Gulf Carriers' Impact Minimal From US Ex-Im Shutdown

Gulf carriers' backlog of Boeing aircraft orders will be largely unaffected by the shutdown of the United States Export-Import Bank, which provides the region's airlines with billions of dollars in guarantees, industry observers said.

Combined orders from carriers in the United Arab Emirates, home to Emirates and Etihad Airways, is around 380 aircraft, according to Boeing figures. Emirates alone has 198 aircraft on order, worth USD$166 billion.

The US bank's charter was allowed to lapse on June 30 as a result of a Republican campaign, who say it promotes "crony capitalism".

It can no longer seek or process new applications for loans or guarantees until its charter is renewed.

The US export credit agency's (ECA) credit exposure in the UAE aircraft sector totals approximately USD$4.3 billion and consists primarily of guaranteed loans but it has no exposure in Qatar's aircraft sector, an Ex-Im spokesman said.

Emirates said almost 11 percent of its financing needs in the last 10 years were backed by Ex-Im. Low-cost carrier flydubai said it has USD$117.5 million in loans with Ex-Im.

Emirates, Etihad and flydubai have sought diversification, which means Ex-Im's closure won't impact their fund-raising capabilities in the future.

Recent fund raising activity by some Gulf carriers ahead of deliveries shows there are plenty of institutions ready to bankroll their fleets. Emirates has issued a USD$913 million Sukuk, over-subscribed by more than three times.

Earlier this year, Etihad Airways said it has raised more than USD$9 billion from 68 financial institutions in the last 11 years.

Industry observers are confident that Gulf airlines will not feel an effect if Ex-Im's charter is not renewed.

"I would be amazed to the point of being dumb struck if Ex-Im were not available that those carriers altered their fleet plans," said George Hamlin, a Virginia-based airline consultant.

Hamlin said the bank's original purpose of supporting less-developed industries was not being fulfilled anymore as many airlines have grown and can obtain commercial funding easily.

Boeing meanwhile, said Ex-Im's suspension will affect its competitiveness for those customers that are concerned about financing deliveries, although it provides less than 15 percent of their commercial exports.

Etihad and Qatar Airways declined comment on Ex-Im.