Our thinking

Navigating turbulence

What's inside

Aviation finance is proving its resilience amid a cooling global economy. Our survey finds that senior executives in the sector are optimistic that global levels of aircraft financing will increase in 2020


Despite the volatility that has affected the overall economy, the aviation industry has weathered the storms. Indeed, sector financing is set to grow, though there could be regional differences according to Justin BensonAdrian BeasleySimon CollinsChristian HansenMichael Smith and Richard Smith, partners of global law firm White & Case

Despite many of the global economy's warning signals flashing red, the prospects for the aviation finance sector appear undimmed. The aviation industry as a whole has demonstrated remarkable levels of resilience amid the uncertainty and volatility of recent years, with continued passenger growth offsetting a moderate decline in air cargo traffic during 2019. Financing has grown in lockstep with the industry and is expected to continue to do so. For example, Boeing predicts the value of global aviation finance will rise to US$181 billion by 2023, up from US$126 billion in 2018.

Our new survey of the aviation finance market suggests these types of forecasts may be realistic. The airlines and capital providers whose views it summarizes expect investment in aviation to continue growing, with a corresponding increase in financing activity. Although challenges certainly may lie ahead, including the deteriorating outlook for the global economy, optimism still prevails in this market. In particular, the increasing diversity of funding sources may provide some protection against setbacks in any one area.

That said, this report also identifies significant differences in sentiment by geography. In broad terms, respondents based in the Asia-Pacific (APAC) region are considerably more likely to have positive views of the outlook for 2020, while those based in North America and—in particular—Europe, the Middle East and Africa (EMEA) are less upbeat.

Clearly, while this is a global industry, with capital flowing freely across borders, there is no escaping the regional economic context. As European and North American economies seemingly move toward a period of slower growth—or outright recession if the most pessimistic predictions are confirmed—Asian markets may offer some respite, despite also being expected to slow.

This report focuses on both the global picture and these geographical nuances. We consider the outlook for investments in the aviation sector, and we survey the funding landscape that will support these investments. Our report also focuses on liquidity, airline consolidation and mergers and acquisitions (M&A) activity, while highlighting opportunities and risks facing this industry in 2020 and beyond.


In the fourth quarter of 2019, White & Case, in partnership with Mergermarket, surveyed 100 senior-level executives at entities that have either financed or invested in the aviation industry in the past three years. The aim of the survey was to analyze sentiment regarding aviation finance. Organizations surveyed included airlines, operating lessors, banks, export credit agencies, private equity and other alternative capital providers. Job titles included CEO, CFO, director level and heads of investment.


“The aviation industry as a whole has demonstrated remarkable levels of resilience amid the uncertainty and volatility of recent years”

Overall investment outlook for global aviation finance

Our exclusive survey of senior executives who have financed the aviation industry in the past three years reveals that the overall investment outlook for the sector is bright, with one region in particular set for larger growth than its global equivalents

airplane engine

Funding sources

The multiplicity of financing sources such as asset-backed security, insurance and leasing companies has been crucial for the sector. In this section, we reveal the origins and sources of expected funding in 2020

airport runway

Liquidity and refinancing

Despite the sector's current strong performance, many survey respondents believe the industry needs even more capital and liquidity. In addition, most expect restructurings and insolvencies to increase in 2020

airplane windows

Winds of change

Economic volatility, political unrest and fierce competition are all seen as major challenges to the sector in the coming 12 to 18 months. Meanwhile, respondents are preparing for rising oil prices and growing industry consolidation

airplane landing


We explore key takeaways from our exclusive survey and what they could mean for the aviation industry and aviation finance

flying airplane
airport runway

Funding sources

The multiplicity of financing sources such as asset-backed security, insurance and leasing companies has been crucial for the sector. In this section, we reveal the origins and sources of expected funding in 2020

4 min read


of APAC-based respondents expect the volume of funding from the asset-backed security sector to increase in 2020

The growing diversity of funding sources for aviation finance has been a critical factor in the resilience of the market, even in the face of challenging economic headwinds. In the capital markets, for example, the asset-backed security (ABS) sector continues to play a more important role, with a broad range of investors attracted to this alternative asset class's value proposition of strong cashflow, global diversification and high-quality collateral.

The majority of survey respondents expect ABS issuances to further increase in 2020, with those in APAC particularly bullish about increased availability of funding from this source.

Many respondents to this survey expect the expansion of the insurance market to continue, with those in APAC particularly bullish about the role of insurers in 2020.

Elsewhere, the insurance market, which provides aircraft non-payment insurance to banks and capital market investors, continues to add to the mix. A relatively new source of financing that complements other funding sources, it has become a growth area for aviation finance, with the Aircraft Finance Insurance Consortium (AFIC) spearheading its expansion. Indeed, aircraft non-payment insurance products have helped in part to compensate for the reduced activity in the export credit agency (ECA) market, which (due to various factors and with some notable exceptions) has not been as prevalent a source of funding in recent years as it was immediately following the financial crisis.

Many respondents to this survey expect the expansion of the insurance market to continue, with those in APAC particularly bullish about the role of insurers in 2020. The exception is EMEA, where 47% of respondents expect funding from this source to decline, although a majority still anticipate growth or stability.

As funding diversity has increased, the need for ECA support has diminished, particularly in the most mature financing markets. Notwithstanding these circumstances, 83% of APAC respondents still expect ECA funding for aviation to increase during 2020, while 55% of North American respondents agree. This indicates that the ECAs continue to be viewed as an important source of funding for new aircraft deliveries, particularly given the potential for global economic factors to create liquidity constraints in other financing options.

Many of the respondents in this research are delighted that funding markets look set to expand. "Capital and liquidity in our sector should be higher," says the Managing Director of an APAC-based bank. "Growth in aviation depends on investment, and there have been too many temporary solutions to cover airline loans and consolidate debts."

The Chief Investment Officer of an APAC private equity fund agrees. "More confidence needs to be placed in the industry's return potential," the executive says. "There is not enough capital and liquidity in the sector."

One important part of the funding diversity story of recent years has been geographical expansion.

Once concentrated in North America and Europe, the appetite for funding aircraft is now global, with Asian investors having steadily increased their presence in the sector.

Japan, notably, with its network of more than 100 regional banks, is a significant player in the market. China, too, is now emerging as a leading source of funding for the aviation industry. Almost two-thirds of survey respondents (65%) expect that trend to gather pace during 2020, forecasting increased investment from Chinese leasing companies and lenders. Still, the geographical split of views suggests Chinese investors are more likely to focus on APAC and North America; far fewer respondents in EMEA anticipate additional Chinese funding.

Growth in Chinese funding will be especially important if the US market—still the dominant player in aviation finance—contracts, as investors become more cautious about the economic and commercial outlook. Our survey evidences this as an increasing possibility: Nearly a third of respondents (31%) expect funding from US capital markets to decline during 2020.

While a majority of respondents still anticipate US funding expansion, some regions are pessimistic about what they can expect from North American capital markets. EMEA shows significant concern, with 53% of its respondents expecting US capital availability to decline.

Even with increased funding from China, declining US capital availability could require the airline sector to look elsewhere for investment capital. If that were to happen, then our survey responses indicate an increase in sale and leaseback finance transactions would be likely. In addition, in APAC the sector would expect to increase its borrowing from other financial institutions, while those in EMEA would be more likely to fall back on ECA funding.

There may also be scope for an increase in Japanese Operating Leases with Call Option (JOLCO) transactions, with every region pointing to this area as a potential Plan B, should the US markets narrow.

Another possibility is unsecured finance, a source of funding that demonstrates growing importance in the sector. Significant numbers of respondents expect to seek unsecured sources of funding during the next 12 to 18 months, particularly in APAC.

In any case, as appetite continues to grow from a broad range of institutional investors, including pension funds, insurance companies and new geographies such as China, financing will likely remain easy to obtain.



This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2020 White & Case LLP


Service areas