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Analysis: Awas bucks market with high volume PDP
20 July 2012
At a time when PDP financing has been scarce lessor Awas has arranged pre-delivery payments for 20 aircraft.
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PDP financing
Awas
pre-delivery payments for 20 aircraft
Airlines and lessors have found pre-delivery payments (PDPs) hard to access for a while now.
In the best of all possible worlds, an airline or lessor will order an aircraft and then pay up to 30% of the aircraft’s total price to cover some of the plane’s manufacturing cost.
Airlines traditionally paid the PDPs out of their own cash reserves. But airline’s cash reserves can easily dry up and many airlines turned to the banks for this financing. Banks were, for the most part, happy to do PDPs as it helped secured mandates from the airlines for the longer-term aircraft financing.
Dropping PDP popularity
However, since the financial crisis began, financiers have been less willing to make PDP loans and the pool of banks available for securing PDP financing has been shrinking.
The credit risk for PDPs is actually quite small as a lender only has to...
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