Helsinki-based Finnair has been looking for various ways to sustain itself during this global downturn. This has been a combination of reducing expenses as well as finding both traditional and conventional ways to raise cash. On Friday, the airline announced that it had been granted export credit support of more than 100 million euros ($119.3 million), which will come from the export credit agencies of Germany, France, and the United Kingdom.
Details of the deal
The export credit support has been granted to Finnair as part of its rebuild program. This will come from the export credit agencies (ECAs) of Germany, France, and the United Kingdom, which are as follows:
- UK Export Finance.
- COFACE (France) – Compagnie Française d’Assurance pour le Commerce Extérieur.
- Germany’s Official Export Credit Guarantee Scheme is delegated to a consortium consisting of Euler Hermes Kreditversicherungs-AG and PricewaterhouseCoopers AG Wirtschaftsprüfungsgesellschaft (PwC).
This credit support has been offered to qualified purchasers of Airbus aircraft. In this case, Finnair notes, credit support has been granted for the Airbus A350-900 aircraft that was delivered to Finnair in September 2020.
Finnair has mandated JPMorgan Chase Bank, N.A., London Branch to arrange the financing.
Why are these foreign agencies supporting Finnair?
If it isn’t already clear from the word ‘export’ in export credit agency, these entities have been established to support a country’s exports. More specifically, according to Investopedia, they exist to offer loans, loan guarantees, and insurance to support domestic companies – particularly in limiting the risk of selling goods and services in overseas markets.
Therefore, in tieing the credit to Finnair’s most recent Airbus A350-900, the ECAs are supporting the economies and industries of their own countries, which all have an important role in manufacturing the Airbus A350.
Export credit’s absence from the aviation industry
According to Global Trade Review (GTR), ECA support for planes made by Boeing and Airbus has been unavailable or strained for most of the last decade. This is in part due to the rise of aircraft leasing rather than ownership.
GTR notes that the ECA of the United States, US Exim, once provided support to almost a third of Boeing’s deliveries. However, this support had fallen to zero by 2018.
“I think export financing could rapidly become an important way for airlines and lessors to gain financing. For us, it’s just a question of whether or not the pricing level correctly reflects the new environment.” -Bertrand Dehouck, head of aviation for Emea at BNP Paribas via Global Trade Review
The return of British, French, and German ECAs to aviation is rather significant. That’s because these groups cut off export credit support to Airbus between 2016 and 2018 due to the launch of a corruption probe into the company’s use of overseas agents. This issue has since been settled as the planemaker agreed to a settlement worth €3.6bn with French, British, and US authorities.
Have you flown on the Finnair A350 recently? Please share your experience with us in the comments.