Boeing share price down, forecasts strong demand for financing airplane deliveries

Boeing Co said it expects strong demand for new airplanes during 2015, materializing in about $124 billion of needed financing for all plane deliveries, nearly double the amount compared to 2010.

Funding of Boeing deliveries in 2015 is projected to mirror that of the broader industry, the company said, roughly balanced between cash, commercial bank debt, capital markets and export loans. Boeing also projected industry demand for funding to slowly increase through the upcoming years to $156 billion in 2019.

The company said that capital market, including asset-backed bonds, will provide 33% of the funds needed for deliveries in 2015, taking the number one spot as primary source of financing from bank loans, which now stand at 29%. The company also said 25% of the amount will be supplied by cash, while the rest will come from export credits.

“The stable performance of aircraft finance and investment over the past few years, particularly through the global financial crisis, is attracting new participants and driving diversification,” said Tim Myers, vice president for aircraft financial services at Boeing Capital Corp, cited by Bloomberg.

The increasing demand for fuel-efficient airplanes will continue through 2015, the company said. Boeing and rival Airbus Group hit record levels of production with joint output of more than 1 200 airplanes this year.

Boeing forecast that China will remain the lead provider of global aircraft debt for 2015, accounting for 23% of all commercial bank debt. Germany and Japan are lagging behind with 17% and 13%, respectively, while the US and Australia are projected to bring a lot of new participants and supply 9% and 8%.

“First-tier airlines and lessors should continue to be the primary beneficiaries of robust competition among banks,” Boeing said.

Usage of export credits is likely to be limited to emerging players or new lessor platforms and would remain at historically low levels in 2015 due to higher fees and equity requirements.

Concerns about plummeted fuel prices, FEDs upcoming decision on whether to increase interest rates, currency volatility and political tension between the US, Europe and Russia are responsible for some market fears.

“However, as long as these variables do not undermine global economic growth, the current trends for new airplane demand should continue in 2015, supporting continued strength and balance for the global aircraft finance industry,” Boeing said.

Boeing Co fell 1.46% and Monday and an additional 1.65% on Tuesday to trade at $128.13 at 15:48 GMT, marking a one-year decrease of 4.90%. The company is valued at $92.88 billion. According to the Financial Times, the 21 analysts offering 12-month price targets for Boeing have a median target of $153.00, with a high estimate of $175.00 and a low estimate of $101.00. The median estimate represents a 17.44% increase from the last close price of $130.28.