Notwithstanding Boeing’s announcement in April that it will cut 777 production from seven to five per month starting next June, the world’s two big airliner manufacturers appear out of touch with the harsh reality of their ability to fund aircraft deliveries this year, according to investment banks familiar with the lending environment. That at least appeared to be the consensus reached during the March 16 and 17 International Society of Transport Aircraft Trading (ISTAT) Conference in Phoenix, Arizona, from where Merrill Lynch and UBS each reported that a yawning funding gap will force Boeing and Airbus to modify their respective plans for maintaining production rates this year 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, cited projections for the same 15- to 30-percent cut in production rates, but by mid-2010.
