A Qatar Airways’ Boeing 787 Dreamliner aircraft is seen on display during the 13th Dubai Airshow. Standard Chartered yesterday said it is planning to expand its airline loan book by almost 75% over the next four years as demand for planes in the Middle East and Asia surges.
Bloomberg/London
Standard Chartered, the British bank that earns most of its profit in Asia, plans to expand its airline loan book by almost 75% over the next four years as demand for planes in the Middle East and Asia surges.
The London-headquartered bank’s airline industry lending grew by $1.7bn last year and the bank expects a similar rise this year, Simon Perkins, the bank’s chief commercial officer for aviation finance, said in a phone interview from Singapore. He said, its airline industry assets, which includes loans and owned aircraft, will grow to $10bn over the period from about $5.8bn at the end of last year.
Emirates, Etihad Airways, Qatar Airways and FlyDubai announced more than $160bn in total plane orders at the Dubai Airshow in December. Planemakers Airbus Group and Boeing Co are expected to deliver about 80 planes to the region’s airlines this year. Deliveries are expected to grow by 11.8% annually over the next three years, Standard Chartered said, citing data provider Ascend.
“Demand is that strong within our footprint of Asia, Africa and the Middle East,” Perkins said. “Of the global order book for commercial jets, about 35 to 45% is from the Middle East and Asia.”
Standard Chartered is in talks with Qatar Aviation Lease Co to lease eight Airbus A320 planes that will be sub-leased to Pakistan International Airlines, Perkins said. Almost a quarter of the bank’s aviation assets are in the Middle East.
Emirates, the world’s biggest airline by international passenger traffic, is seeking to raise about $2bn from four loans to fund plane purchases, two people familiar with the transaction said. Etihad, the Abu Dhabi state-owned carrier, has sought three loan proposals from banks that may raise about $750mn to help pay for 10 Airbus and Boeing planes, three people familiar with the deals said last week.
Banks funded between 25% and 30% of total global aircraft financing last year. That share may rise slightly this year as lenders are cash-rich and interest rates on loans have declined by as much as a percentage point over the last 18 months, Perkins said. Export credit agency financing fell to about 23% last year from a third earlier and may fall further this year, he said.
“The aviation business is very strongly correlated with economic growth,” Perkins said. With growth rates in Asia at about 5 or 6% and the Middle East at about 4%, “these are growth markets”, he said.
