Credit no limit for plane purchases in region

Dubai: The region's carriers are continuing to find finance for aircraft purchases, according to a senior industry official.

Although local banks and financiers have suffered from a shortage of liquidity, the financing of transactions remains strong as long as air traffic continues to grow, said John B. Matthews, Boeing Capital Corporation's managing director for Mena Aircraft financial services.

Boeing Capital is a wing of aircraft manufacturing giant Boeing, overseeing and advising on payments for orders made by airlines.

Some lenders here have seen a reduced ability to lend for aircraft purchases, as liquidity dried up.

"During this region's downturn, the liquidity in the financial marketplace has reduced significantly, so the availability of fin-ancing generally was reduced," said Matthews.

Relative strength

"A part of it is the financial institutions took losses in other transactions like real estate, so that affected their ability to do other transactions because they had to repair their balance sheets."

Matthews added that even financers with liquidity in the region were holding back from financing aircraft purchases out of caution, and preferred to wait for a bottoming out of the downturn.

"But the good news is, the carriers in the region are good credits, successful carriers, and they are also eligible for Export-Import Bank financing, so that's been very helpful," he said.

The Export-Import Bank of the US finances foreign purchases of US goods, when lending may be threatened otherwise. Matthews wouldn't comment on which airlines in the region had used the facility.

Should Boeing find its customers with serious financing problems, Matthews' wing of the company can step in to finance the transaction.

They have a portfolio of $6 billion (Dh22 billion) which translates to around 300 craft, he said. They prefer not to, but have been forced to accommodate such transactions in other parts of the world throughout the crisis.

"We had estimated we might have to do $1 billion of financing this year and it has turned out to be quite a bit less," he said.

One reason financing is holding in the Middle East, he said, was the relative strength of the carriers and airline industry generally when compared with other markets. "Traffic in this part of the world continued to increase throughout the recent downturn," said Matthews.

"The airlines are doing very well — they're taking all their deliveries on schedule. We haven't had any problems obtaining financing."

Huge numbers

The huge numbers of aircraft ordered by the region's airlines when fin-ancial times were better doesn't mean they have over-stretched themselves, he said.

The nature of the industry means those planes may not be delivered for a number of years and as they aren't paid for in full until the handover, it can be more easily managed.

A possible reduction in orders at this year's air show will be more to do with a fall in air travel growth than a lack of fin-ancing, said Matthews.

"So while financing has been challenging, it's not as much an issue of new orders as the fact that traffic is not as strong as it was, so the airlines don't need extra capacity right now," he said.