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Is EXIM Bankís Program Good for Aviation?

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Joined: 19 Feb 2010
Posts: 12
Location: Smyrna, TN, USA

PostPosted: Fri Feb 19, 2010 3:00 am    Post subject: Is EXIM Bankís Program Good for Aviation? Reply with quote

Our company sells refurbished turboprop regional airlines all over the world. In the last 18 months, in the middle of the worst aviation recession in memory, we have sold and delivered aircraft to Nepal, Canada, Columbia, Venezuela, Haiti, Dominican Republic, Australia,and Zambia to name a few. All of this in a time when used aircraft sales in the United States came to a screeching halt and have yet to recover. And the sales could have been higher. Had small airlines who are looking to expand their fleets been able to get financing, we would have sold twice again what we were able to sell around the world. Albeit there is risk associated in financing aircraft for small airlines in other countries, most of the businesses we deal with are well run and not as highly leveraged as the big airlines in Europe and the United States. These small businesses have not had the luxury of obtaining financing for new aircraft and so they typically pay cash,after saving for years, or finance a very small portion of the purchase.

A December 10 article in The Wall Street Journal discusses ExIm bankís effect on Boeing Commercial Airliner sales. The number quoted is that one in four of Boeingís sales are funded though the ExIm Bank guaranties. Without this government-backed financing Boeing would not be where they are today.

Recently our company was introduced to the process of working through the ExIm program as an opportunity to get backing on the sale of aircraft to a small airline in Central America. ExIm works much like other US programs that guarantee loans for loan underwriters to induce the underwriter to make a loan they might not otherwise make.

In a theoretical sense I believe in the free market economy, but a free market economy needs a level playing field, with rule sets that apply to everyone in the market. In the case of most international trade, and especially in aviation, governments across the world intervene to the benefit of their national industries. So if Airbus gets help from the European Union and its home country of France, but Boeing gets no help in any form from the United States is that fair trade in a free-market economy?

Let me take this back down to the small business level where most of the jobs in this country are created. In the case of our company a big percentage of the payroll is tied to buying, refurbishing and reselling these used regional airline turboprop aircraft. We have yet to receive any handouts from the government for anything. We havenít asked for any handouts. We pay our taxes (hard to count how many different ones) like everyone else. So, is it wrong to go to ExIm and ask them to back loans to sell small aircraft to airlines in developing countries who will use these aircraft to develop their own transportation infrastructure?

I donít know the default rate of the ExIm programís backed loans. I am not sure it is published and Iím certainly not suggesting a process that encourages bad loans. I am simply suggesting a process that provides capital for transactions that are sound in business principle but outside the realm of traditional banking sources.

Without capital it is hard to grow the economy, both here in the US and abroad. For the case of our small business, when other small airlines around the world can obtain the capital to grow, jobs and profits are created here in the US.

Not a bad proposition?

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