ATA: U.S. Taxpayer-Backed Financing For Air India Harms U.S.
Industry, Threaten Jobs
The Air Transport Association of America (ATA) has filed suit
against the Export-Import Bank of the United States (Ex-Im Bank) to
halt a pending deal for $3.4 billion in loan guarantees for
aircraft financing to Air India, saying that it fails to meet
statutory requirements, including consideration of the impact on
the U.S. airline industry and U.S. airline jobs.
ATA President & CEO Nicholas
Calio
The Ex-Im Bank recently approved $1.3 billion in U.S.
taxpayer-backed loan guarantees for Air India, and is considering
an additional $2.1 billion in loan guarantees, to support the
purchase of 30 aircraft, including 27 Boeing 787s for delivery
between 2011-2015. In a suit filed with the U.S. District Court of
the District of Columbia, ATA asked the court to find the Air India
loan-guarantee commitments unlawful, to prevent the loan guarantees
from being issued, and to order injunctive relief requiring the
Ex-Im Bank to comply with its statutory obligations.
The lawsuit follows an ATA letter to the Ex-Im Bank earlier this
month, which said that loan guarantees to Air India and other
foreign carriers fail to comply with specific statutory mandates,
including consideration of the impact from such financings on U.S.
industry and jobs, and ensuring that the underlying loans have
reasonable assurance of repayment. U.S. taxpayers could be left to
foot the bill for any default by a foreign carrier on its
loans.
ATA asserted that the practices of Ex-Im Bank put U.S. carriers
at a commercial disadvantage to foreign carriers. Specifically, the
U.S. loan guarantees enable foreign carriers to obtain financing
for aircraft at considerably lower rates, in some cases up to 50
percent lower, than what U.S. airlines must pay on the commercial
market.
Having received more than $52 billion in U.S. taxpayer-funded
loan guarantees over the last 10 years, foreign carriers have added
capacity and gained market share. Lower financing costs have
allowed foreign airlines to add 12 percent more capacity on
U.S.-international routes than they would have without Ex-Im Bank
guarantees. That overcapacity already has crowded out U.S. airlines
and forced some carriers to cut routes.
A reduction in capacity means fewer U.S. airline jobs. Ex-Im
Bank guarantees to foreign carriers have forced U.S. airlines to
cut between 4,100 and 7,500 jobs, costing employees $372 million to
$684 million in lost income.
"This is yet another example of the U.S. government failing to
recognize the contribution of the U.S. airline industry to our
economy and jobs growth by creating an environment that favors
foreign competitors over domestic carriers," said ATA President and
CEO Nicholas E. Calio. "While we support the goal of expanding U.S.
exports, it cannot come at the expense of U.S. companies and U.S.
jobs. Commercial aviation in the United States drives $1.2 trillion
per year in economic activity and more than 10 million jobs; we
cannot do that if we continue to face a harsh and punitive tax and
regulatory environment that, along with this proposed action, puts
us at a competitive disadvantage. It's time to level the playing
field."
Calio said the administration is also considering tripling the
aviation security fee over the next five years and adding a $100
departure tax to every flight. Together, these would add $36
billion in taxes to carriers over the next 10 years. The airline
industry lost $55 billion between 2001-2010 and 160,000 jobs,
one-third of its work force.
"We believe that it is time for Ex-Im Bank to revise its
practices and consider the impact on the U.S. airline industry and
its employees. We repeatedly have sought additional information
about the timing and details of the Air India delivery but the
Ex-Im Bank has refused to provide it. ATA has no choice but to seek
judicial intervention in order to prevent our members from
suffering irreparable injury," Calio said.