Middle East airlines have been tapping the attractively priced export credit agency market to finance their upcoming aircraft deliveries. Airlines are clearly in the driving seat when it comes to selecting financiers for ECA transactions as banks are competing heavily for this low-risk business.
Last month, Emirates Airline closed the first ever capital markets bond offering guaranteed by the US Export-Import Bank. The deal covers three new Boeing 777-300ERs delivered in July, August and September.Brian Jeffery, senior vice-president, corporate treasury at Emirates, says the deal marks the first offering of its kind directly into the global public capital markets. "We believe bond markets represent an important source of capital for the airline industry in general and for Emirates in particular," he says.
Rival Etihad Airways is also eyeing the ECA-backed capital markets option for its third batch of deliveries, part of its $1 billion eight-aircraft programme through 2010. All deliveries are covered by European ECA and US Export-Import support. "We are seriously considering the capital markets structure for these deliveries," says Etihad chief financial officer James Rigney. It is in the process of mandating bank financing for these deliveries.
The airline closed its first ever ECA financing in October after receiving the highest ECA rating, which is endorsed by all Organisation for Economic Co-operation and Development countries. It effectively places Etihad alongside investment grade airlines. The first tranche of the ECA-supported aircraft included two Airbus A340-600s. Etihad Airways had been considering ECA support for the financing of its future deliveries since the beginning of the year, having never previously acquired any new aircraft using this structure.