Execution of committed funding will be the greatest worry for airline chief executives and finance officers next year as tighter liquidity and capital restrictions continue to limit lending at certain European banks, says a London-based banker.
"Forward commitments are almost meaningless in today's market, only when the money is actually drawn down will airline executives be able to sleep at night," says the source. "And, if the funds are drawn, at what cost? Is it the price agreed? No financing agreed yesterday is certain."
Airlines might feel pressure to agree financings with banks that offer lower pricing, but the banker warns this is "extremely risky in today's volatile market".
"Will the bank be able to actually deliver the funds? That is the question airlines really need to ask. Airlines need to focus on execution risk in today's market. They can't just look at pricing," he says.
With the euro falling, and dollars hard to access, the banker believes US banks are a solution for aviation financing.
However, US banks pulled of aviation lending following losses in the 1980s and 1990s and now hardly participate other than in arranging or capital markets capacities.
"Every bank has lost money along the way in some asset class or another, so I don't see why the US banks shouldn't step up now," says the banker. "They have US dollars, this is a dollar industry, so they are a natural player, especially now."
Sources indicate two US banks have approached two French banks about taking over their export credit agency loan books to help the European lenders reduce US dollar funding concerns.