Policy Needed at Eximbank for Financing Aircraft Spare Parts and Other Support Items

ID-81-55: Published: Jul 31, 1981. Publicly Released: Aug 12, 1981.

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Pursuant to a congressional request, GAO reviewed the use of credit memorandums in connection with aircraft loans approved by the Export-Import Bank (Eximbank). Credit memorandums, granted by manufacturers as concessions in negotiating these sales, enable buyers to obtain spare parts, ground equipment, training, and other support items for aircraft at no additional cost. The loans reviewed involved two foreign companies and represented well over 50 percent of the costs for the aircraft support items.

GAO stated that support items generally have much shorter lives than the aircraft itself, and alternative types of financing would be more appropriate for the purchase of these items. GAO believes that excessive financing for support items on the same long-term basis as the major capital item does not contribute to the efficient allocation of Eximbank's funds. GAO concluded that, in periods of restricted lending, it is especially important for Eximbank to use available resources as effectively as possible in assisting U.S. manufacturers to compete for commercial aircraft sales.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Export-Import Bank should establish a policy limiting the amount of spare parts and other support items that may be included in its direct long-term financing for commercial aircraft sales, and it should delay disbursement of loan funds for items obtainable with credit memorandums until the memorandums are used.

    Agency Affected: Export-Import Bank of the United States

 

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