Airlines Attempt To Stop Bank Loan Guarantees To Air India
By Mike Mitchell
January 15, 2012 - On Friday Judge James E. Boasberg of
the U.S. District Court for Washington DC denied
Airlines for America, formerly known as the Air
Transport Association (ATA) of America injunction to
block $3.4 billion loan guarantees to Air India to
purchase 30 Boeing aircraft.
This case was a collision of interests between domestic
airlines, which seek to avoid competing against
subsidized foreign carriers, and domestic aircraft
manufacturers, which desire those foreign carriers to
buy U.S. planes rather than shopping overseas.
Plaintiffs here are organizations representing the
interests of certain U.S. airlines and airline pilots.
The Export-Import Bank of the United States (Ex-Im Bank) is the official export credit agency of the United States federal government, for the purposes of financing and insuring foreign purchases of United States goods for customers unable or unwilling to accept credit risk.
The mission of the Bank is to create and sustain U.S. jobs by financing sales of U.S. exports to international buyers. The Bank Act details certain procedures to reduce the adverse effects of loans and guarantees on industry and employment in the United States. These loan guarantees allow foreign airlines to obtain credit with a lower interest rate, which in turn provides them with an incentive to purchase their planes from Boeing, as opposed to from Boeing?s chief competitor, France?s Airbus. As purchases of Airbus aircraft are frequently financed by various European export credit agencies, the Ex-Im Bank?s loan guarantees help level the playing field for U.S. aircraft manufacturers.
Export-Import Bank?s Board awarded initial approval of the loan
guarantees to Air India of almost $4.7 billion and to Air India
Charters Ltd. of more than $300 million on August 24, 2006.
On four occasions
since September 2006, the Board has converted portions of its
preliminary commitments to Air India into final commitments. These
partial conversions occurred on July 31, 2008; June 11, 2009; May 24,
2011; and, most recently, on September 30, 2011. The September 30, 2011,
transaction involved the approval of two final commitments in the amount
of approximately $1.2 billion. On this same date, the Bank also
reauthorized the remainder of its 2006 preliminary commitment to Air
India. The final commitments approved on September 30, 2011, along with
the preliminary commitments reapproved that day, are intended to support
Air India?s purchase of Boeing 787 and 777-300ER aircraft.
On November 16,
2011, ATA filed this complaint asserting nine claims against the
Export-Import Bank and senior Bank officials under the Bank Ac. It
alleged that Export-Import Bank violated the Bank Act by not considering
the extent to which they are likely to have an adverse effect on the
domestic airline industry and on domestic employment.
ATA filed its
Complaint in this case on behalf of nine of its member airlines. Six of
ATA?s members declined to join the suit: United, Continental, American,
Atlas Air, FedEx, and United Parcel Service. ATA member airlines include
AirTran Airways, Alaska Airlines, ASTAR Air Cargo, Delta Air Lines,
Evergreen International Airlines, Hawaiian Airlines, JetBlue Airways,
Southwest Airlines, U.S. Airways, United Air Lines, Continental
Airlines, American Airlines, Atlas Air, Federal Express, and United
Judge James E.
Boasberg said ?Even were Plaintiffs able to show with certainty that the
delivery of one plane in accordance with the Air India commitments would
result in the loss of an international route and corresponding jobs for
Delta or another of ATA?s participating member airlines, the Court finds
that this harm would be far outweighed by the harm an injunction would
likely cause the Bank and U.S. manufacturers such as Boeing that rely on
Bank-backed exports. A preliminary injunction is thus not warranted.?
also noted "none of the airlines participating in this lawsuit (Air
Transport Association of America Inc. v. Export-Import Bank of the
United States, 11-cv-02024, U.S. District Court, Washington DC)
currently offers a direct flight between the U.S. and India." The court
order Plaintiffs? Motion for a Preliminary Injunction is denied and the
parties shall appear for a status hearing on January 20, 2012, at 2:00
p.m. in Courtroom 19.
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