Gulf Banks Help Underwrite Region’s Aviation Boom

(Live Trading News, New York, 28 February 2015) Cash-rich Gulf banks are becoming bigger players in the region’s aviation boom, helping carriers like Emirates, Qatar Airways and Etihad Airways to fund their fleet expansion. Flush with huge cash deposits estimated at $1.15-T, Gulf banks have the firepower to be increasingly competitive in aviation lending markets. Globally, funding from some international banks has also been less available since the Y 2009 global financial crisis, although a number have made a return to the market. It gives the region’s carriers access to cheap capital, while posing a threat to the dominance of global banks and aircraft lessors which have thrived on the accelerated growth of the Gulf aviation industry. Airlines traditionally relied more on leasing firms, export credit agencies, international banks and capital markets or just cash for their financing needs. But as their order books have swollen, carriers have widened their sources of financing in order to secure competitive rates and diversify risks. Export credit, once a cost-effective mainstay for the big 3 Gulf carriers has been pushed towards market rates as a result of changes in international financing rules.

MRO reports that in recent years the flow of cheap money from European and US export credit agencies has slowed dramatically, so airlines have had to seek alternatives to fund fleet renewal and expansion.