Aircraft producing nations agree export credit deal

PARIS Wed Dec 22, 2010 2:01pm EST

PARIS (Reuters) - Major aircraft producing nations have agreed a deal to bring state financial support for exporting commercial aircraft more in line with market rates, the OECD said on Wednesday.

The agreement between Brazil, Canada, Japan, the United States and the European Union -- including Britain, France, Germany and Italy -- still has to be formally approved by all parties before January 20 so it can enter into force by February 1.

The deal aims to make the terms of state financing of aircraft exports better reflect what buyers would get on the market, especially in the case of airlines that have easy access to funds on the markets.

"The objective of the agreement is to create and maintain a market- and risk-based fee system that produces a level playing field between manufacturers, airlines and governments," the Organization for Economic Co-operation and Development said.

The Paris-based organization, which hosted the talks that led to the accord, said it would help unify a patchwork of different financing terms and conditions.

Airlines have long been lobbying for a change to rules which allow the host governments of U.S. manufacturer Boeing and Europe's Airbus-- France, Germany, Spain and Britain -- to give export financing to some, but not all carriers.

The agreement includes a transition period so that existing orders are covered by current terms and conditions.

Airlines in countries where Airbus and Boeing planes are made say they are unfairly locked out of a system of export aid which reduces costs for major carriers in the Gulf, like Emirates, and Asia which have grabbed market share from older rivals.

The role of export credit financing has increased sharply as private sources of funds dried up during the financial crisis.

The entry of smaller competitors such as Canada's Bombardier and Brazil's Embraer into the market for larger planes, challenging Airbus and Boeing's duopoly, has also brought the issue to a head.

Welcoming the deal, French Economy Minister Christine Lagarde, Foreign Trade Minister Pierre Lellouche and Transport Minister Thierry Mariani said in a statement: "The new agreement allows financial support conditions for all civil aircraft to be unified."

"This new regulatory framework takes into account the interests of the European manufacturer Airbus, which will continue to benefit from the state guarantee in some of its exports," they said.

Airbus "will be subject, as far as financing was concerned, to the same rules of the game as its competitor Boeing," they said, adding that the deal would also be fairer for French, German and British airlines.

(Reporting by Leigh Thomsa and Helen Massy-Beresford; Editing by Greg Mahlich)

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