Delta Air Lines chief executive Richard Anderson claims that US Export-Import Bank (Ex-Im) loan guarantees for widebody aircraft save foreign carriers about 300bp versus commercial rates.
“That’s just not right,” he says, comparing the interest rates on Ex-Im guaranteed debt for foreign carriers to those on commercial debt for Delta during an earnings call today.
Using the 4.75% coupon that Delta received on its $353.7 million 2012-1 A notes in June 2012 - its last capital markets debt deal - foreign carriers would be paying an interest rate of about 1.75% on Ex-Im guaranteed debt if Anderson's comments are correct. The 2012-1 notes are secured by 31 aircraft, including 14 Boeing 767 aircraft.
Delta has filed multiple lawsuits to stop Ex-Im loan guarantees for widebody aircraft to airlines that are investment grade and government owned, including Air India, Emirates, Korean Air and LATAM Airlines Group. It claims negative economic consequences from the credit support.
The airline does not object to Ex-Im support for narrowbody aircraft deliveries and equipment in other sectors, says Anderson.
The Air Line Pilots Association (ALPA) and Hawaiian Airlines have joined it as plaintiffs in some of the lawsuits.
“Every time a US carrier gets financing, we compare what a foreign carrier would pay compared to a US carrier,” said Fred Hochberg, president of Ex-Im, during a House of Representatives panel earlier in April. “In every single case, foreign carriers with our assistance are paying far more than a US carrier would pay.”
“There is no financing advantage that is given to a foreign carrier over a US carrier,” he said. “That is simply an erroneous argument.”
Export credit rates rose after the last aircraft sector understanding (ASU) in 2011. However, some carriers continue to receive aircraft deliveries with lower rates that were grandfathered under the previous ASU in 2007.
Anderson says that the most recent ASU raised interest rates by about 200bp but that export credit remains cheaper than commercial debt.
“When Ex-Im does this, as in the case of Air India, it takes [US] jobs away,” he says.