The timing of the Air Transport Association’s (ATA) lawsuit to stop the U.S. Export-Import Bank (Ex-Im Bank) from providing loan guarantees to has struck some in the industry as curious. The suit claims, among other things, that the loan guarantees will have adverse effects on the U.S. airline industry’s ability to create jobs.
ATA filed the suit Wednesday in the U.S District Court for the District of Columbia (Aviation Daily, Nov. 17) to block the $3.4 billion in loan guarantees and other financing Ex-Im Bank is offering Air India to buy 30aircraft. But according to ATA Chief Counsel David Berg, the timing of the suit is to send a message on the bank’s lending processes. ATA believes last year’s reform of aircraft financing rules in the Organization for Economic Cooperation and Development, which imposed some restrictions on fast-growing airlines and relaxed some rules for European and U.S. carriers to get financing through export credit agencies, did not go far enough.
ATA believes export credit financing should be reserved for companies that do not have access to commercial markets. “We do not think this financing should go to the Singapores and Emirates of the world,” says Berg. The association would like the U.S., the EU, Brazil and Canada to negotiate a multilateral agreement governing aircraft financing to make it available only to airlines that cannot access commercial credit. “But the U.S. cannot unilaterally disarm,” Berg says.
Berg says foreign airlines have increased capacity by 12% thanks to Ex-Im Bank-financed aircraft. “Foreign airlines are able to expand capacity at the cost of U.S. companies,” he says. “We want to reduce the impact on U.S. airlines from bank-supported aircraft.”
ATA has watched in dismay as European government export credits flowed to Middle Eastern carriers, such as Emirates, to stimulate the sale of newjets, industry analysts say. Those jets in turn were used to compete with European legacy carriers, cannibalizing their traffic. “The concern is that Europe is sacrificing its national carriers to help the manufacturers,” says Teal Group analyst Richard Aboulafia. “ATA may be trying to avoid a repeat of what’s happening across the ocean.”
In its suit, ATA takes direct aim at Boeing. “Domestic airlines employ roughly five times as many employees as Boeing does–approximately 389,00 to [Boeing’s] 74,000,” the filing says. The suit further claims that Boeing’s “production process for new aircraft is heavily outsourced overseas.” Berg adds, “We are not targeting Boeing. It is our hope that ATA and Boeing will work together on this.”
Boeing, however, for now is not engaging in this fight. “”ATA’s lawsuit is about the bank’s policies regarding the Air India sale, and it is not appropriate for us to comment at this time,” a spokesman for Boeing Capital Corp. tells Aviation Week. “Boeing disagreed with ATA’s conclusions during the negotiations last year,” he added.