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Gulf carriers impact to be minimal from U.S. Ex-Im shutdown

Combined Boeing orders from carriers in the United Arab Emirates, home to Emirates and Etihad Airways, is around 380 aircraft

Published: Updated:

Gulf carriers’ huge 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 sources said.

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

The U.S. export and import bank’s charter was allowed to lapse on June 30 as a result of the conservative Republicans’ 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 U.S. export credit agency’s (ECA) credit exposure in the UAE aircraft sector totals approximately $4.3 billion and consists primarily of guaranteed loans but it has no exposure in Qatar’s aircraft sector, an Ex-Im spokesman told Reuters.

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

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

“Emirates’ financing strategy has been, and will continue to be, one of diversifying its sources of financing,” it said.

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

Industry sources 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, told Reuters Ex-Im’s suspension will affect their competitiveness for those customers that are concerned about financing deliveries, although it only provides less than 15 percent of their commercial exports.

Earlier this year, Etihad Airways said it has raised more than $9 billion from 68 financial institutions in the last 11 years. Etihad and Qatar Airways declined comment on Ex-Im.