'Swine' bankers shun airline loans

PARIS: The biggest threat to the global airline industry isn���t the swine flu outbreak, according to AirAsia���s Tony Fernandes. ���We���ve been through SARS, bird flu, tsunami, you name it,��� Fernandes, the founder and chief executive officer of Southeast Asia���s biggest discount carrier, said at the Paris Air Show this week. ���The only swine now are bankers.���

Carriers from Air France-KLM Group to AirAsia, already coping with a slump in travel, also have to deal with banks that are unwilling to finance aircraft purchases. Airlines have to come up with money to pay for jets ordered years ago or face penalties for cancellations. In 2010, the funding shortfall may reach $36 billion, or as much as 60% of the spending on larger aircraft, said Nick Cunningham, an analyst at Evolution Securities in London.

���Debt is the critical component of any strategy right now,��� said Steve Rimmer, CEO of Guggenheim Aviation Partners in Issaquah, Washington. Guggenheim has 56 aircraft either owned or under contract with a value of $2.5 billion and makes money by leasing them to carriers in return for regular payments. ���We, like everyone, are chasing debt.��� Airlines, which posted a total of $10.4 billion in losses in 2008 according to the International Air Transport Association, are eliminating jobs, cutting routes and grounding planes to survive a slowdown.

AirAsia X, the long-haul affiliate of Malaysia-based AirAsia, is seeking short-term financing from more banks and paying higher borrowing costs, said Azran Osman Rani, the CEO of AirAsia X. The airline announced an order the Paris show for 10 Airbus SAS A350s, valued at $2.4 billion at list prices, as regional low-cost traffic grows in defiance of the global aviation slump.

���A year ago, when you wanted to finance an aircraft you���d have a queue through your doors,��� Air France CEO Pierre-Henri Gourgeon said in an interview last month. ���Once when we asked for three aircraft to be financed we got positive answers from 12 banks. Now it���s the reverse.���