Bank may back $9 bil in Boeing plane orders

The U.S. Export-Import Bank may increase the value of guarantees on bank loans for Boeing Co. aircraft this year by more than 70 percent and also may lend money directly, helping airlines take delivery of planes while commercial banks are reluctant to lend.

The organization that offers guarantees on the purchase of U.S.-built equipment and services into export markets may put up $7 billion to $9 billion in loan guarantees for planes from Boeing and smaller aircraft makers, Robert Roy, deputy vice president of the bank's transportation division, told reporters today. That's up from $5.2 billion in 2008.

The bank has guarantees valued at $27 billion spread over 700 planes, Roy said at an aircraft finance conference in Dublin. The bank typically backs 85 percent of the value of an aircraft and doesn't usually offer loans itself. The climate is so difficult now that the bank may lend money directly, Roy said.

"We're hopeful the market will come back to some extent so we can get deals funded," Roy told several hundred people attending the conference. "We do have direct lending as a final alternative."

Airlines that plan to take delivery this year of $65 billion in planes from Chicago-based Boeing or Airbus SAS, the only larger commercial-plane maker, face a funding gap of as much as $25 billion as banks and lessors pull back, said Christian McCormick, chief executive officer of Natixis Transport Finance, the aircraft-finance division of France's fourth-biggest bank.

McCormick said that figure is even after expected increases in guarantees offered by export credit agencies.

Export-Import Bank

About 47 percent of the money the export-import bank has offered as a guarantee or loan is related to aircraft, mainly those made my Boeing, Roy said. Boeing is the country's largest plane exporter and the bank also offers guarantees on aircraft by makers including Gulfstream, a unit of General Dynamics Corp.; Hawker Beechcraft Corp.; and Textron Inc.'s Cessna.

Roy also said that while the export-import bank was created to guarantee commercial bank financing, it is "exploring other sources of financing" should banks remain reluctant to lend. He said that may include guarantees on private placements, or so- called commercial paper funding conduits.

The U.S. export-import bank can lend to airlines in any export market outside the U.S. except France, Germany, the U.K. or Spain, where rival Airbus has its main factories and workforces. European credit agencies aren't permitted to extend guarantees on loans of planes going to the U.S., according to a longstanding agreement between the two markets.

Aircraft, as mobile assets, can be easily sold or leased to other parties in the event an airline using a plane stops flying. Some banks say lending has shifted to focus more on the asset rather than a carrier's credit. Airline credit remains the main consideration for the export-import bank, Roy said.

Airliner Orders

Boeing and Toulouse, France-based Airbus together have about 7,000 airliners on back order. Airbus Chief Executive Tom Enders said last week Airbus may deliver about as many planes in 2009 as in 2008, when it shipped 483.

While Boeing hasn't released any delivery forecast, estimates of combined deliveries by the two makers in 2009 of 900 planes are reasonable, Kostya Zolotusky, the managing director of Boeing Capital Corp., said at the conference. He declined to discuss forecasts further, saying Boeing is in a quiet period before earnings are released next week.

About 20 percent of all aircraft deliveries were guaranteed by government-backed credit agencies last year.

In Europe, the U.K.'s Export Credits Guarantee Department, Natixis's Coface and Allianz SE's Euler Hermes Kreditversicherungs unit in Germany, have also said they'll step into the breach, increasing "substantially" the amount of bank loans they're willing to back. Airbus last week predicted the European credit agencies would back as much as 50 percent of all purchases.

For Related News and Information: For Boeing gross annual orders: FRAVBOGO GP For Airbus gross annual orders: FRAVABGO GP EADS financing stories: EAD FP TCNI CORPFIN Today's top transport news: TRNT