The enhanced equipment trust certificate (EETC) aircraft financing market could reach $15 billion this year, according to attendees at the ISTAT Americas 2013 conference in Orlando today.
The majority of attendees anticipate between $12 billion to $15 billion in secured aircraft debt raised in the capital markets this year compared to about $10 billion in 2012.
US airlines are expected to tap the capital markets about half a dozen times this year, says a source familiar with the EETC market. This does not include American Airlines' $663 million private placement that closed today and its up to $1.5 billion EETC refinancing whose bankruptcy court approval has been appealed by investors.
US carriers raised $3.8 billion in secured EETC debt from six issues in 2012.
Delta Air Lines and United Airlines have traditionally been the most prolific issuers, with US Airways a frequent market participant. All three airlines have aircraft financing needs this year.
United is expected to hold off issuing any new EETC debt until the Boeing 787 grounding is resolved, says the market source. It has two deliveries of type the plus roughly six Boeing 737-900ERs that are unfinanced.
US Airways is expected to make a decision on how to finance its six unfinanced deliveries this year in April, says Tom Weir, vice-president and treasurer of US Airways, at ISTAT today.
Foreign airline issuers are also expected to tap the market this year. Air Canada, Emirates, British Airways-parent International Airlines Group (IAG), Norwegian Air Shuttle and Turkish Airlines are all considered likely issuers according to various market participants.
"I expect more than four [foreign] airlines will enter this market over the fairly near term," says Patrick Kaufer, managing director and global head of aviation finance at Deutsche Bank, at ISTAT.
He adds that the capital markets are the only "logical direction" for these borrowers with export credit agencies widely expected to decrease lending and limited capacity in the bank market.
Emirates opened the foreign issuer EETC market with its $587.5 million Doric Nimrod Air Two (DNA2) deal in June 2012.