The sentiment expressed by the world’s two big airliner manufacturers seem increasingly out of line with the reality perceived by the financial community when it comes to airlines’ ability to fund aircraft deliveries this year, according to some of the industry’s most prominent analysts. Merrill Lynch and UBS each reported from this month’s ISTAT conference that a yawning funding gap will force Boeing and Airbus to modify their respective plans for maintaining production rates or find themselves building dreaded “white tails.”
“All but the manufacturers foresee a $10 billion to $20 billion funding gap, equivalent to 15- to 30 percent of 2009 forecast production, mainly attributable to much lower commercial bank funding,” said the UBS report. Merrill Lynch, meanwhile, projected the very same 15- to 30-percent cut in production rates, but by mid-2010.
“The OEMs are still wearing a brave face when confronting the economic downturn,” Merrill Lynch reported. “This may because both Boeing and Airbus need to feed over-budget, bloated and behind-schedule R&D programs with cash.”
Whatever number of airplanes they eventually build by the end of the year, both Airbus and Boeing will no doubt need to rely more on their own financing organizations and export credit agencies to pick up slack left by an anemic level of straight commercial bank financing.
Boeing has placed a $1 billion target on the amount of financing its Boeing Capital division will have to supply this year, while the U.S. ExIm Bank expects to support delivery of 150 to 175 Boeing aircraft this year. Estimates of the level of support expected from European export credit agencies for Airbus airplanes range from 200 to 300.