Buoyed by the resurgence of air travel after almost a year, Boeing expresses confidence in the availability of adequate funding for jet buyers to take deliveries. The aircraft manufacturing industry is pinning its hopes on the recovery of air travel to pull them out of the present economic slump.
The required funding to support deliveries industrywide fell about 40% to $59 billion in 2020. Boeing was especially affected by the pandemic as its production was already weakened by the grounding of its 737 MAX model in 2019.
Tim Meyers, President of Boeing Capital (Boeing’s Financial Arm), said, “Despite the unprecedented impacts of COVID-19 on the global aerospace industry, there generally continues to be liquidity in the market for our customers. We expect it to further improve as travel begins to rebound.”
The past decade saw aviation become a favourite alternative asset class that offered relatively high payouts, especially with low-interest rates.
All of this came to an abrupt end after the COVID-19 pandemic. Widening credit spreads forced capital markets to cut ties with the aviation industry and pushed banks to a head-long retreat, a Boeing aviation finance report revealed.
The report also mentioned the return of capital markets and also the availability of new sources of funding. Institutional investors and funds have joined the market and are expected to play crucial roles in the industry’s revival.
Of niggling concern is the availability of funds from commercial banks which usually made up at least a third of the finances required to support jet deliveries. Although commercial lending has recovered to almost pre-COVID levels, Boeing is keeping a close eye on it. As of now, capital from investment funds is expected to cover the gap left by the commercial banks.
Myers added, “We expect that capital will continue to be routed into the sector by established players and as new entrants seek opportunities during the industry’s recovery.”