Washington SENSE by yourDragonXi Δ 6th of July 2016 Ω 10:06 AM

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«U.S. BIZ Sensing	Θ	Θ
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~ Business News

Record-breaking $65 Billion Global Defence Trade in 2015
Global defence market will jump to $69 billion in 2016
Markets rose $6.6 billion, bringing the value of the global defence market in 2015 to $65 billion

Key findings
The Middle East was the largest importing region,
with $21.6 billion in deliveries of defence equipment;

Total defence spending accelerated in Asia-Pacific
as states bordering the South China Sea boosted defence spending;

France has doubled its backlog of orders from $36 billion in 2014 to $55 billion,
meaning that $55 billion worth of defence equipment has yet to be exported.
This increase means that France will overtake Russia as the second-largest global defence equipment exporter.

Germany moved from fifth- to third- largest exporter

UK dropped from fourth to fifth;

The largest global exporter, the United States,
saw another 10 percent increase in exports over the past year,
bringing the total to $23 billion (35 percent of the global total);

South Korea saw exports climb again to $871 million;

There was significant change in the top five importing countries,
with Taiwan, China and Indonesia all dropping out of the top five and
Australia, Egypt and South Korea replacing them.

UK and Norway Prop Up Western Europe Imports

South East Asia Imports Accelerate by 71 Percent

Nearly all of Western Europe�s military import gains in 2015 have come from Norway, pan-European programmes and the UK

South East Asia Imports Accelerate by 71 Percent

Dramatic Growth of US Defence Exports
the total may exceed $30 billion as deliveries of the F-35 begin to ramp up

Top Defence Importers (in millions USD)

2015 2016
Saudi Arabia 9,325 Saudi Arabia 10,056
India 4,331 India 3,953
Australia 2,306 United Arab Emirates 3,085
Egypt 2,268 South Korea 2,503
South Korea 2,181 Iraq 2,283
Iraq 2,141 Australia 2,063
Unknown 2,080 Egypt 2,032
United Arab Emirates 2,075 Taiwan 2,012
United Kingdom 1,831 Unknown 1,867
Algeria 1,674 Algeria 1,754
Taiwan 1,513 Qatar 1,692

South China Sea Imports (in millions USD)

Importer 2009 2015
Taiwan 517 1,513
China 1,004 1,460
Indonesia 1,061 1,259
Malaysia 789 257
Vietnam 434 1,117
Philippines 115 401

Fastest-growing opportunities over the past year
Romania
Angola
Lithuania
Philippines
Austria
Estonia
Latvia
Poland
Vietnam
Bangladesh

Military electronics spending for communications and intelligence heading upward in 2017

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~ Washington State China Relations Council

»Washington State China Relations Council

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~ Boeing

Boeing

»Boeing Capital

Aircraft Finance Market Outlook 2013-2017

2013 is seen as a year best summarized by sentiments of resilience and gradual realignment

ξ despite a continuous stream of economic and political challenges,
ξ global air travel demand is expected to demonstrate remarkable resilience in 2013
ξ stable demand growth, along with aircraft replacement requirements accelerated by higher fuel prices,
ξ should drive a rising appetite for new fuel-efficient airplanes
ξ Boeing expects that the underlying demand and a scarcity of new airplane delivery positions
ξ will ensure an adequate availability of capital at reasonable prices to fund new airplane deliveries for the industry in 2013
ξ
ξ Aircraft financing sources should benefit from continued strength of seasoned industry participants in Europe,
ξ the increased participation of new and returning entrants, such as banks in Japan, the United States, Australia and Middle East,
ξ along with a steady growth in capital markets financing for airlines and lessors
ξ
ξ This liquidity is necessary to gradually reduce reliance on export credit as higher fees and
ξ equity requirements mandated by the new Aircraft Sector Understanding take effect

ξ Aircraft financing markets should see reasonable liquidity and pricing in 2013, despite a sentiment of uncertainty
ξ Concern will be focused on the impact of higher fees and equity requirements for export credit transactions,
ξ along with more expensive and restrictive commercial bank debt
ξ In response to the challenges, the reliance on lessors and capital markets should increase

2013

ξ The industry should see delivery of roughly $104 billion worth of passenger jets,
ξ with about 95% of the total divided between Boeing and Airbus
ξ there will be important changes in how lessors leverage deliveries,
ξ rapidly increasing participation of new and returning commercial banks,
ξ declining export credit support, and
ξ a significant expansion of capital markets funding
ξ
ξ The scope of changes, along with a sentiment of uncertainty,
ξ will pressure manufacturers to provide backstop financing for future deliveries.
ξ
ξ However, developing market fundamentals and manufacturer pricing discipline for backstop support
ξ are expected to keep actual funding levels in line with recent history.
ξ
ξ Sources of financing for Boeing deliveries in 2013 reflect industry trends of declining reliance on export credit,
ξ rapid expansion of the capital markets, and balanced sources of lessor leverage.
ξ
ξ Global airline deleveraging continues and is represented in the relatively high levels of cash equity contributed.
ξ The majority of lessors' leverage should come from banks and capital markets,
ξ with only 5% of deliveries to be self-funded using parent companies' balance sheets

ξ In addition to new aircraft delivery financing,
ξ the industry can expect to have approximately $11 billion of refinancing requirements
ξ Financial crises and higher oil prices have limited this market's liquidity and
ξ the resulting price disruption between new and used aircraft is attracting additional liquidity from capital markets,
ξ asset-focused commercial banks, and private equity investment firms

Export Credit

ξ Beginning January 2013, higher fees and equity requirements mandated by Organisation for Economic Co-operation
ξ and Development's 2011 Aircraft Sector Understanding go into force.
ξ Barring any severe shock, export credit support for new aircraft deliveries is expected to decline.
ξ Boeing deliveries supported by the Export-Import Bank of the U.S. will be funded in the bank and capital markets.
ξ Ex-Im's guaranteed aircraft bond structure is expected to evolve, expanding the market breadth and improving its efficiency.

Commercial Bank Debt

ξ There were meaningful concerns about the future of commercial bank debt in aircraft finance at the beginning of 2012.
ξ A sovereign debt crisis was impacting European banks and China was tightening its monetary policy.
ξ For 2013, the bank debt market appears stronger and more globally diversified.
ξ European banks continue to be important market participants.
ξ In response to recent loosening of monetary policy, Chinese banks are more active as the primary financiers of deliveries to domestic airlines.
ξ Japanese banks, which have been financing most of the deliveries at home, are now returning to the global markets.
ξ Australian and Middle East banks are growing their share of regional aircraft financing.
ξ A number of North American banks are also starting to finance lessors using their balance sheets.
ξ Despite concern over long-term implications of the new regulations, 2013 is expected to bring an improved commercial bank market.

Lessors

ξ With export credit and commercial bank debt available to fewer customers and at higher prices,
ξ more airlines are likely to lease airplanes
ξ More than half of the world airline fleet is expected to be leased before the end of the decade, up from the current 40% share
ξ Increasing leasing demand and historically strong performance of commercial aircraft investments
ξ should continue to attract sufficient equity and leverage
ξ Lessors are expected to continue to source most financing in the bank and capital markets

Capital Markets

ξ The capital markets' contribution to aircraft finance should increase significantly in 2013.
ξ Boeing expects continued growth in Enhanced Equipment Trust Certificates (EETC) issuances to expand the market's liquidity and improve pricing
ξ Lessors should continue to evolve their use of the capital markets
ξ The expansion will need to coincide with an evolution of the credit rating agencies'
ξ understanding of the aircraft leasing business and the development of rational and consistent rating criteria for aircraft lessors
ξ Rating agencies also have a role in introducing non-U.S. airlines to the efficiencies of capital markets financing
ξ and shaping the market for international EETCs relying on the Cape Town Convention
ξ In 2013, the U.S. capital markets are expected to continue to be the primary market for the origination and
ξ syndication of aircraft public debt, though regional capital markets should continue to play a growing role

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Small & Smart Inc reserves rights to change this document without any notice
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