We previously wrote a story for Commercial Aviation Online about Boeing Capital Corp.’s War Room methodology in tracking the “funding gap” for 2009 deliveries. We posted that story on this website at this link.
We followed that CAO story up with a profile of the Airbus BCC equivalent, the Watchtower Committee. Here is that story:
|Source:||Commercial Aviation Online|
Airbus has established a Watchtower Committee to monitor its customers and financing needs, an operation similar to the War Room established by Boeing Capital Corp. in August 2007.
Watchtower replicates a similar process following 9/11 and extending into 2002, says Nigel Taylor, SVP, Customer, Project and Structured Finance for Airbus. Watchtower analyzes the “real” needs of the airlines over the next two years, seeking to determine if any carrier may not need the equipment this year and moving the aircraft around if necessary.
The committee also analyzes pre-delievery payments and surveys the banks in line to finance customers.
“The world is a very small place,” Taylor says. “There are limited funds available. Boeing and we must be talking to the same banks. At the moment we are relying almost exclusively on bank debt to supply sources to airlines and lessors. As we go forward, the debt will become more scare and more expensive. At same time, capital markets are looking at bonds. We are working with a number of investment banks to generate corporate markets backed by export guarantees.”
This is a similar programme to that being pursued by Boeing and the US Ex-Im Bank (CAO, 1 April 2009). The Boeing-ExIm effort seeks $1bn-$2bn; Airbus-ECA seeks $500 million to more than $1 billion.
“We’re looking at around half the deliveries to be funded by export credit,” Taylor says. This compared to 31-35% for Boeing this year. About 80% of Airbus’ first-half deliveries have financing commitments, falling to 40% at this time by year-end. Taylor says the decline is “fairly normal” because airlines finance about six months in advance.
Airbus is currently still planning on about €1bn in customer financing this year (compared with $1 billion for Boeing) but like Boeing, Airbus could increase this level if necessary.
“We are looking at 480-500 deliveries this year and also we are also looking at next year. We reduce that to where there is greater need to talk to customers,” Taylor says. “The feedback is downloaded into the committee. We end up with teams from commercial production and legal and finance, looking at PDPs, BFEs and all issues that are credit sensitive to the manufacturer.
“We’ve gone from the phase from where we see if banks will honor their existing commitments to seeing if they will do new commitments. We found that even the banks in deepest trouble will honor existing commitments.”
Some at Boeing and some in the industry are more concerned about financing availability next year than this. Taylor acknowledges there is more uncertainty, but says this has as much to do with predicting the future as it has with the market instability.
“The further you go out the less predictable it is. You fear the unpredictable. If you had asked me in 2007 about 2009, I couldn’t have told you then,” he says. “If you look at 2010, it’s unpredictable. Some people believe that in the freight market we’ve hit the bottom. It could be 2010 is not the more difficult year.
“A number of airlines are proving very resourceful looking with banks they’ve not previously used. The big question is where we go for financing for the US next year.”
(This article is a companion piece to the Boeing Capital piece that ran in CAO 3 April.)
After our BCC piece, we were pointed to the job solicitation for an intern for BCC, posted at jobmonkey.com. The caller chuckled as he pointed out one of the duties is to work on the funding gap issue, and also referenced below as the Skyline Financial Index. BCC, it seemed, according to our warped caller, placed the importance of the funding gap in the hands of an intern. Obviously that’s not the case but our warped sense of humor does see the irony in the posting.
Business Administration Intern @ Boeing Company, Tukwila, Washington
The Boeing Company offers a full-time, paid internship to college students seeking hands-on experience in the large-scale financial operations of a major multinational company. Responsibilities may include:
* Assisting with the Skyline Financial Health index
* Preparing funding gap analysis
* Updating Financiers database
* Assisting in the planning of Boeing Capital Corporation events
The ideal intern candidate will have applied business knowledge, strong communication skills, progressive leadership experience and demonstrated financial acumen. Applicants must be MBA level students majoring in Finance.