Boeing, Citi Bank N.A. Partner on Export-Import Supplier Financing Program

Photo Credit: Boeing Images

SEATTLE, WA -- Boeing (NYSE: BA) has become the latest U.S. exporter to help its eligible small-business suppliers gain access to affordable financing through participation in a Supply Chain Financing Program guaranteed by the Export-Import (Ex-Im) Bank of the United States.

Boeing is notifying several hundred qualifying U.S.-based suppliers that system testing is complete for the new financing program, to be operated by Citibank N.A. (Citi), allowing sign ups to proceed and payments to flow. 

The Ex-Im program, first offered in 2009, allows small businesses involved in exporting non-military goods to receive attractively priced working-capital financing. It is done through early payment of their accounts receivable, in this case from Boeing, in exchange for a small discount fee paid to Citi for those receivables accepted for the program. The program is part of Obama Administration's National Export Initiative to double U.S. exports within five years.

At a time when economic recovery continues, the Bank's program helps inject liquidity into qualifying small businesses, providing faster access to needed cash flow. Ex-Im provides a 90 percent guarantee of the eligible invoices while a lender, such as Citi, bears 10 percent of the risk.

"Increasingly Boeing has called on small business to help us in sustaining export-related jobs. The Supplier Financing Program is a great tool to encourage this key growth area to prosper," said Tom Dillon, Boeing corporate finance director who led the financing program's implementation.  "Small business can truly join larger exporters in working together to grow much needed jobs supported by demand for American products the world wants."

The Boeing supplier program was authorized in September 2011 with Ex-Im Bank's approval for an initial $740 million capacity. "Ex-Im is proud to have America's number one exporter, Boeing, join with us in supporting the company's small business suppliers using our supply chain financing product. Eligible companies will be able to more quickly turn their accounts receivable into cash, helping them power more sales and supporting American jobs," said Fred P. Hochberg, Chairman and President of Ex-Im Bank.

Participating suppliers select accounts-receivable invoices they want to sell to Citi which, if accepted, are paid in a day or two instead of on the longer due dates. Capital flows to small businesses faster, and at a lower cost, as a benefit of being a supply partner to a major U.S. exporter.

"Citi is pleased to be a part of this very important initiative in partnership with Ex-Im Bank and Boeing.  We fully appreciate the role of small and medium-sized businesses (SMEs) in the growth of the U.S. economy.  The SME market is one of the keys to sustaining economic growth and stimulating the trade supply chain, globally," said Craig Weeks, Global Head of Trade Product Sales at Citigroup.  He adds, "This program represents Citi's continued commitment to the U.S. economy by providing the financing required for credit-challenged sectors." 

Boeing is offering the program to its aircraft-related suppliers domiciled in the U.S. that qualify under Ex-Im Bank's guidelines for the program. At least half of the outstanding value of the purchased receivables is expected to be from suppliers meeting U.S. Small Business Administration qualifications. The company could expand supplier participation at a later time.

Boeing Media

ALAFCO orders additional 35 A320neo

I guess after all, Boeing isn't the only one bagging up new aircraft orders... 

ALAFCO Aviation Lease And Finance Company, the Kuwait-based international aircraft leasing company, has finalized a purchase order for 35 A320neo Family aircraft bringing its total backlog for the type to 85.

The firm contract is an increase of the previous agreement signed at the 2011 Dubai Airshow for 50 A320neo aircraft.

“After a full analysis, we concluded that the A320neo will continue to be in strong demand, therefore, we are seizing the opportunity to secure an additional 35 aircraft to meet the future requirements of our customers.  The A320neo is the market’s favourite single-aisle aircraft family,” said Ahmad A. Alzabin, ALAFCO Chairman & CEO. “The significant fuel burn savings it offers, combined with the operational reliability and cost effectiveness of the A320 Family, make it an absolute “must have” in our portfolio.” 

“Higher fuel prices means airlines require fuel efficient aircraft and with the A320neo offering a 15 per cent fuel burn reduction, it is the ideal investment. The A320neo reduces operating costs whilst enabling airlines to offer the best cabin comfort levels,” said John Leahy, Airbus Chief Operating Officer Customers. “This significant order from ALFACO confirms that the neo ticks all the right boxes and is clearly the best product on the market.”

Over 8,300 A320 Family aircraft have already been ordered and some 5,000 delivered to more than 350 customers and operators worldwide reaffirming its position as the world’s best-selling single-aisle aircraft family. The A320neo has over 95 percent airframe commonality making it an easy fit into existing fleets while offering up to 500 nautical miles (950 kilometres) more range or two tonnes more payload at a given range.

The A320neo is a new engine option for the A320 Family entering into service from 2015 and incorporates latest generation engines and large "Sharklet" wing tip devices, which together will deliver 15 percent in fuel savings. This reduction in fuel burn is equivalent to 1.4m litres of fuel – the consumption of 1,000 mid size cars.  This saves 3,600 metric tonnes of C02 per aircraft per year, the amount absorbed by 240,000 mature trees. The A320neo NOx emissions are 50% below CAEP/6 and this aircraft also has considerably a smaller noise footprint.    

Airbus

How Boeing Measures up

Aerospace and defense giant Boeing (NYSE: BA ) recently posted decent fourth-quarter numbers followed by a weak future outlook. While that information could be useless out of context, a broader view will help in judging where the company stands at present. Here's an analysis of Boeing's strengths, weaknesses, opportunities, and threats which should help develop a more complete picture about the company.

Strengths

• Boeing bagged several valuable contracts in 2011. In December alone, the company signed deals valued at more than $33 billion and ended the year with a record order backlog worth $356 billion.
• Boeing's strong brand value gives it the required competitive edge. This has attracted loyal customers ranging from the U.S. Defense Department to countries such as Saudi Arabia.
• Boeing has a diversified product offering that comprises military and commercial aircraft sales. This gives the company a definite advantage over rivals Lockheed Martin and Northrop Grumman, which cater primarily to the defense segment.

Weaknesses

• Boeing's production capacity leaves it far behind in the race for deliveries as compared to European rival Airbus. In 2011, Airbus delivered 534 commercial planes, higher than the 477 planes delivered by Boeing.
• Boeing's higher-than-expected pension costs will weigh down on its profits this year. On average, the company expects to earn $4.15 per share in 2012, which is less than analyst expectations at $4.96 per share.
• Production of Boeing's much-awaited, fuel efficient 787 Dreamliner has already been delayed three years. This is likely to add to the company's mounting costs.

Opportunities

• Iranian tension is causing countries in the Middle East to beef up their arms stockpiles and Boeing would do well to cash in on these opportunities in the long run.
• Boeing's commercial aircraft sales have been growing rapidly, and it has tremendous scope to grow in future, given the strong demand in emerging markets such as India and China.

Threats

• The U.S. government will be cutting defense spending by more than $1 trillion over the next 10 years. This will pinch the profitability of all aerospace and defense companies, and Boeing is no exception.

The Foolish bottom lineAfter carefully weighing the pros and cons, Boeing looks strong to me given its reduced dependence on defense aircraft sales, coupled with the thriving commercial aircraft business. Click here to add Boeing to your watchlist to keep track of upcoming developments.

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