Etihad Airways has received the highest rating from export credit agencies in the US, UK, France and Germany, and also signed US$1 billion (Dh3.67bn) in loan guarantees that will substantially lower its borrowing costs for aircraft deliveries scheduled this year and next. The guarantees, from the governments of the Organisation for Economic Co-operation and Development, will help the airline gain access to credit markets at competitive rates at a time when the credit crunch has closed down many avenues for airlines to raise cash.
"What this gives is the banks confidence," said James Hogan, the chief executive of Etihad. "More importantly, it recognises our status as a commercial entity on the global stage." Export credit agencies are typically quasi-governmental institutions that promote exports by helping to arrange financing. Their assistance can come in the form of credit insurance or guarantees, or direct financial support.
In Etihad's case, the guarantees will help it to finance US-made Boeing and European-made Airbus aircraft. Etihad said the rating would save it $20m in interest payments per year for the eight wide-bodied aircraft - two Airbus 340-600s, three Airbus 330-300s and three Boeing 777-300 Extended Range aircraft. The aircraft will be used to help the airline execute an ambitious network expansion as it competes with European and Asian carriers in the lucrative long-haul market. The airline says it has achieved its performance targets for the first half of the year, even as the global recession has seriously crimped demand for international travel.
Etihad has completed the first tranche of the eight-aircraft deal, with HSBC and Landesbank Baden-Wuerttemberg of Germany signing loans valued at $233m to finance the two A340-600s. The guarantees for the first two aeroplanes were made by the Export Credits Guarantee Department of the UK. A second tranche to finance another three aeroplanes is under way. The Etihad rating and loan guarantee, which culminated a three-year effort, lays the foundation for future export credit guarantees on another 100 aircraft scheduled to arrive in the Etihad fleet over the next decade, officials said.
"The precedent has now been set," said Mr Hogan. "We are in play, and we'll stay in play." Etihad achieved the rating even though it does not receive any sovereign guarantees from its shareholder, the Abu Dhabi Government. The rating puts the airline with the most creditworthy carriers including Lufthansa, Air France-KLM and Singapore Airlines. OECD governments awarded Etihad the rating and guarantees after reviewing 300 pages of company data including audited financial statements, its business plan and operational performance up to the first quarter of this year. Mr Hogan said their endorsement was also a tacit admission of Etihad's ability to reach profitability and achieve its commercial mandates.
"This is indirectly acknowledging that, yes, we don't get any free kicks - we pay and hedge for fuel," he said, referring to unsubstantiated claims made about Gulf airlines by European rivals. firstname.lastname@example.org