Airlines seek compromise on export-credit financing

26th Nov 2010
Airlines seek compromise on export-credit financing

Leading airlines from around the globe are seeking to diffuse a growing row over so-called export-credit financing.

Under an informal agreement between the US and the European Union, airlines from the home countries of Boeing and Airbus may not receive government export support on the companies’ planes.

This group includes the United States, United Kingdom, Spain, France and Germany.

However, the arrangement has come under pressure as airlines outside of the pact seek government support for their expansion, particularly those on the Middle East.

The ongoing economic crisis has also played a key role.

Before the crisis, airlines were able to fund airplane purchases inexpensively through highly developed capital markets.

But since financial markets froze up in 2008, commercial financing has gotten more expensive than funding backed by guarantees from the US and European governments.

As a result, 24 airlines from the home countries complained to governments in September the current arrangement is unfair.

Many carriers in the ineligible group want access to export-credit financing, while some want it limited for all carriers from developed countries.


Latest Developments

Today ten major airlines – including Ryanair, Emirates, Etihad and Korean Air – called for a relaxation of rules on export-credit financing to defuse tension.

The airlines are among the biggest beneficiaries of state funding for aircraft purchases.

Following talks at the Organisation for Economic Cooperation and Development meeting in Paris the airlines – calling themselves the Aviation Alliance issued a statement which read: “Export credit financing is essential to the continued growth of the aviation industry.

“We have come together today to call for the extension of export credits to all airlines in the US and Europe, irrespective of whether they are based in a country which manufactures aircraft.”

The home-market rule developed because the US Export-Import Bank (which supports foreign sales of Boeing planes) is forbidden from financing domestic sales.

To establish a level playing field between Boeing and upstart Airbus in the 1980s, both agreed not to seek export-credit support for sales into the other’s home market.



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