Anticipating Revised Rules Affecting Aircraft Finance Transactions

In 2011, financing markets began to inch toward pre-crunch availability levels; however, as the production schedules for each of the major aircraft manufacturers increase to produce more energy-efficient equipment, there will be even more demand for such financing. Against the backdrop of high demand, financiers and airlines must now prepare to adapt to the new finance regulatory regimes of Basel III and the 2011 Aircraft Sector Understanding ("ASU"). While it is not anticipated that either new regime will limit the availability of credit again, it is expected that both will make aircraft financing more expensive.

Basel III

Basel III will become effective in 2013. Announced as a reaction to the credit crunch, the new capital and liquidity standards of Basel III are designed to ensure (and require) a higher level of capital within the banking system. Aircraft finance transactions, under Basel II, have generally required very low levels of capital because they are