Air Transport World

Funding fleet renewal; Latin American carriers seek paths to financing for aircraft upgrades and eliminate costly political-risk insurance. (includes related article on Aeromexico)

Latin American carriers seek paths to financing for aircraft upgrades and eliminate costly political-risk insurance. By Edvaldo Pereira Lima.

Mexico City-The first-ever aviation-financing in Latin America seminar, sponsored by IATA and cosponsored by the Latin American Air Transport International Association (AITAL) and Aeromdxico, brought home the realization that three different but mutually converging realities are affect the picture.

* A fierce competition is building among world airlines for the shrinking availability of funds for fleet renewals.

* As airlines of the developing countries face more difficulty in gaining access to those funds than do carriers from developed nations, new and unusual moves must be-and are being-made to guarantee a slice of the cake.

* Airlines feel inclined to press the financial community toward some degree of change in the rules, seen here as Draconian, that govern north-south deals.

Setting the stage, Patricio Sepulveda, executive president of the consulting group BDO-Chile and former president of AITAL, presented a paper in which he predicted that average yearly traffic worldwide will rise by 5.5% from now to 2005 but that because of the aging-aircraft issue and coming noise restrictions, some 10,000 new jetliners-a greater level of growth for the fleet than for traffic-worth $626 billion will be delivered.

According to Sepulveda, Latin carriers must renew their fleets not only because of the average of the aircraft-14.3 years--but because of increasing competition f rom megacarriers that tend to operate younger fleets-average age of the world fleet is 11.8 years.

Against this backdrop is the economic condition of much of Latin America and the Caribbean, where GNP fell in seven countries during 1989, while expanding slightly in 13 others. Over all, GNP increased 1. 1 % over 1988. But population increases were above that level, causing per capita income to fall by 1%. Total foreign debt reached $416 billion. Service of that debt caused transfer of $25 billion abroad, contributing to recession and high inflation rates in most of the region. …

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