ANALYSIS: How Emirates has financed its first 50 A380s

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When the A380 entered service in the final quarter of 2007, there were a lot of question marks over how the aircraft would be financed.

Financing was predicted to be difficult because of the large amount of capital required to purchase the aircraft compared with other models in the market.

In addition, financiers expressed concern about transition costs when the aircraft passed from one customer to the next.

However, the quality of airline credits in the A380 orderbook ensured a soft introduction among financiers.

The most obvious form of financing was export credit agency (ECA) support but, over the years, various non-ECA backed structures have been introduced.

Emirates, which recently took delivery of its 50th unit, has tapped five different markets for A380 financing.

The Dubai-based carrier has tapped the export credit market for a large number of A380s but has also relied on the commercial debt banking market, the capital markets and the Konmmanditgesellschaft (KG) market.

The ECA portion accounts for 36% of Emirates’ current fleet, or 18 units. KG and UK operating leases account for 20% of its deliveries, while the commercial debt market financed 20%, or 10 units.

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The capital markets financed eight units, mainly through enhanced equipment trust certificates (EETC). This represents about one in six A380 deliveries to Emirates.

The final four aircraft, or 8% of the deliveries, have been financed through unsecured amortising bonds.

During the past 15 months, the carrier has added about 20 A380s to its fleet and has continued leveraging financing through ECA funding, EETCs and commercial debt.

Emirates’ fleet of 31 A380s at April 2013 included five units financed with commercial finance leases. The ECA market represented almost 39%, with 12 units. KG and UK operating leases accounted for 10 units, and EETC funding for four.

The Dubai-based carrier has six additional deliveries scheduled through December this year, Flightglobal’s Ascend Fleets database shows.

Two units will be financed in the commercial debt market, says Emirates, with one under an Islamic finance lease structure and another on a pure commercial basis. The other four deliveries are likely to be operating leases through different structures. A pair of A380s has been mandated to lessor Amedeo, sources say, under a sale-and-leaseback transaction.

Other A380 operators have also tapped diversified funding sources for their A380s.

South Korean carrier Asiana Airlines has closed ECA-guaranteed loans with a syndicate of banks for its first two deliveries, while Korean Air has financed its 10-aircraft fleet through a combination of ECA-guaranteed financing structures (six) and commercial debt (four).

Thai Airways financed four units under ECA guarantees and another two with the national ministry of finance.

Malaysia Airlines has also used its country’s ministry of finance to fund its fleet.

Qantas’s 12-aircraft fleet is financed with ECA funding arranged by a pool of international banks.

China Southern Airlines has tapped the sale-and-leaseback market for one of its A380 deliveries, as well as the ECA bond market for another. The remaining three aircraft in its fleet were financed in the commercial debt market.

Prevented from using ECA products, European carriers Air France, British Airways and Lufthansa have tapped the commercial debt, Japanese operating lease, and German operating lease markets for their deliveries.

However, the KG market has been the most prolific. Half of Singapore Airlines’ and Air France’s A380 fleets have been financed in the KG market.

Last year, Flightglobal estimated that of the first 100 A380s entering service, the KG market financed almost a quarter, with ECA-guaranteed deals covering a third.