Airlines Propose New Export Credit Rules

 - October 13, 2010, 11:37 AM

A group of 24 airlines based in Europe and the U.S. yesterday issued a set of common principles they claim should underlie a new OEDC Sector Understanding on Export Credits of Civil Aircraft (ASU) to ensure a “level playing field” in the arena of export financing of Boeing and Airbus airplanes. The 24 airlines, which include 15 members of the U.S. Air Transport Association and nine European carriers, have called on governments to limit export credit agency-backed loans to 20 percent of any airline’s or lessor’s aircraft deliveries. 

The airlines have also called for export credit to come on terms less favorable than those available from commercial bank financing. “The use of export credit financing by airlines should not be allowed to provide a competitive advantage to such airlines over their competitors through unrestricted access to cheap capital,” according to the statement.

Meanwhile, maximum loan-to-value ratios should be lower than those available through commercial market financing and export credit should address political and country risks that limit access to commercial credit, according to the airlines.  

“The fundamental purpose of official export credits in the aircraft sector must be to support borrowers that are unable to access commercial markets because of specific country risks,” said the statement. “It is a distortion of commercial markets to use official export credits to enable aircraft sales to credit-worthy borrowers merely because conditions in commercial markets are relatively unfavorable.” 

Finally, the airlines called on governments to make public all terms of financing transactions undertaken by export credit agencies.