Boeing sees opportunities for Middle East aircraft financiers

"Investors who have capital available and are willing to enter the aircraft financing market will find much less competition now," said John Matthews, managing director for the Middle East and Africa at Boeing Capital Corp., the company's aircraft financing unit.

"Investors can take advantage of short-term financial market dislocations to enhance the returns of their longer-term aircraft portfolios."

Matthews hosted the company's annual Financiers and Investors event for the region, which was held at the Grosvenor House Hotel.

He was joined by Boeing colleagues who presented the company's current view of the state of the global aircraft financing market and the implications for financiers from its recently released 2008 commercial market outlook.

In its latest market outlook, Boeing increased its forecast for airline industry growth in the Middle East by 40% over the next 20 years as a result of recent orders and the emergence of low-cost carriers in the region.

The Middle East market is valued at $260bn in the next two decades, which translates into an expected need for 1,580 commercial jets.

Boeing Capital has actively encouraged the Middle East's emergence as an increasingly important source for aircraft financing.

"We recognize that the Gulf's rapidly developing financial markets are becoming important centers for aircraft finance and that there are significant opportunities for willing financiers in the region to invest in long-term and very mobile assets," Matthews said.

"We have worked with regional investors to make them more comfortable with airplanes as an investment class, and to see the advantages planes offer when compared to alternatives like real estate."

Importantly Boeing believes that "aircraft are ideal for Islamic financing since a fundamental criterion is that such investments be asset based," Matthews said.

The company's latest focus is to see if aircraft financing can be included in the Islamic Sukuk, or bond, market, based on a recent transaction in which an Islamic financier securitized a mortgage portfolio in the Sukuk market in tranches, similar to how aircraft investments are structured in the U.S. using a security instrument known as the Enhanced Equipment Trust Certificate (EETC)

This year's Boeing financiers' event attracted approximately 80 participants from the financial community [participants are largely but not exclusively from the region], twice the size of the company's first one in 2005.

A wholly owned Boeing subsidiary, Boeing Capital Corp. creates financing solutions for customers purchasing the company's commercial airplane and defense products. BCC works closely with third-party financing sources that provide nearly all of the financing support required by Boeing customers. BCC also manages the company's $6bn portfolio of approximately 350 aircraft, many of them newer, fuel efficient jetliners.