Banking

Mainland banks bankroll aircraft purchases

By Lu Haoting (China Daily)
Updated: 2009-11-27 08:02

According to Boeing, the market for new commercial airplanes would touch $3.2 trillion in the next 20 years. [China Daily]

Chinese banks are expected to become an important source of capital financing for airplane purchases globally in the coming years as they fill a void left by the exit of many US and European banks, a senior executive from Boeing's financing arm said yesterday.

The current global financial crisis has allowed China's healthy and active banking community to step into the spotlight to become more active in the global aircraft lending arena, said Foster Arata, Boeing Capital Corporation's vice-president and senior managing director for Asia Pacific and Greater China Region.

Boeing Capital, which provides customer financing support, is a wholly owned subsidiary of US aircraft manufacturing giant Boeing.

"Unlike Western banks, Chinese banks have been less affected by the global economic downturn and they are in a much stronger position at this point," Arata said.

"Right now, there are fewer banks in this market competition and it gives Chinese banks a greater access to the market and also enables them to charge a higher premium to good credit airlines," Arata said.

US banks were a major source of global aviation financing from the 1960s to the 1980s, while Japanese banks covered major financing in the 1980s and European lenders played an increasing role since the 1990s. But in the last 18 months, there has been an emergence of "a very strong and new generation of lenders, specifically from China", Arata said.

Last week, China Construction Bank and CDB Leasing Co, of which China Development Bank (CDB) is a major shareholder, signed agreements with Boeing to increase their regional and international aviation financing reach.

CDB Leasing's agreement with Boeing includes an intention to offer up to 25 billion yuan for financing and leasing Boeing aircraft over the next 24 months. Boeing Capital will facilitate connecting the leasing company with new and promising opportunities.

Boeing signed similar agreements with the Bank of China, the Industrial and Commercial Bank of China (ICBC), CDB and the Export-Import Bank of China last year.

Boeing's European rival Airbus also signed an agreement for cooperation on aircraft financing and leasing with ICBC in June this year.

China has the potential to become a significant operator in aviation financing globally, Laurence Barron, Airbus China president, told China Daily in an earlier interview.

"While in other parts of the world the financing community is struggling and there is a lack of liquidity in the market, Chinese banks have come through the financial crisis pretty strongly and they are all interested in doing more in the area of aircraft financing and leasing," Barron said.

Boeing in September forecast a global market for 29,000 new commercial airplanes worth $3.2 trillion over the next 20 years, while China is expected to require 3,770 new planes valued at $410 billion over the next two decades, making it the world's second-largest aircraft market after the US.