European and US airlines call for capping of export credits
US and European governments have been urged by nine European and 15 US airlines to cap export credits on the sale of commercial aircraft at 20% of deliveries (Reuters, 13-Oct-2010). The airlines called for new principles to govern the rules being considered under a new OECD aviation sector understanding:
- New agreement must ensure a level competitive playing field;
- Volume should be controlled and reduced from present levels;
- Establish a cap of 20% of ECA financing for aircraft deliveries for each airline/lessor;
- Current/suggested premiums are too low, use of ECA financing by airlines should not be allowed to provide a competitive advantage;
- Export credit should be on less favourable terms than commercial bank financing;
- Current/suggested loan-to-value ratios amount financed per aircraft are too high and must be lowered;
- Export credit should address political and country risks. Official export credits must support borrowers that are unable to access commercial markets because of specific country risks. Using export credits to enable aircraft sales to credit-worthy borrowers merely because conditions in commercial markets are relatively unfavourable distorts the market.
- The terms of all financing transactions undertaken by ECAs, whether by direct financing, guarantee, or otherwise, should be made public in a timely manner.
Signatories to the letter:
- Air Berlin;
- Air Europa;
- Air France;
- British Airways;
- Monarch Airlines;
- Virgin Atlantic Airways.