Last week ING Bank closed a $403 million aircraft financing for Korean Air to fund the purchase of three aircrafts from Boeing. Out of the three aircrafts equipped with Pratt & Whitney engines, one is a 777-200ER passenger aircraft delivered on September 24, while the other two 747-400 freighter aircrafts are slated for delivery in October 2002 and February 2003.
The financing comprises a 12-year loan guaranteed by the Export-Import Bank of the United States (Eximbank) funding 85% of the net purchase price of the aircrafts. Korea Development Bank provided additional financing in the form of a five-year loan to finance 10% of the net purchase price.
ING acted as both advisor on obtaining the guarantee and arranger of the loan. This not only marks ING's first Eximbank transaction for Korean Air, but also its first Eximbank financing in Asia. In August, ING arranged a $138 million aircraft financing, also guaranteed by Eximbank, for Luxembourg-based cargo air carrier, Cargolux Airlines International.
The transaction marks a major coup for ING as Korean Air's aircraft financier in the past for Eximbank-guaranteed transactions has been Citibank. Some observers feel that given Korean Air's fleet comprises mostly of Boeing aircrafts, it was natural that Citibank had a stranglehold on this financing.
Typically, European banks, predominantly French, are the arrangers for aircraft purchase from French aircraft manufacturer, Airbus. But of late, other European banks such as Barclays Capital, ING, HSBC and Standard Chartered have also been increasingly involved in aicraft financing.
According to figures supplied by Dealogic, only last month Korean Air tapped a $82.6 million aircraft financing for the purchase of one Airbus A330-300. Comparison of pricing on the aircraft financing deals is difficult given that arrangers are reluctant to release this information. Provided below is a summary of aircraft financing deals for some of the regional airlines.
For purchase of
Two Boeing 777s
Four Boeing 777s and one 747
One Boeing 747
Five Airbus A340
One Airbus A330
One Airbus A330
One Airbus A330
Korean Air, which serves 77 cities in 29 countries, had a fleet of 111 aircraft as of January 2001. The flagship carrier for South Korea is the world's nineteenth largest international scheduled passenger carrier and the second largest commercial airline cargo carrier. Korean Air also enjoys the distinction of being the largest transpacific carrier of goods and operates the largest freighter fleet of any passenger airline in the world.
For the first half ended June 2002, Korean Air posted net profits of KRW195.4 billion reversing its net loss of KRW345.9 billion last year. The airline's RPKs (revenue passenger kilometres) for the first half grew 3.7% to 19.85 billion, while FTKs (freight tonne kilometres) as of May 2002 were 2.42 billion. RPKs are obtained by multiplying the number of revenue passengers carried on each flight by the flight stage distance. FTKs are obtained by multiplying the total number of tonnes of each category of revenue load carried on each sector of a flight by flight stage distance.
The latest transaction arranged by ING is one of the many it has arranged for aircraft financing this year. In April ING Structure Finance arranged a $32.8 million financing for Singapore Aircraft Leasing Enterprise (SALE), which is a frequent borrower in the loan markets. SALE is on another visit to the loan markets with a $105 million 12-year deal paying a spread of 85bp over Libor. Arab Bank, DBS and Standard Chartered are arrangers to the transaction that closed last week.
Singapore Aircraft Leasing Enterprise $105 million 12-year loan
Bank of China
Bank of East Asia