The current perilous state of the world's financial sector is set to have a radical impact on aviation finance, with the number of active banks having almost halved from 50 in the last downturn to about 30.

This was the consensus among attendees at Commercial Aviation Online's Inside AirFinance Asia conference held in Hong Kong in early September.

HSBC's director of asset and structure finance Martin Harris says 30 banks cannot finance the total backlog and expect the original equipment manufacturers (OEM) to step up in the future. "We will see more OEM support," he says.

However, Airbus and Boeing say no financing support has been committed thus far and they do not expect to step up financing support in the second half of this year.

Harris also says there are opportunities in the marketplace. "Banks can change the way they do financing: there are true leasing opportunities and I expect banks to shift to a more export credit role," he comments.

Airbus estimates export credit agency financing will account for 17% of this year's deliveries but anticipates ECAs to slightly increase support next year. "ECA financing to airlines and lessors will probably increase to 20% next year," says Nicolas Chretien of Airbus Customer Finance.

Chretien believes some banks which exited the aviation market in the last downturn are now eyeing a return, with certain Japanese banks have recently enquired about financing aircraft and looking at export credit products.

DVB Bank's managing director regional head of aviation Asia Pacific Vicente Alava-Pons says long-term players will stay in the industry but will face difficulties. "Even if some banks have not been affected by the subprime crisis, they have some issues to deal with," he explains.

Natixis Transport Finance's head of aircraft finance Asia Pacific Louis Douady says banks will have problems raising the same volume in financing as in the past.

"While we will continue the trend of building our portfolio, we won't be able to raise the volume as in the previous years to fill the gap created by the absence of some players," he comments.

Source: Flight International