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Airlines row heats up; export credit cap sought

Frankfurt, October 13, 2010

Leading airlines have called on Europe and the US to cap export credits on the sale of passenger jets at 20 per cent in the latest row over multi-billion-dollar subsidies.

US and European airlines say their Gulf rivals get subsidies and export credits that allow them to grow at a breakneck pace and take market share.   

But Dubai is leading a vigorous defence against the charges and the head of its airport, which is home to Emirates, hit back on Wednesday with suggestions that the real problem for Western airlines was their own governments' 'parasitic' taxes.

The proposal for a financing cap comes in a letter by 24 airlines, including the world's largest carriers such as Delta  and Lufthansa, ahead of international talks on the rules for financing Boeing and Airbus jets.   

Airlines in the countries where Airbus and Boeing planes are made say they are unfairly locked out of a system of export aid which reduces costs for Emirates and others.   

The export credits are provided by the United States for Boeing planes and by France, Germany, Spain or Britain for Airbus, which is owned by European aerospace group EADS.   

Airlines in those countries cannot get export credits even when US airlines are importing Airbus planes or Boeing jets go to airlines based in the four nations which are home to Airbus.

'Export credit is a specific tool that can have many adverse impacts on the market,' the airlines said in the letter to governments, a copy of which was obtained by Reuters.   

The role of such financing has increased sharply as private financing dried up during the financial crisis, pushing the contribution of financing by export credit agencies as high as one third of the value of aircraft sales, according to Airbus.   

Governments will disuss the issue at the Organization for Economic Co-operation and Development on Oct 20.
   
In addition to limiting volumes, the signatory airlines said terms of credit should be less favourable than those of commercial bank finance to avoid giving some carriers an unfair advantage and the maximum loan-to-value ratio should be lower.   

The agreement should also take into account political and country risks that limit airlines' access to commercial markets.   

'It is a distortion of commercial markets to use official export credits to enable aircraft sales to creditworthy borrowers merely because conditions in commercial markets are relatively unfavourable,' the airlines said.
   
Emirates airline president Tim Clark on Tuesday defended the use of export credits and denied the airline received subsidies either from exporter funding schemes or locally.   

Dubai's airports chief said the biggest regulatory threat to US and European airlines came from their own governments.   

'The only thing Dubai is guilty of is providing an environment that actually supports aviation,' Dubai Airports chief executive Paul Griffiths said on Wednesday.

'Most governments around the world treat aviation as a pariah, choking its growth with costly, misdirected regulation. ...They then compound the problem with parasitic forms of taxation that usually flow straight out of the sector.' -Reuters




Tags: export | Emirates | subsidy | Airlines |

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