Airbus warms to customer financing

Airbus on Monday signalled it was prepared to provide more financing to airlines buying its aircraft amid the deteriorating economic environment, as the company gave a bullish long-term view of sales.

John Leahy, Airbus’s chief operating officer with responsibility for customers, said the France-based company was worried by how European banks that play a leading global role in aircraft financing had been hit by a “dollar crunch” linked to the region’s sovereign debt crisis.

Mr Leahy said Airbus was willing to consider vendor financing to airlines if necessary, and noted how the company’s parent group, EADS, had a net cash position of €11bn ($15bn). Airbus arranged financing worth $750m for customers in 2010, and $600m in 2009.

In June, the International Air Transport Association, the airlines’ representative body, slashed the industry’s net profit forecast to $4bn for 2011 because of rising oil prices, political unrest in the Middle East and the Japanese earthquake.

Air travel is closely correlated to gross domestic product, and this month the Organisation for Economic Co-operation and Development, in a significant downward revision to its forecast, predicted advanced economies would barely grow in the second half of 2011.

Mr Leahy, outlining Airbus’ annual market forecast for global aircraft sales over the next 20 years, said the company was not anticipating a double-dip recession in the US or Europe in the short to medium term.

However, he added Airbus had a “worry” at some European banks’ “inability” to secure dollar-denominated funds in wholesale markets during the past two months partly because of fears about their exposure to the region’s sovereign debt crisis.

“That concerns us because aircraft are to a large degree sold in dollars and financed in dollars,” said Mr Leahy. “The European banks have been bigger players in the aircraft financing market than some of the American banks.”

In addition to Airbus looking at vendor financing for customers, Mr Leahy said governments’ export credit guarantee agencies should be willing to step in and provide more support for aircraft orders if necessary.

Airbus’s new market forecast estimated that the number of passenger aircraft in the world would more than double from the current 15,000 to 31,400 by 2030.

The company estimated that 27,900 new passenger and freight aeroplanes worth $3,500bn would be delivered to airlines over the next 20 years, partly because they would need to replace the less fuel-efficient parts of their fleets.

Last year, Airbus estimated 25,800 planes would be delivered over the next 20 years, and the increase of 2,100 to 27,900 reflected the company’s view of rising demand for more fuel-efficient, narrow-body aircraft, notably in emerging markets.