Aerospace Execs See Easier Financing in 2010

Global aerospace companies are seeing early signs that financing conditions could improve next year, but executives cautioned at the Paris Air Show that the economic situation remained tense.

General Electric Vice Chairman John Rice said on Wednesday he expected credit conditions to improve by 2010, though he added that it could be too early to say the economy had reached a trough. GE is the parent of CNBC.

"The environment continues to be difficult. People talk about green shoots and stabilization -- I don't know that we've seen enough yet to say that we've bottomed out, although certainly we expect that to happen," he said.

GE's Aviation unit makes large jet plane engines, each one of which costs millions of dollars.

Companies around the world have been squeezed by tight credit markets in the global economic crisis, and airlines have found it difficult to finance expensive aircraft purchases.

An improvement in the availability of funds would be seen as a sign that the downturn could be nearing its end.

Customers of planemaker Bombardier, whose corporate jet business has been hurt by a drop in spending by companies, still face difficult financing conditions.

"It's very challenging right now," Bombardier Aerospace President and Chief Operating Officer Guy Hachey told Reuters Television in an interview at the air show.

But the rate at which customers are canceling orders has peaked, and the company now has fewer so-called "white tails," he said.

White tails are planes that have been built but not yet sold and so are not painted in any airline's livery.

The sales chief of EADS unit European planemaker Airbus said at the air show that financing had been secured for remaining deliveries this year but that the jury was still out on 2010.

Positive Messages

"Essentially, (2009 deliveries) are now financed. The question is whether they will stay financed," John Leahy said, adding that well over half of anticipated 2010 deliveries had been financed.

European credit agencies have been asked to raise the amount of finance offered to support aircraft deliveries to 50 percent of the total from 20 percent last year.

Airlines are currently getting about 40 percent of their finance from such agencies, Leahy said, adding "we will put some money in ourselves."

German engine maker MTU Aero Engines sees a light at the end of the tunnel next year as early signs of an improvement on credit markets emerge.

"Compared with a few weeks and months ago, when we had a lot of bad news on financing, we have been getting a lot more positive messages," MTU Chief Executive Egon Behle said.

MTU, which builds military and civil aircraft engines and offers maintenance services to airlines, has had to offer support to some suppliers who are exposed to the weak automotive industry to help them weather the downturn, Behle said.

In another segment of the aerospace market, EADS unit Astrium Satellites said commercial satellites were also feeling the squeeze of tight credit markets.

"Because of the financial crisis the commercial market is very volatile," division Chief Executive Evert Dudock said, adding that he was urging governments to help stabilize the market by providing loan guarantees.

"For 2009, the market is still looking stable, but from what I am seeing at the moment, it will be more critical next year," he said.

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