Increased competition among financiers for aircraft transactions has resulted in softer pricing on export credit deals, say three bank sources.
Sources indicate European export credit agency deals are being priced in the "high double digits" above Libor, while US Export-Import Bank transactions trade in the Libor plus 60-70 basis points range.
"The currency aspect is the most sensitive area these days, even more so than the airline credit," says a banker. "Some European banks need to stick with euro-backed airlines, so there is a lot of competition for certain names."
Another banker adds: "Depending on the deal, export credit agency financing, even under ASU [Aircraft Sector Understanding], is still more attractive than commercial financing, so airlines will go with what makes most sense."
But in cases where there are a lot of deliveries, the airline has to be "open to all financing options", even when export credit financing has become more expensive than commercial debt, says the banker source.
Sources agree competition has increased on all aircraft financings during the past three months, but the bidding process has been tougher on export credit deals particularly, resulting in lower pricing levels.
"I am seeing names looking to finance aircraft that I have never heard of before as aviation is more attractive than other asset classes right now," says a banker, adding: "And these names aren't prepared to consider 15-year aircraft, they want new ones."
The bankers agree during the course of the year, the split between commercial and export credit agency financings should become more balanced than previous years due to the introduction of ASU.