Alliance: Remove Home Country Export Rule

A group of 10 international airlines, as disparate as Ryanair and Emirates, has launched a counter offensive over proposed changes to international export credit agency (ECA) rules. Dubbed the Aviation Alliance, the group comprises Cargolux, Emirates, Etihad, Korean Air, Norwegian, Oman Air, Pegasus, Ryanair, Virgin Blue and Wizz Air. It is calling for the removal of the “Home Country rule” which dates back to 1986 and prevents airlines in the “home nations” of Airbus and Boeing from benefiting from ECA support. This agreement, which affects airlines in the USA, France, Germany, Spain and the UK, was designed to create a level playing field between the nations of the two aircraft manufacturers. Without it, it could have been favourable for a European airline to buy Boeings or a US airline to take Airbuses as they would qualify for ECA funding. Although this rule has existed for more than two decades, it has become contentious since the 2008 banking crisis when commercial financing for aircraft deliveries dried up and many airlines outside the home nations turned to the ECAs for support. This has caused a groundswell of opposition among the home nation airlines, and BA chief executive Willie Walsh was one of a number of airline bosses calling for a level playing field and the abolishment of the Home Country rule. A number of European airlines as well as the US Air Transport Association are understood to have put proposals to regulatory body the Organisation for Economic Co-operation and Development (OECD) to revamp the rules governing ECA access. The OECD is expected to finalise its proposed changes to ECA funding by year-end. However Alliance members are concerned that rather than easing access to the home nation carriers, the shake-up could result in a restriction in the ability of qualifying airlines to access ECA financing. The Alliance also believes that the home nation airlines are also trying to get the rules changed to allow “export” credit assistance for the acquisition of aircraft even if they are produced by their “home” manufacturers. Ryanair deputy CEO and CFO Howard Millar, who is the Alliance spokesperson, says the removal of the “Home Country rule” is the simplest solution, but without ECA funding being available to airlines from the four Airbus nations for Airbus aircraft or carriers from the USA for Boeing aircraft. “It is supposed to be ‘export’ credit financing, not credit financing,” he says. Millar says that the 10 members between them have almost 730 aircraft on order, and the Alliance warns that for some of them, a restriction in the access to ECA funding could prevent them being able to take all the aircraft. As well as the abolition of the ‘Home Country rule’, Millar says the Alliance is urging other changes: “Export credit structures should be enhanced, and the existing exposure fees and structures governing the proportion of an aircraft that can be financed using export credits should be maintained.” According to Millar, during the recent downturn, up to 40% of the deliveries that qualified benefitted from ECA funding, compared with 20% in prior to the banking crisis. He adds that across the 10 alliance members, the percentage of deliveries that use ECA funding ranges from 20% to 70%. He adds that Ryanair is at the top end.