HSBC helps Air China complete ECA-backed aircraft financing

Lender's experience in overseas markets gave it edge to help carrier obtain guarantees from 3 ECAs.

HSBC Group has recently helped Air China complete an aircraft purchase transaction guaranteed by European export credit agencies (ECA), marking the first time that a mainland Chinese airline has financed an aircraft purchase without guarantees from Chinese state banks or the government.

Acting as the Joint Mandated Lead Arranger and ECA agent, HSBC worked closely with Air China to assist the national flagship carrier in obtaining guarantees from three European ECAs to support the airline’s Airbus aircraft financing. The completed transaction is the first of several facilities amounting to US$260 million, which Air China has appointed HSBC to arrange under a framework mandate relating to aircraft delivery by Airbus to the airline during 2010, according to an HSBC report.

This represents a breakthrough deal as earlier aircraft financings by Chinese airlines had all been guaranteed by Chinese state banks or government or had involved them to provide supporting guarantees. It sets a financing model, offering Chinese airlines increased options to fund their aircraft purchases while reducing financing costs.

Fan Cheng, Vice President and CFO of Air China, said: “We are very pleased to cooperate with HSBC to complete this first-ever deal in China’s aviation industry. The breakthrough transaction is a strong demonstration to our growing competitiveness, better management and internationalisation. As we continue to expand and upgrade our fleet in the coming years, this transaction has helped us identify a new option in aircraft financing. As a leading air carrier in China, we are dedicated to building an efficient air service network to maximise shareholder value.”

Gordon Lam, Managing Director of Global Banking, HSBC Bank (China) Company Limited, said: “We are very pleased to pioneer this approach in mainland China’s aviation industry through close collaboration with Air China. In view of China’s fast-growing air travel market and the associated fleet expansion needs, this deal provides increased options for airlines in China. HSBC has very rich experience in overseas markets. We will fully leverage our global expertise and resources to support the further development of China’s aviation market.”

As one of China’s top three airlines, Air China operates a fleet of more than 270 aircraft serving 250 domestic and international routes. As a member of Star Alliance, a major global airline alliance, Air China is able to further extend its reach to over 1,000 destinations across 175 countries and territories.

HSBC Global Banking and Markets is an emerging markets-led and financing-focused business that provides tailored financial solutions to major government, corporate and institutional clients worldwide. Global Banking and Markets has offices in more than 60 countries and territories.