ARCHIVES HISTORIQUES 
DE LA COMMISSION 
 
 
 
COLLECTION RELIEE DES 
DOCUMENTS "COM" 
 
 
 
 
COM (85) 242 
 
 
 
Vol. 1985/ 0113 
  
 
Disclaimer  
Conformém ent au règlement (CEE, Euratom) n° 354/83 du Conseil du 1er février 1983 
concernant l'ouverture au public des archives historiques de la Communauté économique 
européenne et de la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983, 
p. 1), tel que modifié par le règlement (CE, Euratom) n° 1700/2003 du 22 septembre 2003 
(JO L 243 du 27.9.2003, p. 1), ce dossier est ouvert au public. Le cas échéant, les documents 
classifiés présents dans ce dossier ont été déclassifiés conformément à l'article 5 dudit 
règlem ent. 
In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983 
concerning the openi ng to the public of the historical archives of the European Econom ic 
Community and the European Atomic Energy Communit y (OJ L 43, 15.2.1983, p. 1), as 
amended by Regulation (EC, Euratom) No 1700/2003 of 22 September 2003 (OJ L 243, 
27.9.2003, p. 1), this f ile is open to the public. Where necessary, classified documents in this 
file have been declassified in conformity with Article 5 of the aforementioned regulation.  
In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom  1. 
Februar 198 3 über die Freigabe der historischen Archive der Europäischen  
Wirtschaftsgemeinschaft und der Europäischen Atomgem einschaft (ABI. L 43 vom  15.2.1983,  
S. 1), geändert durch die Verordnung (EG, Euratom) Nr. 1700/2003 vom 22. Septem ber 2003  
(ABI. L 243 vom 27 .9.2003, S. 1), ist diese Datei der Öffentlichkeit zugänglich. Soweit  
erforderlich, wurden die Verschlusssachen in dieser Datei in Übereinstimmung mit Artikel 5  
der genannten Verordnung freigegeben.  
COMMISSION  
OF THE
EUROPEAN COMMUNITIES
General SecretariatC0MC85) 242 final. 
Brussels, 22 May 1985
FOR OFFICIAL U S E  ONLY
Proposal for a 
-  COUNCIL DECISION
on the application of a sector understanding on 
export credits for wide-bodied jet aircraft
(submitted to the Council by the Commission)
C0M(85) 242 final

EXPLANATORY MEMORANDUM
INTRODUCTION
On 10 December 1984, the Council established negotiating directives 
for the international negotiations on export credits for aircraft. 
These directives are divided into two parts (A :  large aircraft - 
B :  other airacraft) and are aimed at a global agreement covering 
all categories of aircraft.
Since then, negotiations on each part have been opened. On large 
aircraft ("wide bodied jet aircraft") which is produced only in 
the US and the EC, the Community has negotiated bilaterally with 
the US. On other aircraft produced in a number of OECD countries, 
negotiations are presently carried out in the OECD .
Concerning wide bodied jet aircraft, the negotiations with 
the US have resulted in a draft understanding .  The US side 
has indicated its agreement to this text. The US also agreed 
that this Understanding should be incorporated in a global 
OECD agreement on export credits for aircraft as soon as 
the ongoing negotiations in the OECD have been concluded.
With the present communication the Council is requested to 
approve as a first step, the Understanding negotiated with the 
US.
APPRECIATION OF THE DRAFT SECTOR UNDERSTANDING
The Commission is of the opinion that the draft sector Understanding 
constitutes a considerable development of current financing practices 
and corresponds fully to the objectives set out in the negotiating 
di rectives.
(a) The Sector Understanding applies to all markets,  including 
the countries producing wide bodied jet aircraft.
(b) The financial conditions take into account the needs of the 
aircraft market as well as the evolution of financial markets 
in the US and the Community .  It provides for the possibility 
of offering long term finance up to 12 years to airlines.
The interest rate provisions are based upon the long term 
government bond market and introduce a system of automatic 
interest rate adjujtments at short intervals ,  allowing

for a high degree of flexibility in the financing offers.
(c) The necessity of ensuring that European offers are competitive 
against US offers is fully respected.
In particular, financing agencies in the Community
can compete with US institutions at competitive rates of interest.
In addition, should it become clear that commercial banks in the 
US can offer finance at more attractive conditions, the 
Understanding provides for a downward adjustment of interest 
rates. The Understanding also ensures that offers carrying 
shorter repayment periods than the maximum of 12 years (an 
alternative which European countries may prefer) remain competitive.
(d) The Sector Understanding maintains traditional European financing 
practices, such as the possibility of holding financial offers 
over a period of three months.
(e) The application of the Sector Understanding is preceeded by
a transitional period of 12 months. During this period,the new 
system is phased-in in three stages, allowing producers to 
adjust stepwise to the new conditions.
(f) The Understanding provides for financing in ECU.
3. CONCLUSION
Given that the objectives set out by the Council in December 1984 
have been achieved, it is in the interest of the Community to conclude 
the Sector Understanding on wide-bodied jet aircraft. The Understanding 
should become effective as foreseen , on 1 July 1985. It goes without 
saying that all efforts should be made in order to bring the OECD 
negotiations on the other categories of aircraft to a successful 
end,as soon as possible. In this respect it is worth noting that 
in the attached Understanding, both the Community and the US 
have confirmed their willingness to contribute to such a result.

COUNCIL DECISION
ON THE APPLICATION OF A SECTOR UNDERSTANDING ON
EXPORT CREDITS
FOR WIDE-BODIED JET AIRCRAFT
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Economic 
Community, and in particular Article 113 thereof,
Having regard to the proposal from the Commission,

-  2 -
Whereas it is necessary to establish international discipline in 
sectors not covered by the Arrangement on Guidelines for Officially 
Supported Export Credits in order to minimize self-defeating and 
counterproductive credit competition between suppliers in these 
areas;
Whereas in its Decision of 21 February 1983 the Council made a 
complementary undertaking to proceed, inter alia, to negotiations 
on an Understanding on Export Credits for Aircraft;
Whereas the Council accordingly adopted directives on the basis of 
which the Commission was to express the position of the Community 
in Internationa l  negotiations aimed at concluding an Understanding on 
Export Credits for wide-bodied jet aircraft;
Whereas the results of these negotiations meet the interests of the 
Community;
Whereas , in the interests of the Community and in order to give 
effect to the principle of international co-operation, it is 
necessary that the Understanding on Export Credits for wide-bodied 
jet aircraft be applied in the Community,
Whereas this Understanding is intended to become part of a comprehensive OECD 
civil aircraft agreement to be concluded expeditiously,

- 3 -
HAS ADOPTED THIS DECISION :
ARTICLE 1
From 1  July 1985, the Sector Understanding on Export Credits for 
wide-bodied jet aircraft annexed to this Decision shall be applied 
in the Community.
ARTICLE 2
This Decision is addressed to the Member States.
Done at Brussels For the Council 
The PRESIDENT

ANNEX
UNDERSTANDING ON G U ID E LIN E S  FOR O F F IC IA L  SUPPORTED  
EXPORT CREDITS FOR LARGE C IV IL  AIRCRAFT  
(LARGE AIRCRAFT SECTOR UNDERSTANDING)
A. FORM AND SCOPE
This Sector Understanding
complements the Arrangement on Guidelines for Officially  
Supported Export Credits;
is concluded with a view towards forming part of a com­
prehensive OECD civil aircraft agreement, the remaining  
•  portion of which should be concluded expeditiously;
sets out in paragraphs B through P the particular Com­
plementary Guidelines which are applicable to officially  
supported export credits for the financing of sales or  
leases of large aircraft listed in Annex 1  and super­
sedes the terms of the OECD "Standstill”  (TC/ECG/M.75.1  
item 6 and Annex III-A) with respect to such aircraft.
B. OBJECTIVES,OF THIS SECTOR UNDERSTANDING
The objective of the Understanding on Guidelines for Offi­
cially Supported Export Credits for Large Civil Aircraft  
shall be to establish a balanced equilibrium which in all  
markets;’
equalizes competitive financial conditions between Par­
ticipants;
neutralizes finance among Participants as a factor in  
the choice among competing aircraft; and
avoids distortions of competition.
C.  CREDIT TERMS AND CONDITIONS  
(1) Cash Payments
The minimum cash payment is 15 percent of the aircraft  
total price (the price of the airframe and any installed  
engines plus the spare engines and spare parts described  
in paragraph I). Participants will not provide official  
support for such cash payments other than insurance and  
guarantees against the usual pre-credit risks.

sV
\
-  2 -
(2) Maximum Repayment Term
The maximum repayment term of an officially supported 
credit shall be 12 years.
D.  MINIMUM INTEREST RATES
(1) Notwithstanding the provisions of paragraph E below, the  
following minimum interest rates, inclusive of credit  
insurance premia and guarantees, shall apply where  
Participants are providing official financing support by  
way of direct credit, refinancing or interest rate  
subsidy:
(a)  Financing in US Dollars
Date of Application  
From 1  July 1985  
From 1  October 1985
From 1 July 1986
If during the period from 1  July 1985 to 30 June 1986,  
TB 10 1/ falls to 10.8 percent or below, the final  
minimum interest rates of TB 10 + 120 basis.points for  
the 10-year option and TB 10 + 175 basis points for the  
over 10-12 year option shall apply immediately and the  
minimum interest rates shall thereafter be adjusted  
automatically in accordance with paragraph D(2) below.Number of Years in  
Up to 10 Years 
12%
TB 10 — ^ + 90  
basis points  
or 12%, whichever  
is more
TB 10 ^ + 120  
basis pointsMaximum Repayment Term  
Over 10-12 Years  
12.55%i.
TB 10 + 145
basis points  
or 12.55%, whichever  
is more
TB 10 ^ + 175 
basis points
1/ Ten-year U.S. Treasury bond yield at constant maturity,  
averaged over the previous two calendar weeks.

- 3 -
(b) Financing in the Currencies of the Currency Cocktail  
(DM, FF, h, ECU) 2/
A currency cocktail package based on 10-year government  
bond yields for DM, FP and f c  3/ plus a margin shall  
apply. This margin, calculated as a weighted average of  
the margins applicable to each currency, shall be equal  
to the margin applicable in the case of financing in  
U.S. dollars.
In the case of financing in ECU, the minimum rate appli­
cable shall be the long-term ECU bond yields 4/ less 20  
basis points plus a margin equal to the margin appli­
cable in the case of financing in U.S. dollars.
(2) Interest Rate Adjustments
An adjustment will be made to the minimum rates of  
interest set out in (i) above if the two-weekly average  
of the 10-year government bond yields at constant matu­
rity at the end of each two-week period differs'' by 10  
basis points or more from the average of the 10-year  
government bond yield at constant maturity at the end of  
ttie 'last two calendar weeks of June 1985 .  When such a  
change occurs, the levels of the minimum rates of inter­
est set out above shall be adjusted by the same number  
of basis points, the recalculated minimum rates being  
rounded off to the nearest 5 basis points. Subse­
quently, minimum rates of interest will be adjusted on a  
two-weekly basis according to the aforementioned method
2J At present, the "currency cocktail" financing for the A 300  
and A 310 consists of the following percentages of the  
following currencies:
Deutsche Mark or ECU 40%
French Franc or ECU 40%
UK Pound Sterling, or  
US Dollar, or ECU 20%
For the A 320, the "currency cocktail" shall consist of the  
following percentages of the following currencies:
Deutsche Mark or ECU 33.7% (Provisional)
French Franc or ECU 40.0% (Provisional)
UK Pound Sterling, or
US Dollar, or ECU 26.3% (Provisional)
3/ At constant maturity, averaged over the previous two calen­
dar weeks.
4/ As published by the Luxembourg Stock Exchange -- long-term  
bond series, averaged over the previous two calendar weeks.

if there is a change of 10 basis points or more in the 
interest rate underlying the preceding change in minimum 
rates of interest. Similar provisions shall apply to 
the ECU in the case of changes in the ECU bond yield.
(3) Special Adjustment?
(a) If a Participant believes that at least two signi­
ficant sales in any six-month period, (a) for which 
Participants are direct competitors, and (b) on 
which offers have been made with official financial 
support (See paragraphs E(l) and (2)), have been 
concluded on a pure cover basis, other than PEFCO, 
at a fixed interest rate below the applicable 
minimum interest rates specified in this Sector 
Understanding, Participants shall consult each other 
immediately (1) in order to determine the interest 
rates on the basis of which the sales have been con­
cluded and (2) if necessary, to find a permanent 
solution which ensures that the objectives of parag­
raph B are fully met. If during these consul­
tations, (1) it cannot be determined that the inter­
est rates for the sales in question were at, above, 
or equivalent to the applicable minimum interest 
rates specified in this Sector Understanding, and
(2) if a solution cannot be found within '30 days 
from the start of the consultations, then the mini­
mum interest rates specified in paragraph D(l)(a) 
shall be reduced by 15 basis points, unless the 
participants agree that the sales concerned were not 
significant. In no case shall the interest rate for 
the 10 year option be reduced below TB 10 plus 105 
basis points. Such adjustments would be made with­
out prejudice to continuing consultations to find a 
solution, including the possibility of a recoupment 
in the event that additional cases do not occur.
(b) If in any six-month period two or more sales for 
which Participants are direct competitors are con­
cluded on a floating-rate pure cover basis, consul­
tations to ensure that the objectives of paragraph B 
are fully met shall be held at the request of any 
Participant.
(4)  Differential Between 10- and 12-Year Financing options 5/
(a) If, subject to the conditions outlined below, at the 
end of the period between 1 July 1985 and 1 July 
1986, 66 percent or more of all sales of aircraft, 
financed either by means of official support or by 
.  pEPCO, have been concluded on a 10-year term, then

- 5 -
the minimum interest rate on the 10-year financing 
option shall be increased by 15 basis points.
If during the following year, 66 percent or more of 
all sales of aircraft, financed either by means of 
official support or by PEFCO, have been concluded on 
a 10-year term, then Participants shall review the 
differential between 10- and 12-year financing 
options with a view to finding a permanent solution 
to the problem of equating the differential between 
the two options. If, on the other hand, 66 percent 
or more of the above sales have been concluded under 
the 10-12 year financing option, then the minimum 
interest rate on the 10-year financing option shall 
be decreased by 10 basis points.
(b) If, subject to the conditions outlined below, at the 
end of the period 1 July 1985 and 1 July 1986, 66 
percent or more of all such sales have been con­
cluded on a 10-12 year term, then the minimum 
interest rate on the 10-year financing optipn shall 
be decreased by '15 basis points.
If, during the following year, 66 percent or more of 
all sales of aircraft have been concluded under the 
10-12 year term then Participants shall review the 
differential between 10- and 12-year financing 
options with a view to finding a permanent solution 
to the problem of equating the differential between 
the two options. If, on the other hand, 66 percent 
or more of the above sales have been concluded under 
the 10-year option,· then the 10-year minimum 
interest rate shall be increased by 1.0 basis points.
5/ For the operational purposes of this paragraph it is- under­
stood thatj
the test sample shall include only those cases in which the 
two financing options have been offered by at least one 
Participant;
- the activation of an interest rate adjustment can take place 
only if 66% of sales of aircraft according to one option 
have been concluded under two or more separate transactions;
the term "sales of aircraft" signifies that each separate 
aircraft sold is included in the sample.
4
1  \

(5) Date of Determination of Interest Rate Offer
A Participant may offer the borrower a choice of one of 
the two following methods for selecting the date on 
which the minimum interest rate (as defined in paragraph 
D(l) et seq.  )  on official fixed interest rate financing 
(see paragraph'E(1) below) and on PEFCO financing (see 
paragraph E(2) below) shall be determined. The 
selection by the borrower shall be irrevocable.
- the minimum rate shall be the minimum rate prevail­
ing on the date of the offer by the lender or,
the minimum rate shall be the minimum rate prevail­
ing on whichever one of a series of dates may be 
selected by the borrower. The date selected shall 
\in no event be later than the date of delivery of 
the aircraft.
AMOUNT OF FINANCING
(1) Official Fixed interest Rate Financing
(a) The percentage of the aircraft total price (as that 
term is defined in paragraph C (  1 )  )  which may be, 
financed at the fixed minimum rates specified in 
paragraph D(l) by means of official financing 
support shall be a maximum of 62.5 percent, when 
repayment of the loan is spread over the entire life 
of the financing, and a maximum of 42.5 percent when 
repayment of the loan is spread over the later 
maturities. Participants are free to use either 
repayment approach, subject to the ceiling appli­
cable to that pattern. A Participant offering such 
a tranche shall notify the other Participants of the 
amount, interest rate, date on which the interest 
rate is set, validity period for the interest rate 
^nd pattern of repayment.
(b) Participants will review the two ceilings at the 
time of each review pursuant to paragraph P to 
examine whether one ceiling proves more advantageous 
than the other with a view to adjusting the more 
advantageous ceiling so that a balance is more 
evenly struck.

- 7 -
(2) PEFCO Financing
Fixed-rate funds may be officially financed in a manner 
comparable to that provided by the Private Export Fund­
ing Corporation (PEFCO). Weekly information on PEFCO's 
borrowing costs and applicable lending rates exclusive 
of official guarantee fees on fixed-rate finance for 
immediate disbursement and for disbursements over a 
series of dates, for contract offers and for bid offers 
shall be communicated to Participants on a regular 
basis. A Participant offering such a tranche shall 
notify the other Participants of the amount, interest 
rates, date on which interest rate is set, validity 
period for the interest rate and pattern of repayments. 
Any Participant matching such financing offered by 
another Participant shall match it in all of its terms 
and conditions other than the validity period of offers 
•  of commitment (see Paragraph F).
These rates as notified shall be applicable by all 
Participants as long as the 24-month disbursement 
interest rate does not exceed 225 basis points "above TB 
10 (see Paragraph D).  In the event the 24-month rate 
exceeds 225 basis points, Participants shall be free to 
apply the rate of 225 basis points for 24 months dis­
bursement and all the corresponding rates and shall 
consult 'immedlately with a view toward finding a perma­
nent solution.
(3) "Pure Cover" Tranche
Official support by means of guarantees only ("pure 
cover") shall be permitted subject to the ceiling 
specified in paragraph 4 below. However, a Participant 
offering such a tranche shall notify the other Partici­
pants of the amount, term, pattern of repayments, and, 
where possible, interest rates.
(4) Total Official Support
The total amount of funds benefiting from official 
support pursuant to paragraphs E(l), (2), and (3) above 
shall not exceed 85 percent of the total price as 
defined in paragraph C(l) above.
F. VALIDITY PERIOD OF COMMITMENTS
The duration of fixed-interest rate offers of commitment on 
the tranches of financing defined in paragraph E(l) and E(2) 
shall not exceed three months.
1  \

-  8 -
'  '  \
G. FEES
Commitment and management fees are not included in the 
interest rate,
H. SECURITY
The Participants retain the right to decide upon security 
acceptable to themselves autonomously and will communicate 
fully to other Participants on this point, as requested or 
when deemed appropriate.
I·  SPARE ENGINES AND SPARE PARTS
The financing of these items is provided as a function of 
the size of the fleet of each specific aircraft type, 
including aircraft being acquired, aircraft already on firm 
order or aircraft already owned on the following basis:
For the first five aircraft 15 percent of the aircraft
of the type in the fleet: price (airframe and
installed engines.)
For the sixth and subsequent 10 percent of the aircraft
aircraft of that type in the price (airframe and fleet:
installed engines.)
The Participants reserve the right to change their practice 
and match the practices of competing Participants in matters 
of detail relating to the timing of the first repayment with 
respect to spare engines and spare parts.
J. TIED AID CREDITS
The Participants will not provide tied aid credits, associ­
ated financing (as defined by the Development Assistance 
Committee of the OECD), aid loans or grants or provide any 
financing at credit conditions more favorable to the bor­
rower than those set forth in this Sector Understanding.
K. PRIOR COMMITMENTS
The Participants reserve the right to honor all financing 
commitments made prior to 1 July 1985 and the dates of all 
subsequent changes in interest rates. Participants reserve 
the right to match offers made by other Participants.

- 9 -\
L. MODEL CHANGES
It is understood that when a loan contract has been 
concluded on one type of aircraft, the terras contained 
therein cannot be transferred to another type bearing a 
different model designation*
M. LEASES '  ,
It is also understood that a Participant may match a 12-year 
officially supported lease transaction with a 12-year repay­
ment term and 85 percent credit financing support, subject 
to the other terms and conditions of this Sector 
Understanding.
N. COMPETITION REFERENCE POINT
In the event of officially supported competition, aircraft 
defined in Annex 1 to this Sector Understanding competing 
with othier aircraft shall be able to benefit from the same 
export credit terms and conditions.
O. PROCEDURES
The procedures outlined in the Arrangement on Guidelines for 
Officially Supported Export Credits shall apply to this 
Sector Understanding. In addition should any Participant 
believe that another Participant may be offering an offi­
cially supported export credit not in conformity with the 
Guidelines without giving advance notice, consultations ,  
shall be held within ten days upon request.
P. REVIEW
The information procedures and conditions outlined in this 
Sector Understanding are subject in principle to an annual 
review. However, the Participants shall review the pro­
visions of this Sector Understanding whenever requested, 
notably in relation to the possible development of certain 
financing and interest rate trends (see paragraph D(3) and 
(4).
A special review shall be initiated not later than October 
1985 with a view to examining!
ECU financing provisions;
disbursement pricing; and,
questions relating to credit insurance premia and 
guarantee fees.

-  10  -
At the first annual review Participants shall examine, inter 
alia, questions of:
leasing,
sales of spare parts and engines, and 
new developments in financing systems.

-  11  -
APPENDIX
This list identifies large civil aircraft competing on 
world markets. All other similar aircraft, which may be 
introduced in the future, shall be covered by this Sector 
Understanding and shall be added to the list in due course.
(1) US AIRCRAFT
BOEING B 737 
BOEING B 747
BOEING B 757. ·  .
BOEING B 767
MC DONNELL DOUGLAS MD-80 series 
MC DONNELL DOUGLAS DC-10
(2) EUROPEAN COMMUNITY AIRCRAFT
AIRBUS A 300 
AIRBUS A 310 
AIRBUS A 320