New OECD understanding on aircraft financing
OECD announced a new aircraft sector understanding (ASU) was been signed on 25-Feb-2011 between five signatory governments: Brazil, Canada, the European Union (including France, Germany, Italy and the UK), Japan and the US. The ASU updates rules on the use of state financing in support of commercial aircraft exports by signatories. Russia and China participated in discussions on the new agreement during 2010 but have not yet decided to join.
Substantial updates from the 2007 agreement include:
- Unification of the terms, conditions and procedures under which export credit support is offered to large aircraft (manufactured by Airbus and Boeing) and regional aircraft (produced by Bombardier and Embraer);
- Creation of a maximum 12-year term for export credit support;
- Standardisation of the risk rating system (in terms of categories and fee levels) for all types of aircraft; and
- Unification of underwriting standards, through the use of equivalent risk reduction techniques in all risk categories.
- The ASU allows a transition period for certain previously ordered aircraft, which will be covered by existing financing terms, within time or volume limits for export credit financing.
Selected Aerospace daily share price movements (% change): 25-Feb-2011