Banks Ready To Aid Boeing, Airbus

Concerned that record order backlogs will dissolve as airlines are unable to finance new aircraft deliveries in a hostile economic environment, financial authorities on both sides of the Atlantic have agreed to pour new cash into banks to help fund those planes.

Last week, the Wall Street Journal reported the US Export-Import Bank planned to increase loan guarantees for new aircraft purchases to as much as $9 billion in 2009... nearly $4 billion more than last year, and double the amount seen in the darkest days following the September 11, 2001 terrorist attacks.

The government-backed financial institution -- EXIM for short -- funds purchases of American products by foreign interests.

While that money would be technically available for any aircraft purchase meeting the bank's terms -- including business aircraft, and even some smaller planes -- the bulk of those funds will likely go towards shoring up otherwise shaky financing deals for Boeing airliners. The American planemaker is the bank's largest customer, holding some 47 percent of EXIM's overall portfolio.

"Given problems in financial markets, we're predicting a significant pickup in 2009," said Robert Roy, deputy vice president of the bank's transport division. "It's going to be a big year for us."

Not to be outdone, unnamed French government sources recently told the Wall Street Journal that country plans to invest $6.5 billion into banks that lend to aeronautical interests, in order to provide similar incentives for customers planning to take delivery of Airbus planes.

"There is indeed a plan to lend 5 billion euros to the banks to finance Airbus contracts," the source told the WSJ. French business newspaper Les Echoes first reported the news last week, stating "the aim is to prevent airlines from cancelling orders citing difficulties in raising money."

Neither the French nor American governments are particularly eager to use the term "bailout" to describe their respective financial incentive plans... though there's an argument to made that's what they are.

What's less clear is how these plans relate to the ongoing battle between the US and the European Union before the World Trade Organization, concerning previous allegations of unfair government aid on both sides to their respective aircraft manufacturers.

FMI: www.exim.gov, www.ecb.int, www.boeing.com, www.airbus.com