in Air Transport / Business & Finance

Ethiopian warns Boeing that Ex-Im bank closure threatens new orders

Posted 10 October 2015 · Add Comment

Ethiopian Airlines has warned Boeing that the shutdown of the U.S. Export-Import Bank has raised concerns about the airline's ability to take delivery of Boeing jets already ordered and the closure would force it to reevaluate future orders.

Boeing, has been fighting to get the trade bank reauthorised by the US Congress, and it released the letter from Ethiopian, saying the airline had 27 airplanes on order with a value of more than $3.8 billion at current list prices.

Airnation reported that 21 of those aircraft are officially listed on Boeing’s website as purchased by Ethiopian Airlines, with a value of $2.5 billion. Most of these are B737 MAX jetliners, are not due for delivery until at least 2017. Ethiopian did not discuss the potential impact on a reported order for 15-20 Boeing 777X aircraft that it is expected to place before year-end.

But Ethiopian Airlines Chief Executive Tewolde GebreMariam told Boeing in the letter dated Oct. 3 that uncertainty about the future of the bank had put Boeing “at a competitive disadvantage relative to manufacturers in other countries that continue to support their export credit agencies.”

Unless Congress revived the bank, Ethiopian Airlines would have to reevaluate future U.S. aircraft orders at a time when it is finalising plans to double its fleet to 150 aircraft by 2025, he said, suggesting it could turn to Europe’s Airbus Group instead, Airnation reported the letter as saying.

Boeing, EXIM’s biggest beneficiary with $7 billion worth of loans and guarantees last year, released a similar letter last week from South Africa’s Comair Ltd that involved $1.1 billion in aircraft orders.

Boeing has also lost two satellite orders since the bank’s charter lapsed at the end of June, halting its lending, loan guarantees and trade insurance.

Boeing spokeswoman Kate Bernard said the company had heard similar concerns from other airlines and could see more letters in coming days. “Customers have come to us with their concerns and they want to know what they can do to help,” she said, when asked if Boeing had orchestrated a letter-writing campaign.

A small group of Republicans have targeted the bank as an example of “corporate welfare.” Supporters say it allows U.S. companies to compete overseas, and produced $675 million in revenue for federal coffers last year.

Boeing and other EXIM backers hope to resuscitate the bank in coming weeks, with a group of House Republicans and Democrats aiming to put the issue to a vote through a rarely effective procedural maneuver known as a discharge petition.

Ethiopian’s GebreMariam said EXIM financing allowed the airline to fund large, long-term acquisitions and borrow in its own currency, which lowered exchange rate risk. He added that the airline had never defaulted on any EXIM guarantees.

 

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