Aircraft financing market to grow amid travel demand

Boeing says Islamic financing gaining traction as tool to fund aircraft purchases

An increase in demand for travel and new aircraft around the world is leading to an increase in liquidity in the aircraft financing market, with forecasts pointing to continued growth in the sector.

According to Boeing Capital, bank loans and cash are the most commonly used tools by Middle Eastern airlines to finance new aircraft. However, other financing options are also gaining traction among airlines, and include insurance risk capital, mezzanine financing, and Islamic financing products.

“The amount of liquidity coming into the aircraft financing space just continues to increase, and we’re seeing that from all different parts of the world,” said Timothy Myers, president of Boeing Capital, the financing subsidiary of Boeing. “You’re going to continue to see more and more interest in aircraft financing as the asset type itself is becoming more and more attractive.”

Speaking in Dubai yesterday, he said that there is strong appetite to continue financing aircraft purchases.

However, there are also concerns about macro-economic factors such as geopolitical tensions and rising interest rates. “One of the top [challenges] is always geopolitical concerns. One of the things that combats that today is the tremendous diversity we have in the global airline business,” Myers said.

According to earlier Boeing projections, funding needs for new aircraft deliveries will jump from to $189 billion in 2022 from $122 billion in 2017.