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Some of the world's fastest growing airlines face significantly higher costs for new planes after the U.S., the European Union, Japan and seven other countries agreed to toughen rules for government subsidized aircraft financing.
After year long talks, the nations struck an outline agreement at the Organization for Economic Co-operation and Development in Paris. It covers export credit guarantees which governments, especially the U.S. and the EU, use to promote exports by Boeing and Airbus.
The various governments are expected to sign the agreement in January, and it will come into force on Feb. 1. It will maintain the current system except that airlines will have to pay fees that will bring the cost of government subsidized finance closer to market rates.
Negotiators also agreed to a transition period for the new regime that will keep in place credit guarantees for aircraft that have already been ordered for delivery before the end of 2012.
Reform of export credit guarantees, which totaled around $40 billion and covered around a half of all aircraft orders in the past two years, have deeply divided the airline industry.
U.S. and European airlines are angry that powerful new rivals such as Dubai's Emirates and Abu Dhabi's Etihad have massively increased their fleets with the use of credit export guarantees which they themselves can't access because of the so-called "home country rule," which bars carriers in nations where Boeing and Airbus operate from getting subsidized financing.
U.S. and European carriers claim the system has distorted competition and artificially inflated aircraft orders during the recent industry recession.
Successful carriers that have used export credit guarantees, including Ireland's Ryanair, Europe's leading low cost airline, and Cargolux, the Luxembourg-based all-cargo carrier, have lobbied against the agreement claiming it will create a boom for banks.
Airbus and Boeing also fought to retain the current export credit system.
(Source:www.joc.com)
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