Superjet Customers Now Enjoy a 'Competitive' Financing Package

 - March 1, 2014, 12:40 AM
Indonesia’s Sky Aviation took delivery of its Superjet 100s under a complex credit and lease agreement devised by Russia’s Vnesheconombank and Sukhoi.

Russia’s Sukhoi Civil Aircraft has long claimed its Superjet 100 offers a level of technical sophistication that surpasses that of any Western regional jet on the market. Now, a new funding system state-controlled Vnesheconombank (VEB) devised with Sukhoi to support export sales of the Superjet 100 promises to place the Russian regional jet on equal footing with Western models in terms of financing cost as well, according to VEB deputy chairman Alexander Ivanov.

“Our ultimate goal is to make Russian aerospace and financial products competitive in the global market,” Ivanov told AIN. Ivanov called Sukhoi “a long-standing partner” of his Kremlin-controlled bank, with whom it “has spent two years structuring the workable aircraft sales system support.”

The first airline to benefit from the new system–Indonesia’s PT Sky Aviation–signed for 12 Superjet 100-95Bs at Moscow’s MAKS 2011 airshow. The carrier accepted its first Superjet in December 2012, its second in the middle of last year and the third just before the new year. Deliveries to PT Sky Aviation could resume next year, provided the airline continues to demonstrate steady, profitable growth, according to Sukhoi.

Ivanov described the mechanism under which Sukhoi supplied the three aircraft as “a complex credit and lease scheme.” The bank granted the airline a credit worth $80 million on a 12-year term to cover most of the purchase. Export insurance comes from Exar, the Russian agency for insurance of export credit and investment.

While declining to reveal the exact interest rate charged by VEB, Ivanov insisted it needed to be “quite competitive” given the “competing environment of the fast-growing Indonesian market.” Russian bankers managed to arrange good terms “because we have good insurance for the political and economical risks from Exar,” he added. A special branch of VEB Leasing specifically established “in the region” as a tool of convenience managed the delivery of the airplanes.

“Should the airline not pay rentals on time and default happens, we can take airplanes back rather quickly and efficiently, for subsequent placement with another carrier,” insisted Ivanov, who explained that the scheme uses elements of both financial and operating leases.

“The credit and lease scheme we worked out is the one that minimizes risks for the leading funding institution. Aircraft are registered locally in a way that creates best conditions in terms of country-to-country relations.”

VEB also participated in the deal between Superjet International (SJI)–the Western sales and support arm for the SSJ100–and Mexico’s Interjet, in which France’s Natixis acts as the lead financier. SACE of Italy and Coface of France provide insurance, both in cooperation with VEB. With French, Italian and other EU manufacturers participating in the project as vendors and suppliers, European banks and insurers expressed eagerness to fund the deal. (Western content on an SJI-supplied Superjet exceeds 60 percent.)

The syndicate provided its first credit to the airline on December 19 last year, marking the first time a Russian bank took part in such an international collaboration, albeit with a rather small share: VEB provided about $6 million. The deal covers just one airplane, but plans call for it to serve as a model for funding the remaining aircraft later this year. Interjet accepted two Superjets this past summer and added two more by year-end.

According to Ivanov, VEB’s involvement will grow as more airplanes are delivered; Interjet holds firm orders for 20 airplanes and options on another 10. “Our participation means that Russia is taking the project seriously,” said Ivanov. “For the Western banks this is important and comforting. In the end, we have a workable solution where every participant is happy.”

VEB has invested more than $1 billion in the Superjet project so far, Ivanov reported. Export sales generate cash flow that help the bank recoup its earlier investments. “From our viewpoint as the main financier, the more Superjets that get delivered, the more services its manufacturer renders to airlines, and the sooner our earlier-made investments pay off. In that case the whole project gets clearer to us.”