x Abu Dhabi, UAETuesday 25 July 2017

Etihad needs $13bn to triple fleet

Etihad Airways is heading to New York this week to drum up financing for the near tripling of its fleet - a move which will need US$13.3 billion.

Etihad Airways is likely to need US$13.3 billion (Dh48.85bn) in financing as it prepares to almost triple its fleet of aircraft in the next decade.

That financing will account for most of the $15.8bn Etihad plans to spend on aircraft and spare engines until 2020, the Abu Dhabi carrier says.

"Over next year and the year after, in fact over the next 10 years, there are large financing and treasury opportunities," said James Rigney, the carrier's chief financial officer.

Mr Rigney was speaking at a recent bankers' investor roadshow in London. The airline will hold the next in a series of such events in New York this week as it seeks to attract financing to help pay for 106 aircraft in the next decade.

The events are taking place amid a row between international airlines about rules controlling export credit assurance, an important source of funding for the purchase of aircraft.

The Etihad chief executive James Hogan said he expected export credit guarantees to remain a funding source for the airline, despite calls by some European and North American airlines to curb the amount of export credit foreign airlines can use. "There are some issues they [export credit agencies] need to determine in regards to terms moving forward but I would expect us to still take advantage of that source if we consider the terms acceptable," said Mr Hogan.

Etihad has increased its focus on export credit since last year, and it is expected to account for 14 per cent of the airline's financing mix before the end of this year.

The carrier is seeking to further diversify and deepen its range of financing to ensure its business model remains on a sustainable footing as its expands.

Commercial bank lending is its biggest single source of finance for aircraft at the moment. It will represent 29 per cent of its aviation finance by the end of the year, with operating leases and equity also playing an important part.

As the airline seeks to widen its funding sources, Islamic financing is also expected to play an increasing role in the next two to three years, says Etihad. It now accounts for 8 per cent of its finance.

The airline may also seek a credit rating to help improve its ability to access funding once it reaches full profitability, said Mr Hogan.

That may not be too far into the future, with the airline aiming for a full break-even next year and profitability from 2012 on.

But any decision on issuing a bond would be taken by the airline's board, Mr Hogan said.

Etihad's financing needs stem from 2008 when it announced the largest aircraft order in commercial history at Farnborough International Air Show. Its current fleet is 54 aircraft.

Etihad's financing needs next year are $780 million, with the arrival of three A330-300s, two B777-300ERs, one B777-300 freighter and one A320-200.

Three spare engines are also on order. In 2012, Etihad is scheduled to take delivery of anotherfour aircraft, with a financing requirement of $600m.

tarnold@thenational.ae