Boeing sees progress, untapped opportunities in Middle East aircraft investment
Boeing told bankers and financiers in Dubai that, since the company's first regional financers' event in 2005, the Middle East continues to emerge as a source of opportunities for aircraft financing capital. However, chances for additional aircraft investment remain untapped, particularly as global economic conditions further improve.
"The Middle East remains a robust area for the aircraft investor as the region continues to diversify its funding sources, but the door remains wide open to profitable opportunities. Air travel here is stronger than most other regions, which creates great opportunity for willing investors in aircraft financing," said John Matthews, managing director for the Middle East and Africa at Boeing Capital Corp., the aircraft manufacturer's customer financing unit.
Matthews served as host to more than 80 financers at the sixth edition of Boeing's annual Financiers and Investors Conference for the Middle East and Africa region, held here on September 22. Boeing presented its view of current aircraft financing market conditions and provided updates on its commercial airplane programs, including the 787 Dreamliner now in flight testing.
Boeing reported that, compared to conditions one year ago, the environment continues to improve for the various sources for aircraft financing – commercial banks, export credit agencies and private equity among them.
"The markets are much stronger than they were and they continue to gradually improve. There is no talk of a gap in terms of required funding and new planes continue to deliver on time with less difficultly than last year," Matthews said, adding that all-in pricing for aircraft funding remains at historic lows.
According to Boeing's latest market outlook, the Middle East continues to outperform the world in air travel growth. It was the only region that saw an international traffic increase during 2009, with a robust growth rate of 11.2 percent. The company's outlook over the next two decades expects the region to need 2,340 new airplanes to keep up with industry demand, at a market value of U.S. $390 billion.
Boeing also credits the Middle East in helping develop new industry financing sources. Last year, Emirates Airline secured more than $400 million in financing for three new Boeing 777 aircraft through a public bond offering backed by the Export-Import Bank of the U.S. It was the first such bond offering backed by Ex-Im Bank.
Meanwhile, the region continues to expand the use of Islamic financing. 2009 saw the first Sukuk deal for aircraft in which about U.S. $500 million worth of Islamic bonds, secured by 16 airplanes, were issued.
"It demonstrates our belief that airplanes are ideal for Islamic financing, since a fundamental criterion is that such investments be asset based," Matthews said.
On a personal level, Boeing is also pleased that its goal of expanding the Middle East's aircraft investment pool, and connecting its aircraft finance talent base, is being realized.
"Increasingly we're seeing people move from one financial institution to another, which helps spread industry knowledge around the region. It's encouraging to see our efforts to improve understanding, and encourage investment in our aircraft products, yielding such positive results," Matthews said.
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