x Abu Dhabi, UAESaturday 22 July 2017

Middle East airlines could face credit cap by end of year

Complaints by rivals in Europe and the US over what they say is an unfair business advantage spur credit export agencies to look at limiting financial help provided to regional carriers.

European and US export credit agencies are considering limiting the level of financial help they provide to Middle Eastern airlines by the end of this year. 

The move would appease 24 airlines in Europe and the US that assert Middle Eastern and Asian airlines have unfairly benefited from this financial help when buying aircraft. 

But such a move could impair the funding plans of the Gulf's long-haul carriers, which need to finance tens of billions of dollars of aircraft purchases this decade.

"The OECD is taking up this issue between now and the end of this year," said Fred Hochberg, the chairman of the US Export-Import Bank, referring to the Organisation for Economic Co-operation and Development. "There are a lot of countervailing forces between aircraft manufacturers and airlines, and that is under discussion now." 

The 24 airlines have highlighted disparities in recent aircraft financing deals. The purchase by Delta Air Lines of three Boeing aircraft was financed at an interest rate 4.5 percentage points higher than the rate applied in a similar deal with Emirates Airline. The Emirates purchase was backed by credit guarantees from the Export-Import Bank.

Mr Hochberg said at a press conference today in Dubai that his agency would comply with any decision taken by the OECD. "We have been in compliance and we will stay in compliance." 

igale@thenational.ae