Diversifying Airplane Market Moderates Investment Risk 

By Walt Skowronski

This is the time of year when Boeing publishes its annual Current Market Outlook. Our airline customers use this analysis to assess future demand and to evolve their strategies. Our aircraft financier customers use the same information to evaluate their portfolios and to appropriately adjust their risk management strategies. Walter E. Skowronski President, Boeing Capital Corporation Liberalization of airline markets, rapidly developing economies in Asia, and great global liquidity are all driving unprecedented global aircraft demand. The diversification of the global fleet and demand should be a moderating influence on the cyclical nature of the aviation industry. Of course, liberalization also brings increased competition, which encourages airlines to develop innovative business strategies. The aviation industry will likely gain stability as the spectrum of airline business models becomes broader and more diverse. The diversification of airplane demand makes the world’s most mobile asset even more mobile. Rapid economic growth in the Asia-Pacific region, as well as in the Commonwealth of Independent States, Middle East, Latin America and Africa, should smooth out the peaks and valleys of demand that affect individual regions. Airplanes are good investments, but the best investment is an airplane that is designed to hold its long-term value by taking maximum advantage of the diversifying market. The recently introduced 737-900ER is a prime example. Lion Air, based in Jakarta, Indonesia, has ordered 60 of the newest member of the 737 family to serve its extensive domestic route structure, connecting the islands of Indonesia and reaching out to Singapore and Malaysia. Yet the 737-900ER’s excellent fuel economy and greater passenger capacity make it equally attractive to a broad range of operators across the globe. For instance, the 737-900ER’s range and ability to carry 31 more passengers than the highly successful 737-800 make the -900ER the ideal replacement for older airplanes, such as the 757, that are currently flying U.S. domestic routes. This level of flexibility makes the 737-900ER a valuable asset in airline fleets anywhere in the world, keeping long-term asset values high and providing investors with a large pool of potential resale or leasing customers.