The Air Transport Association (ATA) is suing the Export-Import Bank of the U.S. (Ex-Im Bank) to stop $3.4 billion in loan guarantees the bank is offering to Air India for the purchase of Boeing aircaft.

The suit, filed in U.S. District Court for the District of Columbia, claims the bank is failing in its statutory obligations by offering the loan guarantees. The Ex-Im Bank has approved $1.3 billion in loan guarantees and $2.1 billion in preliminary financing commitments to Air India to buy 30 Boeing aircraft.

The airline trade group claims financially struggling Air India could default on the loan, leaving U.S. taxpayers responsible for the bill. “The Ex-Im Bank decided to provide billions of dollars in loan guarantees without fully considering whether that carrier will be able to repay its debts,” the court filing says.

ATA argues the loan guarantees would harm the U.S. airline industry by providing Air India access to aircraft at more favorable financing rates than those available to U.S. carriers. Furthermore, this loan would increase available seats on routes that U.S. airlines serve, putting the U.S. industry at a competitive disadvantage, which is a dereliction of the Ex-Im Bank’s mandate, ATA claims.

Earlier this year, changes in the rules for the Organization for Economic Cooperation and Development in theory leveled the playing field for access to export credit agency (ECA) support. Before the change in the so-called “home market rule,” U.S. airlines were barred from receiving loan guarantees from Ex-Im Bank for Boeing aircraft, and European airlines could not secure ECA financing from European export support banks. Boeing and Airbus supported this rule. At the time, ATA argued that ECA support functioned as a virtual subsidy, allowing foreign carriers more favorable financing for aircraft (Aviation Daily, Oct. 11, 2010).

ATA claims Ex-Im Bank has provided more than $52 billion in loan guarantees to non-U.S. carriers in the past 10 years, and this has forced U.S. airlines to cut routes and capacity, at the cost of 4,100-7,500 U.S. airline jobs. “While we support the goal of expanding U.S. exports, it cannot come at the expense of U.S. companies and U.S. jobs,” says ATA President Nick Calio.