Jetrader - March/April 2012 - 15

which we have been experiencing, it’s done its job very well,” said Scott Scherer, senior vice president at Boeing Capital Corporation, the manufacturer’s ﬁnancing unit. Scherer also co-chairs the Aviation Working Group (AWG), the aircraft ﬁnancing industry association, which he helped found. “Export credit has ﬁlled any gaps that we might have with respect to what’s occurring in the ﬁnancial markets right now, particularly in regard to the European banks, which is having some spillover effects to other areas. For 2011, the result was a record year,” Scherer said. For example, since 2009, the ExportImport Bank of the U.S. hit record levels of large-aircraft support for three consecutive years. For ﬁscal year 2011, Ex-Im authorized approximately U.S. $11.7 billion, all of it through loan guarantees for commercial transactions. ECA support was also prevalent elsewhere, namely Europe’s export-credit agencies supporting Airbus nations, and agencies in Canada and Brazil, serving regional jet producers there at even higher rates. “For Airbus, 26 percent of all our deliveries were supported by the ECAs. That was less than in 2010, when the level was 32 to 33 percent,” said Claude Brandes, aircraft ﬁnancing director at Airbus Industrie, and Scherer’s counterpart as the AWG’s co-chair. “Concern that airlines might take advantage of the lower rates for export credit that are in place prior to the new ASU taking effect did not materialize and remained at a reasonable level. However, with questions about the viability of bank funding going forward, and the challenge of European banks ﬁnancing in U.S. dollars, 2012 conditions may be a different,” Brandes said. Boeing estimates that with its and Airbus’ planned production increases, total delivery capital needs in 2012 will reach about $95 billion. Of that ﬁgure, manufacturers are again counting on a continued sizeable chunk coming from the ECAs, which face another record year as the world’s

economy grapples with Europe’s debt crisis. At the same time, the industry is bracing for impacts from new Basel III global banking regulations going into effect and more stringent ECA borrowing terms that arrive in 2013 with the new ASU. “2012 will continue to be very much like 2011 as far as export credit is concerned, subject to Ex-Im Bank’s reauthorization successfully concluding as we assume it will,” said Boeing’s Scherer. “The other reason is the transition to the 2011 ASU, and the provision that less stringent ﬁnancing terms of the 2007 ASU will be applicable to aircraft delivered in 2012, as was the case in 2011,” Scherer added. Airbus’ Brandes shares the conﬁdence that ECAs in 2012 will provide the support needed so as not to contribute to capital shortfalls. “Under which forms export credit will be forthcoming is an interesting question. Everything will depend upon the funding. We don’t know what the position of the banks in Europe will be in this respect. Funding in U.S. dollars started to be difﬁcult by mid-last year for the French banks, and to a lesser extent for the other European banks,” Brandes explained. “The other concern is Basel III. In Europe, the monetary authorities have decided, taking into account the ﬁnancial crisis, to speed up its imple-

necessary. Will that really materialize in 2012? That I do not know, although taking into account employment in the European aircraft industry, governments will be strongly incentivized to support,” said Brandes. The Airbus executive pointed to what he called a “dramatic change” in the nature of export credit that occurred over the last few years. “Export credit is now compared to the commercial markets. It is considered that its terms and conditions should only match what is currently available elsewhere,” said Brandes. “We thought it was actually the back-up solution in any situation. Nowadays that is no longer the case.” Both experts share relative comfort with export credit’s potential for 2012. However, views become cloudier around 2013 and the new ASU, with its more costly fees and complex terms designed to address criticism by some stakeholders of unlevel playing ﬁeld conditions for some of the parties. “2013 is the new world. We don’t know just yet how the new ASU will work,” said Boeing’s Scherer. “It’s going to depend on conditions in the market at that time and the alternatives that might be available to our airline customers. Export credit will be there until the commercial markets stabilize and become more attractive and pick back up again. At this time we don’t really expect that to happen. The European debt crisis is going

“2013 is the new world. We don’t know just yet how the new ASU will work.”
-Scott Scherer, senior vice president at Boeing Capital Corporation

mentation. What will be the outcome on aircraft ﬁnancing is not known as yet.” Brandes said while the ECAs will still be involved, they are likely to be concerned about market criticism of the proper role for export credit support. “They will monitor more carefully their exposure and will try not to support an aircraft delivery if it is not really

to go on for quite a while, plus there’s the implementation of Basel III. Export credit will still play a key role in 2013, even though it’s going to be considerably more expensive,” Scherer said. Both look forward to April 2012 when the governing Organization for Economic Development and Cooperation (OECD) next adjusts export credit pricing Jetrader 15

http://www.ISTAT.org

Jetrader - March/April 2012

Table of Contents for the Digital Edition of Jetrader - March/April 2012