U.S. AIRLINES SUE EXPORT-IMPORT BANK OVER LOAN GUARANTEE TO AIR INDIA & BOEING'S OUTSOURCING OF JOBS & U.S. TECHNOLOGY TO CHINA & PAKISTAN
Lalit J. Kha, Press Trust of India Mar 01, 2012
The American airline industry has sued the Export Import Bank alleging that its financial support to Indian national carrier Air India, which itself is in the deep red, will harm American airlines. In a revised complaint filed before an American court Feb. 17, the Air Transport Association of America, Delta Air Lines and the Air Line Pilots Association International, alleged that Exim Bank’s decision to provide a loan guarantee of $3.4 billion to Air India, to help it buy 30 aircraft from Boeing, would badly affect several American airlines, Delta in particular. Arguing that without the financial support from Exim Bank, Air India would not have purchased these aircraft and deploy them on those routes where it gives a tough competition to American airlines.
"The bank's support for foreign carriers puts ATA's operator members, including Delta, at a competitive disadvantage because, among other things, the bank's foreign beneficiaries have access to cheaper capital to finance their aircraft purchases," the complaint said. "Delta's experience is illustrative. In 2006, Delta offered nonstop service between New York and Mumbai. Between 2006 and 2009, the bank gave Air India loan guarantees totaling approximately $3.3 billion.
"Those guarantees allowed Air India to flood the U.S.-India market with extra capacity and crowd out competitors like Delta. Delta stopped flying from New York to Mumbai in October of 2008 due to the bank's loan guarantees to Air India," the court affidavit said. Exim Bank’s subsidies to foreign carriers have forced American airlines to cut between 4100 and 7500 jobs which has led to $372 million to $684 million in lost employee income, it alleged. ATA also challenged the argument of the Obama administration that orders placed by foreign airlines like Air India are creating jobs in the United States.
"Boeing's production process for new aircraft is heavily outsourced overseas. According to a recent report by the Inspector General for the U.S. Department of Transportation, only four of the 17 principal components of the Boeing 787’s airframe are manufactured exclusively in the U.S.," it said. The complaint alleged that the bank's support for foreign carriers has caused dramatic increases in the size of those carriers' wide body fleets. "By 2015, foreign carriers are scheduled to take delivery of 1157 wide body aircraft, 692 of which will be net additions to foreign carriers’ fleets. By comparison, U.S. carriers are scheduled to take delivery of only 55 wide body aircraft by 2015, seven of which will be net additions to U.S. carriers’ fleets," it said.
The complaint said the bank’s support for Air India in 2006 created a surplus of available daily seats between Mumbai and John F. Kennedy Airport in New York. The Air India commitments would exacerbate that surplus, it said. The Air India commitments will cause “substantial injury” to American carriers that compete on international routes to and from India, it said, adding that the American airlines currently produce 1296 available seats per day on routes between the two countries.
Richard H. Anderson, CEO of Delta Airlines, argued that based on its operating losses and its debt burden, Air India could not afford to finance 30 additional wide body aircraft without support from Ex-Im Bank. "If Air India takes delivery of 30 new wide body aircraft, it will be able to do so only because of the bank’s loan guarantee. And, if Air India deploys some of those new aircraft on routes between the United States and India, as I expect that it will, I believe that Delta will be foreclosed from that nonstop market for the foreseeable future," he said.
