ANALYSIS: Manufacturers play down delivery finance worries

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Manufacturers are playing down concerns that the lack of liquidity with some European banks could leave airlines facing a severe struggle to secure finance for new aircraft deliveries this year. But while other finance providers are expected to step in to fill the void, this funding will come at a steep price.

After breaking the 1,000 deliveries mark for the first time in 2011, Airbus and Boeing will set another shipment record this year, producing about 1,100 aircraft. Boeing estimates these deliveries will be worth $95 billion, more than a fifth higher than last year. Funding requirements are forecast to rise again in 2013 and break through the three-digit barrier, reaching about $106 billion.

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"There's clearly a bit of jitteriness [about finance]," says Boeing Capital's managing director of capital markets and leasing, Kostya Zolotusky.

Speaking to Airline Business for this year's interactive special report on finance, Zolotusky said: "We have our sleeves rolled up and see some realignment of the industry participants. Bank debt will shrink, in part due to pressures in Europe, but this will create opportunities in the lessor and capital markets space."

Airbus parent EADS is optimistic new players will step in. "We don't think we're getting into a severe problem in 2012," EADS chief financial officer Hans Peter Ring told Airline Business Interactive. "We would think that almost all the financings are settled [for deliveries during] the first six to eight months of 2012."

Ring expects international banks from other nations to become more active in aviation finance, such as China and Japan. With this, along with support from Europe's export credit agencies (ECAs), "we think it is manageable", he says.

Eddy Pieniazek, global head of consultancy at Flightglobal's Ascend division, expects the continued support of ECAs will prove vital for deliveries in 2012: "We've had three or four years where the ECAs and Ex-Im Bank have come to the fore, providing 25-30% back-up support to the financial markets, and we don't see 2012 being any different.

"European banks will be playing less of a role this year and will hopefully be replaced by some of the new entrants, like the Asian banks. The lessors will also perhaps step up to the plate."

However Robert Martin, boss of lessor BOC Aviation, warns "there will be an upward pricing effect on the available capital".