Airplane Value Provides a Firm Foundation for Financing

By Walt Skowronski

Walter E. Skowronski, President, Boeing Capital Corporation

Aircraft financiers are increasingly basing airplane financing decisions on the long-term value of the airplane asset as opposed to the credit of airline operators. A commercial jetliner is one of the most mobile assets in the world. It can fly to any point on Earth where demand is strong and market values are high. The long economic service life of a commercial airplane gives aircraft financiers and investors the flexibility to address cyclical market challenges over time.

The recent ratification of the Cape Town Treaty demonstrates the global desire to enhance the financing infrastructure to better protect airplane value and liquidity. The Treaty formalizes and improves financier rights to the value of a financed airplane, bringing airplane assets in line with international custom and agreement on other types of real assets.

The resulting confidence in the ability to use the airplane's value as security for a loan gives financiers greater flexibility to develop innovative financial arrangements. This, in turn, removes political and economic obstacles that have traditionally made it difficult for some airlines to qualify for favorable financing.

The Boeing product strategy reinforces the notion of airplanes as assets. Long-lasting composite structure, increased component standardization, engine interchangeability, flexible interior designs, and open systems architecture—aggressively developed by Boeing—all directly enhance the liquidity and asset value of Boeing airplane products.

Boeing technology leadership and innovation reduces ownership costs, cuts the cost of transitioning airplanes between customers and regions, and keeps residual values strong by ensuring operational flexibility with low operational and maintenance costs. The Boeing focus on designing, producing, and supporting airplanes that meet airline operational requirements—and on delivering superior asset performance and liquidity—allows Boeing customers and partners to count on airplane products and services with the highest value and the lowest risk. This is one area where Boeing Capital Corporation is leading innovation in financing infrastructure to gain the full benefit of Boeing's technological developments.