Export Credit: A Lifeline For Engine Overhauls?

This week saw another major European carrier secure billions of euros of government-backed support as KLM followed Air France and Lufthansa in agreeing financing to weather the coronavirus crisis.

The support packages - €9 billion ($10.1 billion) for Lufthansa, €7 billion for Air France and €3.4 billion for KLM – should also benefit each airline’s technical arm, but for those MRO providers not connected to an airline, an oft-overlooked source of aftermarket finance may become increasingly available.

Export credit is typically associated with new aircraft and engine sales, but in its latest report UK Export Finance disclosed its continuing support for engine overhauls – the sector of the aftermarket likeliest to be hardest hit by airline cost-cutting in response to coronavirus.

In the 2019-20 financial year, a loan was provided to support engine overhauls undertaken by GE Caledonian in Prestwick in Scotland, taking support for GE Aviation overhauls in the UK to close to £100 million ($124 million), UKEF said.

The recent assistance was for Atlas Air Worldwide’s engine overhauls at GE Caledonian, and was delivered in partnership with the Export-Import Bank of the United States.

The UK’s maximum liability on the transaction was £8.5 million, although in total it extended almost £700 million of support to the aerospace sector in 2019-20.

“Supporting international trade will be crucial as the UK looks to recover from the impact of the COVID-19 pandemic,” said the state secretary for international trade, Liz Truss.

She added: “UK Export Finance is already playing a critical role at the centre of the government’s plan to power an export-led recovery and its offer is more important than ever for UK exporters.”

Alex Derber

Alex Derber, a UK-based aviation journalist, is editor of the Engine Yearbook and a contributor to Aviation Week and Inside MRO.