The airline finance industry could find it easier to raise money from next year. Despite the advantages of using aircraft as collateral different legal codes around the world mean that lenders can find it impossible to take possession if the borrower defaults. This means that raising money by selling secured bonds has been mostly confined to US airlines. However, in November 2001 a conference in Cape Town agreed on a convention and protocol that would make repossession far easier, reducing risks, allowing cross-border re-leasing of financed aircraft, and generally making loans to airlines far cheaper. The convention is not yet in force - the International Air Transport Association anticipates that it would take at least the rest of the year for enough states to ratify it, while Scott Scherer of Boeing Capital predicts that it might not come into force until 2006.
But, in the long term, easy access to large amounts of cheap capital could help the airlines re-equip and expand their fleets, in good time for the next generation of aircraft - the Airbus A380 ultra-large aircraft and the Boeing Sonic Cruiser. Work has already begun on an international register of aircraft assets.
Source: Flight International
