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Draft OECD agreement to be formally approved in early 2011

22-Dec-2010 11:02 AM

Organisation for Economic Cooperation and Development (OECD) announced a new agreement on export credit financing is to be formally approved in Jan-2011 and introduced from 01-Feb-2011. The US, Canada, France, Germany, Spain and the UK will reportedly sign. The agreement increases minimum premiums charged by export credit agencies and references them against market conditions. Aircraft purchasers will also pay a market surcharge, which will be revised quarterly, with increments limited to 10% to reduce volatility. Existing export financing rules will be kept in place for aircraft due to be delivered up until the end of 2012, to protect financing arrangements already in place. Aircraft purchased prior to an earlier OECD agreement in 2007 will also be protected, with “small” financial penalties.

OECD: “It’s a robust agreement. It will mean that government-backed financing can complement the market, without crowding the market out,” Steven Tvardek, OECD Negotiator. Source: Bloomberg, 22-Dec-2010.

British Airways: “[The agreement] is a step in the right direction. The new financing levels only become effective in two years, however, and are still cheaper than the market rate,” Laura Goodes, spokeswoman. Source: Bloomberg, 22-Dec-2010.

Ryanair: “If this deal goes through we will be trying to have it overturned because it is cartel pricing,” Howard Millar, Finance Director. Source: Financial Times, 22-Dec-2010.