U.S. Export-Import Bank Says Persian Gulf Aircraft Aid Fills Financing Gap

The U.S. Export-Import Bank said governmental aircraft financing for Persian Gulf airlines such as Emirates doesn’t distort global markets because the funds fill a need that financial institutions aren’t meeting.

“When it comes to exports, banks have been more reluctant to make loans when it comes to foreign credits than domestic credits,” Export-Import Bank Chairman Fred Hochberg told reporters today at a briefing in Dubai. “We exist to level that playing field and take out market distortions.”

U.S. and European airlines are urging governments to limit financing of aircraft exports to avoid giving an advantage to competitors abroad buying from Airbus SAS and Boeing Co., the Washington-based Air Transport Association trade group said in a letter yesterday to U.S. Treasury Secretary Timothy Geithner. Hochberg said the needs of plane manufacturers and carriers must be considered when private banks won’t give loans for purchases.

“There are a lot of countervailing forces in terms of the aircraft industry, from the manufacturers to the airlines,” Hochberg said. “What is under discussion is how to find the most equitable way of dealing with it.”

Emirates overtook Cologne, Germany-based Deutsche Lufthansa AG last year as the world’s biggest carrier in terms of international traffic. The Dubai-based airline financed 20 percent of its aircraft purchases through export credits, Hochberg said. The U.S. Export-Import Bank also guaranteed $414 million of Emirates’ bonds last year to fund the purchase of three Boeing 777s.

Ex-Im’s Role

“We exist when the private sector financing is not able to make financial support,” Hochberg said.

Air France-KLM Group Chief Executive Officer Pierre-Henri Gourgeon and Lufthansa CEO Wolfgang Mayrhuber are among executives attending an Association of European Airlines meeting in London tomorrow to discuss a joint push with U.S. rivals for changes to state export guarantees for aircraft purchases.

The Export-Import Bank and its counterparts in Organization for Economic Cooperation and Development countries are looking at whether to set new policies when rules on state backing for aircraft purchases expire at the end of 2010, Hochberg said.

“We’ve always been in compliance and we’ll stay in compliance” with OECD trade rules, Hochberg said.

The role of export financing has ballooned since the credit crunch reduced banks’ willingness to lend. The share of plane deliveries covered by government guarantees more than doubled to 34 percent in 2009, according to figures from Toulouse, France- based Airbus and Chicago-based Boeing, the world’s two biggest makers of commercial aircraft.

To contact the reporter on this story: Stefania Bianchi in Dubai at sbianchi10@bloomberg.net.

To contact the editor responsible for this story: Edward Evans at Eevans3@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.