AIG Problems Affect Aviation Sector


Aviation’s relative immunity to a host of political, economic and even social issues that have dragged down virtually every other sector couldn’t last forever and the potential failure of American International Group Inc. (AIG) could be the fly in the ointment. MarketWatch, The Wall Street Journal’s online newsletter, says AIG may have to sell its commercial aircraft leasing arm, International Lease Finance Corp., to stay afloat and that will undoubtedly send ripples through the whole industry. In fact, Boeing has 102 firm orders through ILFC and if the company’s credit rating is downgraded, that could mean higher prices for the end customers of those aircraft.

“If [ILFC] becomes consumed by AIG’s problems, it may not be able to maintain the same purchase terms and financing terms with its banks and lenders and manufacturers,” Henry Harteveldt, an analyst with Forester Research, told MarketWatch. “That may force them to cancel orders, and that could have a huge impact on Boeing Co. and Airbus.” Of course, trouble in the commercial sector doesn’t always translate to problems in GA and even the opposite can happen, but given the sheer scope of the problems, it seems unlikely to escape.