The US Export-Import bank has announced it will begin backing narrow body aircraft purchases with low cost loans for US domestic airlines. This means domestic airlines purchasing Boeing 737 can now access the same low cost loans that foreign airlines have been getting. Why?

Because the equivalent Canadian institution has decided to do the same for the Bombardier C-Series.

This is good news for airlines, particularly in the United States, because I think we’re going to see a storm of low cost loans made by various governments to support the purchase of new aircraft. No doubt the European governments will do the same to support Airbus. The gloves are off.

I don’t know if this is good for the airline industry, however. Newer, more efficient aircraft in the fleets is good but this kind of loan storm, if it happens, could also have the effect of encouraging airlines to stretch their finances to take advantage of this and airlines do not need to be stretching right now.

In addition, these kinds of loans can distort the aircraft marketplace long term. A buying binge can result in a drought later. I’ll take stability over a flurry of purchases any time. Droughts can stymie aircraft development and I would far rather see a new Boeing narrowbody rather than another 1000 Boeing 737s sold. It’s better for everyone all the way around.

Filed under: Aircraft Development by ajax