Thousands Of U.S. Aerospace Jobs Threaten By Airline Industry Lawsuit

 

 
 
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Thousands Of U.S. Aerospace Jobs Threaten By Airline Industry Lawsuit

By Bill Goldston
 

January 12, 2012 - A decision is expected soon on a lawsuit filed by an airline industry trade group that has the potential to cost thousands of U.S. aerospace jobs and cripple the work of the U.S. Export-Import Bank. 

The Airlines for America (formerly Air Transport Association Inc.), the industry trade organization for the leading U.S. airlines, on November 16, 2011, filed suit against the Export-Import Bank of the United States (Ex-Im Bank) to halt a pending deal for $3.4 billion in loan guarantees for the sale of dozens of Boeing aircraft to Air India, saying that it fails to meet statutory requirements, including consideration of the impact on the U.S. airline industry and U.S. airline jobs. 

Airlines for America asserts that the practices of Ex-Im Bank put U.S. carriers at a commercial disadvantage to foreign carriers. Specifically, the U.S. loan guarantees enable foreign carriers to obtain financing for aircraft at considerably lower rates, in some cases up to 50 percent lower, than what U.S. airlines must pay on the commercial market.

Airlines for America believes, having received more than $52 billion in U.S. taxpayer-funded loan guarantees over the last 10 years, foreign carriers have added capacity and gained market share. Lower financing costs have allowed foreign airlines to add 12 percent more capacity on U.S.-international routes than they would have without Ex-Im Bank guarantees. That overcapacity already has crowded out U.S. airlines and forced some carriers to cut routes.

In addition to the lawsuit, Delta Airlines and Airlines for America are lobbying Congress to further restrict the bank’s activity by preventing any increase in the bank’s lending limit, which is currently set at $100 billion.

“Delta Airlines’ CEO Richard Anderson, who also serves as the Chairman of the Board at Airlines for America, is promoting a campaign designed to benefit his airline at the expense of thousands of American jobs in dozens of states,” said IAM Headquarters Vice President Rich Michalski.

The Export-Import Bank has a long history of supporting global trade deals that create U.S. jobs, particularly in the manufacturing, aerospace and heavy equipment sectors. The bank provides loan guarantees rather than direct loans and operates at no cost to U.S. taxpayers.

 
   

Among the conditions placed on loan guarantees by the U.S. Export-Import Bank is a requirement that any loan guaranteed may only be used to purchase products that are 85 percent U.S.-made. “The ‘Buy America’ component in the bank’s loan guarantee program should be expanded for the benefit of the entire economy, rather than attacked and manipulated for the benefit of a single corporation,” said Michalski. 

In a letter sent earlier this month to congressional leaders, more than 60 chief executives warned that thousands of U.S. jobs would be lost if the bank’s current lending limit was not increased. 

Whatever competitive advantage Delta hopes to gain by blocking the sale of Boeing aircraft to Air India would likely be short-lived, as Air India could easily purchase the aircraft from Airbus or another foreign manufacturer.

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