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SUMMARY 12 their financing agencies. Inconsistency in the application of Eximbank policy has made it difficult for foreign customers to plan purchases and financing. Both of these conditions handicap U.S. manufacturers because purchasers have long memories. The combination of weakened domestic customers, growing reluctance of traditional lenders to provide funds under conventional arrangements, and uncertain financing from Eximbank has forced aircraft manufacturers to invent new forms of financing. Creative extensions of operating-lease arrangements (leveraged leasing), which make provision for buy-back coupled with transfer of the investment tax credit (ITC) to the lessor, point the way to the trend of the future. U.S. manufacturers have demonstrated ingenuity and a willingness to take risks that are commendable. This emerging trend does increase their financial exposure and reflects a need for still further development of financial instruments (and even new institutions) that can spread risk adequately. The growing importance of foreign markets means that restrictions on investment tax credit to foreign operators could have a detrimental effect on U.S. aircraft manufacturers. The panel recommends consideration of additional measures that would enable aircraft manufacturers to spread the risk in leasing aircraft to domestic and foreign customers. The panel recommends that Eximbank reexamine its mode of operation and lending roles in the light of the heightened international competition facing all of U.S. industry. This report suggests several specific areas warranting attention to ensure that Eximbank is consistent, effective, and responsive to competitive realities. Smaller Aircraft Since smaller aircraft are typically sold to customers with very limited capability to finance purchases, financial terms can be a powerful competitive weapon. This weapon is being used aggressively by foreign competitors. It is important for Eximbank to review its procedures for their appropriateness in the light of the heightened competition U.S. manufacturers are facing. Equally important, Eximbank should seek consistency in its approach and its priorities so that U.S. companies can propose financing terms with greater confidence. The panel endorses and recommends continuation of the recent new Eximbank facility to provide medium-term loans for sales of small aircraft.
