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.

FMI: www.airlines.org