Government moves to reduce aircraft financing costs

Transport Minister Steven Joyce has announced that New Zealand will become a party to the Cape Town Convention and associated Aircraft Protocol, which will reduce finance costs for companies purchasing and leasing aircraft.

The move will improve certainty for investors in high-value mobile equipment such as aircraft, and reduce financing costs for aircraft operators. Joining the convention means New Zealand will become part of an international system to protect commercial security interests in mobile aircraft equipment.

The Cape Town Convention and Aircraft Protocol allow lenders and lessors to register their security interests in mobile equipment on an international register. It also offers globally consistent legal remedies for financial defaults by debtors, as well as additional rights, including the ability to remove an aircraft from a national civil aircraft register and export it.

“The Convention will offer greater certainty to all parties allowing lenders and lessors to offer discounted rates to aircraft operators in States that are party to the Convention,” says Mr Joyce.

“This will reduce aircraft financing costs for most of the country’s commercial air transport operators in future aircraft acquisitions, helping improve the bottom line for both the aviation and finance sectors.”

Air New Zealand has previously announced the acquisition of 23 new aircraft over the next six years, the Aviation Industry Association has forecast that the remainder of the industry could acquire some 160 aeroplanes and over 400 helicopters in a similar period. These operators stand to benefit from accession.

Potential savings in finance costs over this period are estimated to be between $18 million (fore premium reductions in the cost of export credit guarantees) and $325 million (on loan interest rates).

This is a significant economic benefit for the country as a whole with no downside.

“Legislation will need to be amended to enable New Zealand to become a party to the agreements. The government will be working to see this in place as quickly as possible and I anticipate amending legislation to be introduced by the middle of the year.”

ENDS

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