Company calls on engine manufacturers to assist with financing aircraft on order

Boeing Capital is seeking the help of its suppliers and the major leasing companies to put in place financing arrangements enabling airlines badly impacted by the fall out from the 11 September attack to continue taking delivery of aircraft already on order.

The company is believed to have approached some of the larger leasing companies - General Electric, International Lease Finance (ILFC) and CIT, to step in with financing as banks pulled back from the airline market. Boeing is also calling on the support of its main suppliers, such as the engine manufacturers to assist with financing proportional to their workshare.

Boeing is offering new delivery positions to leasing companies in the hope the aircraft can be placed in other markets such as Asia. "There have been discussions, but it is conceptual at this stage. The bigger issue is who is still in a position to take the aircraft," says a senior leasing company executive.

The leasing companies already account for around 35% of the civil aircraft orderbook, larger than at any time in the past, which in itself has many in the industry concerned. Leasing company orders and options, however, extend out six or seven years. Furthermore, compared with the last serious downturn 10 years ago the major aircraft lessors have much stronger financial backing from their owners, such as ILFC's American International Group and CIT's Taikoo.

"The four major leasing companies have much deeper pockets and are better equipped to handle this crisis," says the chief operating officer of a major US lessor. "The short term will be severe, but I would expect companies to still take aircraft and try to place them. I don't see this as being a meltdown."

The near-term impact will be felt strongest by the smaller leasing companies with large fleets of older aircraft. "The [Boeing] 727 fleet will be the first to be parked and I wouldn't expect many of them still to be flying by the first quarter of next year," says Merrill Lynch aerospace analyst Byron Callan. "The Fokker 100s will also go, along with [McDonnell Douglas] DC-9s and early generation 737s."

Source: Flight International