Worrying times for cash-strapped suppliers and Engine Lease Finance in yet another big deal

Victoria
By Victoria January 12, 2012 11:58

Worrying times for cash-strapped suppliers and Engine Lease Finance in yet another big deal

Abu Dhabi’s Etihad Airways has mandated Sanad Aero Solutions and Engine Lease Finance Corp to finance its 23 spare engines in a sale-and-leaseback deal valued at $367m it was confirmed yesterday. The transactions are for a 10-year operating lease term. The financing is for 16 in-service spare engines and seven future spare engine deliveries. Sanad, owned by Abu Dhabi government’s Mubadala, will purchase and lease back to Etihad five GE90 and six Rolls Royce Trent 500 engines and Engine Lease Finance Corp. will purchase and lease back to Etihad six Rolls Royce Trent 700 and six IAE V2500 engines.
James Hogan, Etihad CEO, said: “These spare engine sales and lease back transactions provide the airline with a long-term financing solution for its entire spare engine fleet while mitigating residual value risk and providing competitive cost of ownership over the long term.”
Meanwhile: GKN has confirmed that some of its suppliers are struggling to secure the financing required to increase production of components for aircraft including as bank credit for new equipment dries up. This is something that this service has been warning of for some time now but the situation is now critical. GKN remains on track at the moment but it is its suppliers who are now under severe strain. The A350 was delayed just before the Dubai Air Show last year because of parts delays. It is now likely that this pressure will force Airbus to purchase its part suppliers.
Considering the reductions gained by Qatar on the back of the A350 delay last November it is likely that such costs to Airbus are below those of purchasing suppliers outright. The question is: does Airbus have the cash to hand or will it be farming out loans? If it is the latter then one must wonder if OEM suppliers will be forced to concentrate reserves on new aircraft parts. This in turn will lead to shortages of A340 parts – Maybe it is time to part out an A340 if you can get one cheap?

Victoria
By Victoria January 12, 2012 11:58
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