A US appeals court rejects a request by Delta Air Lines to vacate $3.4 billion in loan guarantees from the Export-Import Bank of the United States (US Ex-Im) to Air India for the purchase of aircraft manufactured by Boeing.
But in its 18 June ruling, the United States District Court of Appeals for the District of Columbia Circuit does require the bank to further explain its decision to offer financing without conducting an in-depth review on the impact on US industry and jobs.
"This represents a victory for tens of thousands of American aerospace workers," says Fred Hochberg, chairman and president of the bank, in a media release. "I am gratified by the court's recognition that these transactions should not be impeded by litigation."
But Delta, which had requested the court vacate the financing, also praises the decision in a separate media release, saying the bank "now will be required to take the complaints of industry participants seriously before proceeding with potentially harmful subsidies".
"According to the court, the bank failed to explain its exclusion of aircraft transactions from economic impact review," says Delta, which challenged a lower court decision with another plaintiff, the Air Line Pilots Association (ALPA).
"Export-Import financing for widebody international aircraft puts thousands of US airline jobs at risk by subsidising foreign carriers that compete directly with Delta and other US airlines on key international routes," Delta adds.
At issue are loan guarantees approved by the bank in 2011 for the purchase of Boeing 777 and 787 aircraft by Air India for use on trans-ocean routes.
Delta and ALPA asked the court to reject a July 2012 court ruling that the bank had properly approved the financing.
US Ex-Im is required under the Export-Import Bank Act to consider the effect on US jobs and industry before issuing loan guarantees, according to court papers.
But the bank does not conduct the analysis on loans and loan guarantees that it "categorically" determines do not affect US jobs or industry, papers say. The bank put the Air India deal in that category because it did not "result in the foreign production of an exportable good," court documents say.
Delta argued that the bank's procedures are "inconsistent" with US law.
While the appeals court declined to vacate the financing, it agreed with Delta that the bank has not explained why services provided by foreign companies "can never cause adverse effects to US industries and US jobs".
"At this stage, we conclude simply that the bank failed to reasonably explain its application of the Bank Act," the appeals court says.
The decision directs US Ex-Im to explain how its procedures comply with the law, or to consider and explain adverse effects that the Air India guarantees would have on US industry and jobs.
The bank's actions will later be subject to judicial review if further challenged, the court adds.
US airlines have long challenged US Ex-Im's financing to foreign carriers. Other suits have been filed by Delta, AlPA, industry group Airlines for America and other airlines, including Hawaiian Airlines.