Dropping aircraft lessors from eligibility for U.S. Export-Import Bank financing could be one way forward to resolving the legislative impasse over the long-term reauthorization of the agency, CEO and Airlines for America Chairman Richard Anderson suggested yesterday.
Anderson identified the prohibition as part of a series of potential steps. On a broader level, his suggested steps also would include analyzing the impact of the bank’s aircraft financing as a way to “begin a process to negotiate the end of the subsidies,” he said.
“You could even take an important step of only financing end users,” he continued in remarks after a speech at the U.S. Chamber of Commerce Aviation Summit in Washington. “We also finance a significant number of lessors, who then take the low-cost financing, mark it up and resell the airplane.”
Beyond that, he said, the question becomes how a carrier such as Delta can get a competitive interest rate. “Either it has to go away or we have to be given the opportunity to participate, so that we aren’t at a strategic disadvantage,” he added.
For widebody aircraft that typically cost $150 million to $175 million a piece, Anderson said, Ex-Im financing can make the difference between having to pay $4 million a year in interest and $1 million. He specifically cited having to compete againston U.S.-India service after it received Ex-Im help for aircraft it uses on the routes, which he says helped enable Air India to undercut Delta on fares.
Most foreign flag carriers that are getting Ex-Im support are investment grade, Anderson asserts. Another possibility he mentioned is stricter criteria for carriers that are eligible for the financing.
“Many of these companies are investment grade and among the most profitable in the world, so they don’t have a problem financing whatever they want to finance,” Anderson said. “Just go to market criteria; pure market criteria would be an answer.”
In his speech, Anderson also called for the U.S. government to add an enforcement mechanism akin to the World Trade Organization (WTO) to its open-skies agreements. The aviation agreements lift restrictions on aviation service between countries and regions.
“Open-skies policies need to be modified to be ‘fair skies,’” Anderson said. “We negotiate aviation treaties; we don’t have an enforcement mechanism in there. We are not advocates on behalf of industry as we are under WTO.”
As one example of where it might be needed, Delta cited about $8 billion that Japan’s government provided forto keep the carrier’s planes in the air during a bankruptcy restructuring in 2010.
At the time, Delta tried to pull JAL into theAlliance, but the carrier opted to stick with American and its Oneworld alliance instead.