Best Exchange For Euros: Aircraft Financing Hit by Euro Debt CrisisMay 14th, 2012
Best exchange rate for euros: The European debt crisis is hitting the airline industry in a big way. European banks have been withdrawing funds for over 2 years now, as a direct result of the declining and shrinking of assets caused by the European debt crisis. This is in an attempt to recover some of their losses and restore balance to the account ledgers. Airlines have been pushed into referring to bond markets to finance aircraft. Airlines are also making the move to lease aircraft rather than purchase, which is a far less attractive and commercially viable option.
A combination of a poor best exchange rate for euros and the EU sovereign debt crisis, in addition to new regulations, have forced many European banks that have previously played a huge role in aircraft financing – to withdraw. In addition a new international agreement has been put in place to increase fees charged by export credit agencies on guarantees for aircraft purchases.
The total percentage of commercial bank lending for aircraft is set to decrease from 25% to 21% between 2011and 2012, however export credit agencies role in aircraft financing is set to stay as it is, at 30%. The number of airplanes on lease out of the aviation industries global fleet has increased the most dramatically, from nearly 24 % in 2000 to 36% in 2010. Leasing as appose to purchase is not as commercially viable but does help keep planes from airlines balance sheets.
As a result of all this, many euro countries are finding it impossible to re-finance government debt against aircraft, without help from other third party organisations. The US Airways Group has reported that their airline has been in favour of European Bank debt over capital markets, but this situation has changed dramatically since the euro zone debt crisis and does not look set to change any time soon. Using US Airways as an example, during 2008 to 2009, the company almost wholly relied on the European debt market to fund aircraft purchase, this picture started to change in 2010 when a deal was intercepted as a result of European bank participation being withdrawn. This has gradually got worse into 2011 and 2012 and is not anticipated to improve quickly.
The aviation industry is just one example of how the European debt crisis, foreign exchange issues and poor best exchange rate for euros are affecting global industry and trade.