircraft lending market, according to which both Boeing and Airbus will be asked to provide less financing support to customers than in 2009.

According to the forecast, Boeing expects that airlines worldwide would be sourcing a $62 billion for the purchase of new commercial aircraft in 2010. This would be down from $68 billion in 2009, as fewer aircraft are delivered to airlines.

Boeing said it has extended $800 million of financing in 2009 to its customers and foresees lesser requirement in 2010.

It also said it expects 2010 to be challenging year for aircraft financing as European banks, the traditional financiers for aircraft, retreated to the sidelines.

According to Boeing officials, capital markets, mainly in the US, and regional banks in China, Asia and the Middle East would contribute to financing at levels similar to 2009, as would government banks.

At the beginning of this year, a severe credit crunch forced European banks out of the aircraft-finance business, even as it hit parent companies of many aircraft lessors. Giants of the business such as the International Lease Finance Corp., a unit of American International Group (AIG), were put up for sale.

But an easing of liquidity in capital markets around the world allowed airlines to raise cash, which is expected to be used to finance deals in 2010. Regional banks in growth markets like China and the Middle East contributed almost $18 billion in bank financing even as Government export-import banks in the US and Europe contributed $21 billion of aid for 2009.

At the manufacturers end, Boeing and Airbus filled up a small credit gap of $2.5 billion in 2009.