Jetrader - November/December 2010 - 16

the Canadians don’t agree. In addition, airlines have raised concerns about it as well. So, it appears that the home market restriction will be eliminated. This has a lot of implications, particularly for the United States, which doesn’t now have a programmatic mechanism to ﬁnance U.S. airlines. Presumably this would be resolved before the United States would sign up for the new, revised ASU. Q. What do you see as the desired outcome? S.S. – I think what’s important is to create a long-term and sustainable agreement such that, at the end of the day, we could bring in the Russians, Chinese and other new entrants into the airliner market into this process. The goals are a level playing ﬁeld for the manufacturers and their airline customers and a system that has an appropriate balance with the commercial markets. And at the same time, we’d have something that’s politically sustainable and doesn’t use too much export credit, yet allows for it when y

needed to help customer deliveries like in the market disruption we’ve just had in ’08 and ’09. Q. What are the odds the process will be ﬁnished by late 2010? S.S. – The agreement is that it will be done by the end of this year, and all the Organization for Economic Cooperation and Development (OECD) participants are working in good faith toward that goal. If it goes beyond year end, there are others things that will have to be revisited. We’re all trying to build consensus, and it’s a pretty tough assignment for everyone involved. No matter if it’s the 2007 ASU or a renegotiated version, it’s a new ballgame for global aircraft export credit. Q. The role of export credit continues to be debated within the industry. Where is it likely to head next year? S.S. – Clearly export credit as a percentage of the aggregate amount of ﬁnancing for new deliveries will go down in 2011 and

beyond. One reason is that the commercial bank markets have come back very strongly. Banks have complained somewhat about being crowded out and that sensitivity has not gone on deaf ears. United States Ex-Im Bank has encouraged a number of our customers to look for alternative sources of ﬁnance even though it may be easier for them to get Ex-Im ﬁnancing. More importantly, as we transition to a new ASU, whether the 2007 version or a renegotiated one, there are materially higher fees based upon the credit risk classiﬁcation of the airline, along with mandatory risk mitigants. All of these will go to lessen the demand for export credit relative to the commercial markets. Q. The airline industry has the Cape Town Treaty. In essence, it’s an international treaty which offers security protections to aircraft ﬁnanciers in countries where it’s been ratiﬁed. What’s been the treaty’s progress of late, and what’s likely to happen to Cape Town in the coming year?

Classiﬁcation Challenge

– The new Aircraft Sector Understanding (ASU) governing global export credit ﬁnancing is set to take effect at year end 2010. However, its renegotiation was spurred by disagreement among the countries involved over its two-level credit fee pricing structure – Category 1 for larger airplanes from Airbus and Boeing and Category 2 for smaller regional jets (RJ). Category 2 gives RJs more favorable pricing terms than their larger brethren. In 2009, Canada requested to have Category 2 status for Bombardier’s new CSeries jet, a direct competitor to the A319 and 737-600 models. The move pushed the various industry and governments players into the current action, being overseen by the Organization for Economic Cooperation and Development (OECD). (Photo credits: Boeing, ©Airbus SAS, Bombardier)

16 The ofﬁcial publication of the International Society of Transport Aircraft Trading
Jetrader - November/December 2010

Table of Contents for the Digital Edition of Jetrader - November/December 2010
