The US Export-Import Bank (Ex-Im) president Fred Hochberg calls claims that the bank’s loan guarantees to foreign carriers provide them with a competitive advantage over US carriers “erroneous”.
“Every time a US carrier gets financing, we compare what a foreign carrier would pay compared to a US carrier,” he says during a panel on Ex-Im’s upcoming reauthorisation held by Democrats in the US House of Representatives on 8 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 continues. “That is simply an erroneous argument.”
Boeing seconds Ex-Im’s position.
“Foreign airlines are not getting sweet heart deals to compete with our US carriers,” says Ted Austell, vice-president of executive, legislative and regulatory affairs at the Chicago-based airframer.
Ex-Im has faced multiple lawsuits by Delta Air Lines claiming negative economic consequences as a result of its loan guarantees to foreign carriers, including Emirates, Etihad Airways, Korean Air, LATAM Airlines Group and LOT Polish Airlines.
“Delta continues to urge members of Congress to enact reforms that will ensure that the bank provides support to US manufacturers without damaging the ability of US airlines and their employees to compete in the global marketplace,” says Delta in a statement.
The Air Line Pilots Association (ALPA) and Hawaiian Airlines have joined the Atlanta-based carrier in the suits.
Hochberg says that Ex-Im has implemented reforms since its last reauthorisation in 2012. These include greater transparency, reviews of the economic impact of its loan guarantees and disclosure of all deals valued at more than $100 million in the US Federal Register.
Ex-Im anticipates supporting a “mid-teens” percentage of Boeing deliveries during 2014, or about 100 aircraft, said Robert Morin, then vice-president of the transportation division at the bank, at the International Society of Transport Aircraft Trading (ISTAT) Americas in March.
This is down significantly from the 30% of Boeing deliveries that Ex-Im supported in 2012, he says.
Uncertainty over the reauthorisation of Ex-Im’s charter has thrown its support of Boeing aircraft, as well as exports by other US companies, in jeopardy.
The House Committee on Financial Services has yet to schedule a hearing on Ex-Im reauthorisation, despite a deadline of 30 September when its existing authorisation expires. Any such legislation must originate in the committee before going to the full House and on to the US Senate and president Barack Obama for passage.
The House financial services subcommittee for financial institutions and consumer credit, which will craft the legislation, was not immediately available for comment.
Ex-Im reauthorisation had been a relatively smooth process until 2012, when politicking during the presidential election campaigns and Republican legislation to abolish it threw the bank’s future into doubt.
“Very frankly we’re dealing with a philosophical challenge,” says Steny Hoyer, a Democratic representative from Maryland and the second most powerful Democrat in the body after minority leader Nancy Pelosi. “There are some [House] members that very legitimately believe that government ought to play no role in enhancing business opportunities or enhancing business operations.”
Other governments, including the Chinese, do not have the same philosophy when it comes to supporting their country’s exports and will continue to do so despite what happens with Ex-Im, he says.
US president Obama and the US Chamber of Commerce, as well as other businesses and organisations, support Ex-Im reauthorisation.
The uncertainty is creating difficulties for Boeing.
“Boeing is seeing where our competitor is out marketing the uncertainty of the availability of export credit when they are going to airplane campaigns,” says Austell. “[Saying that] when it’s time to deliver those airplanes, you can’t count on Ex-Im three, four, five years from now like you can count on us.”
He cites the competition with Airbus for Ethiopian Airlines’ widebody aircraft order in 2004 as an example of the need for Ex-Im. The lender’s support was key in securing an order for 10 Boeing 787s over the offer by Airbus, which was supported by three European export credit agencies, he says.
“If we were not there, those airlines would be buying Airbus planes and flying Airbus planes to the US and around the world,” says Hochberg. “Had we not been there, there’s a high likelihood – particularly for a credit like Ethiopian Airlines – that they would have purchased Airbus planes, which does provide financing.”
Notably, Airbus, who could gain significantly if Ex-Im’s authorisation lapsed, is not opposed to the lender. The airframer told Flightglobal in 2012 that it would “welcome” financial support for any aircraft assembled at its under construction Mobile, Alabama, final assembly line and exported from the USA.
Doug Greco, vice-president of sales finance at Airbus Americas, said in March that he has no “thoughts” on Ex-Im reauthorisation but that Airbus expects a significant number of the first A320 family aircraft assembled in Mobile to go to US customers.
The general consensus is that Ex-Im will be reauthorised again in 2014. However, another heated debate regarding the role of the bank is likely – especially among legislators who are seeking re-election this year – once hearings begin.
“Since the bank was founded in 1934, it has functioned under both Republican and Democratic presidents, and Congress has reauthorised it 15 times,” says representative Maxine Waters, a Democrat from California, during the panel. “The Export-Import Bank isn’t a Republican bank or a Democrat bank. It’s an American bank.”
Source: Cirium Dashboard
