Delays over Saudi Arabia Airlines' expected huge orders for Boeing and McDonnell Douglas aircraft are linked to the Saudis' need to spread the cost of heavy national capital expenditure projects in the power, telecommunications and transport industries.
At presstime, the Saudis were not expected to place firm aircraft orders until at least January 1995. 'They are looking at which orders go forward and at what time,' says one source close to the deal. In the meantime, Riyadh is looking at financing options for 61 new aircraft, worth US$8 billion, including spares.
The main issues facing the government, include how to stage the commitments and whether to accept the US Eximbank's offer of 85 per cent loan guarantees or place any debt on the airline's balance sheet.
The aircraft deliveries are likely to be staged over a number of years, giving the Saudis the option of funding them outright. 'Saudi Arabia can do that at a canter - they probably don't even need finance,' says the source.
Any loans will either be raised independently or with Exim support. This would mean the US government's credit rating would operate in financial markets, enabling Saudi Arabia to keep its credit free for other financings. A major factor will be whether finance can be raised at cheaper rates without export credit.
Past aircraft acquisitions have been a gift to the airline from the state and, while Saudia is not considered creditworthy, it is being put on a more commercial footing in preparation for privatisation. This could see the airline putting some of the debt on its balance sheet subject to a sovereign guarantee.
Past aircraft acquisitions have been a gift to the airline from the state and, while Saudia is not considered creditworthy, it is being put on a more commercial footing in preparation for privatisation. This could see the airline putting some of the debt on its balance sheet subject to a sovereign guarantee.
Source: Airline Business
