Ex-Im bonds will give Boeing an advantage

 

Airbus and the European ECAs will nervously be watching the progress of Emirates’ Ex-Im bond – arguably the most significant aviation bond since ALPs in 1992.

While they will not want to admit it, they know they cannot compete. Coface and Hermes are not set up to guarantee bonds. The UK’s ECGD is happy to front deals (so guarantee 100% of certain deals) but: it won’t have the same capacity as Ex-Im; it will be more complicated to issue them bonds than for Ex-Im as US government entities have simpler regulations; and bonds will be more expensive as UK CDS trades outside the US.

Coface and Hermes need to change quickly. Next year we will start thinking of US Ex-Im as a cheap, liquid bond market while Airbus ECA looks like an old fashioned bank market. Whether this is true or not (and there is a lot to be said in support of the bank market) it will encourage airlines to order Boeing over Airbus.

While we are talking about export credit let’s scrap the home country rules. Aircraft parts are sourced from all over the world and the home country rules are increasingly outdated and still very unfair. European ECAs could do this tomorrow – the big problem would be for Ex-IM.