Airliner Export Credit Feels the Political Heat

(AIN, New York, 20 May 2013) Boeing’s recent assertion of an increased appetite in capital markets to fund airliner orders is welcomed by manufacturers and their customers when other sources of funding seem under pressure. Export credit, now comes generally at higher interest rates and tougher equity requirements while such government-backed capital has become a hostage to global politics, according to Kostya Zolotusky of Boeing Capital. “There are no surprises [about export credit becoming harder to secure] because it continues to be political on all sides,” he said. Zolotusky predicted further rancor between Brazil and Canada over their long-running squabble about accusations that each country illegally subsidizes their national aerospace champions–Embraer and Bombardier, respectively. Also clouding the export credit environment is how January's new OECD administered Aircraft Sector Understanding, may resolve long-running disputes over issues like the “home market” rule under which Europe and the U.S. maintained a long-standing agreement to abstain from providing financing to airlines in their own or each other’s domestic markets. This prompted accusations from “home” carriers of alleged anti-competitive assistance for new rivals from other regions, such as the fast-growing Arabian Gulf airlines. Last month Delta Air Lines significantly elevated the issue when it filed a lawsuit against the U.S. Export-Import (Ex-Im) Bank.