TEXT-U.S., European airlines’ export credit proposals

Oct 13 (BestGrowthStock) – Leading airlines have called on Europe
and the United States to cap export credits on the sale of
passenger jets at 20 percent of deliveries in the latest ripple
of a growing multi-billion-dollar subsidy spat. [ID:nLDE69C1RN]

Following are the main points of a letter drawn up by the 24
airlines, which say they collectively employ 750,000 workers.

The letter, obtained by Reuters, was drawn up ahead of Oct.
20 talks on a new OECD agreement on export credits known as ASU.

STATEMENT OF PRINCIPLES

(1) The new agreement must ensure a ‘level playing field’
among the world’s airlines: there cannot be any situation where
an airline is able to benefit from export credit, either in
terms of quantity or quality to the detriment of competitors.

(2) Volume should be controlled and reduced from present
levels: export credit is a specific tool that can have many
adverse impacts on the market.

There are various means to control volume. We have observed
that during the last 10 years export credit has financed
approximately 20 percent of aircraft deliveries. Establishing
this level as a cap for each airline’s and lessors’ order book
could be one such measure to control volume.

(3) Current and suggested premiums are too low: the use of
export credit financing by airlines should not be allowed to
provide a competitive advantage to such airlines over their
competitors through unrestricted access to cheap capital.

Export credit should be on less favorable terms than
commercial bank financing. In recent years export credit has
been significantly cheaper.

(4) Current and suggested Loan-to-Value ratios (ie amount
financed per aircraft) are too high. The maximum LTV ratios
permitted by the new agreement must be lower than available
through commercial market financing.

(5) Export credit should address political and country
risks. The fundamental purpose of official export credits must
be to support borrowers that are unable to access commercial
markets because of specific country risks. It is a distortion of
commercial markets to use official export credits to enable
aircraft sales to credit-worthy borrowers merely because
conditions in commercial markets are relatively unfavorable.

(6) The terms of all financing transactions undertaken by
Export Credit Agencies, whether by direct financing, guarantee,
or otherwise, should be made public in a timely manner.

SIGNATORIES

European airlines: Air Berlin (AB1.DE: ), Air Europa, Air
France (AIRF.PA: ), British Airways (BAY.L: ), Easyjet (EZJ.L: ),
Iberia, Lufthansa (LHAG.DE: ), Monarch Airlines and Virgin
Atlantic Airways.

U.S. airlines: ABX Air, AirTran Airways (AAI.N: ), Alaska
Airlines (ALK.N: ), American Airlines (AMR.N: ), ASTAR Air Cargo,
Continental Airlines (CAL.N: ), Delta Air Lines (DAL.N: ), Evergreen
International, Federal Express (FDX.N: ), Hawaiian Airlines
(HA.O: ), JetBlue (JBLU.O: ), Southwest Airlines (LUV.N: ), United
Airlines (UAUA.O: ), UPS Airlines (UPS.N: ) and US Airways (LCC: )N>.

TEXT-U.S., European airlines’ export credit proposals