flee 5 Report post Posted August 2, 2010 Malaysia Airlines is finalising the financiers and the priority is for the Boeing 737-800 that is coming in this October National carrier Malaysia Airlines (MAS) (3786) has shortlisted six candidates to finance its 22 new aircraft to be delivered from October this year until 2012. "We issued the request for proposals (RFPs) and received an overwhelming response of 60 (proposals). We are very pleased with the response, especially when you think about what the market was like last year and the year before," MAS group managing director and chief executive officer Tengku Datuk Azmil Zahruddin told Business Times in Kuala Lumpur. He attributed the interest to the airline's strong balance sheet and good cash balance. In its first quarter ended March 31 2010, MAS had a cash horde of almost RM3.2 billion. The RFPs sent out were for 14 Boeing 737-800 and eight Airbus 330-300. The Airbus delivery will begin from April next year. "We are in the process of finalising the financiers. The priority is for the Boeing 737-800 that is coming in this October," Tengku Azmil said. He said MAS aims to firm up the financiers for the first Boeing plane by month-end, but did not rule out the possibility that negotiations could come down to the wire. "It is common to be negotiating (for financing rates) until the last day of delivery. It happens to many airlines, and has happened to us before. So I don't discount that from happening," said Tengku Azmil. MAS is looking to a mix of financing options for the planes. Although securing the best rate is a key factor in MAS' choice of a financier, the latter's expertise in a certain financing structure is also an important consideration, Tengku Azmil said. Four financing options commonly used by airlines are operating leases, tax lease structures, export credit agency (ECA)-backed structures (which involve government guarantees) and commercial debt. An operating lease involves the sale and leaseback of the aircraft, while a tax lease structure lets the airline own the plane at reduced costs. In keeping with MAS' strategy to lease one-third of its fleet at all times, it will opt for operating leases to fund the new planes coming in from October. When asked if Penerbangan Malaysia Bhd (PMB) would be one of the lessors among the six financiers, Tengku Azmil declined to comment. "We don't exclude local (lessors), but the Europeans tend to dominate the aircraft-leasing market and whether PMB can be competitive against all those who join becomes the question," he said. Under the Widespread Asset Unbundling agreement between MAS and PMB, PMB has first right of refusal for operating leases if it can match the best rate offered to MAS. Tengku Azmil added that ECA-backed structures are a financing option used for some aircraft when an airline has a large number of orders, while tax lease structures, which are complex in nature, can provide good financing rates. For instance, the 17 ATRs MAS owns are fully financed through a mix of financing structures: nine on Japanese operating leases, five through ECA-backed term loans, and three through Islamic financing. Source: http://www.btimes.com.my/Current_News/BTIMES/articles/pjsm1/Article/index_html#ixzz0vQagaJOM Share this post Link to post Share on other sites
