Ending Ex-Im guarantees to Air India would create ‘chaos’: Boeing

Washington DC
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Boeing says there is a potential for “chaos” if a lawsuit brought by Delta Air Lines to end widebody aircraft loan guarantees from US Export-Import Bank (Ex-Im) succeeds.

The customer Air India could lose its guarantees for 19 Boeing 787 aircraft – 13 of which have been delivered and seven financed with Ex-Im backing – Boeing could lose orders to Airbus, and commercial lenders would have to renegotiate terms of the debt without the support of the export credit agency, if a US appeals court rules in favour of Delta, says the Chicago-based airframer.

“This case threatens to jeopardise the substantial benefits to the US economy provided by Boeing exports and, more fundamentally, the very credibility of the government’s commitment to support US exports,” says Boeing in a brief filed in with the court in April.

Delta, along with Hawaiian Airlines and the Air Line Pilots Association (ALPA), claim that there are negative economic consequences for US carriers as a result of Ex-Im’s loan guarantees to Air India and other state-supported airlines, in the suit.

Ex-Im has faced four lawsuits on the subject from Delta since 2011.

The bank received commitments from Air India that the 787s it guaranteed would not fly to the USA – a fact confirmed for July 2014 by Innovata FlightMaps Analytics – and found abundant evidence that the airline would order equivalent aircraft from Airbus if export credit was not available, says Boeing.

Air India and its predecessor airlines used European export credit for previous orders of Airbus A300, A310 and A320 family aircraft, according to the airframer.

“Bank guarantees are critical to Boeing’s ability to compete for the business of foreign airlines like Air India, and an airline’s expectations regarding the ultimate availability of those guarantees is often critical to closing a sale,” says Boeing, repeating an argument that the company has made repeatedly on the need for Ex-Im support.

Air India has closed from $1.3 billion in loan guarantees from Ex-Im and has $2.1 billion in preliminary commitments outstanding, says Boeing.

While the status of Delta’s lawsuit remains pending with the court, Ex-Im faces challenges reauthorising its charter before it expires on 30 September. The House Financial Services committee held its first hearing on the matter on 25 June but nothing since.

“Without meaningful reform, we are opposed to [Ex-Im] reauthorisation,” said Richard Anderson, chief executive of Delta, at a luncheon in June.

Ex-Im has become a partisan issue, with the incoming House majority leader Republican representative Kevin McCarthy – the second most powerful member of the legislative body – speaking out against the bank in June.

“I think Ex-Im bank is one [thing] that government does not have to be involved in,” he said on the Fox News Sunday television show. “The private sector can do it.”

Democrats, by and large, support Ex-Im and are pushing for it to be reauthorised ahead of the September deadline.