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Airlines Take Legal
Action To Stop $3.4 Billion In Loan Guarantees To Air India By Mike Mitchell |
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November 17, 2011 - The Air Transport Association of
America (ATA), the industry trade organization for the
leading U.S. airlines, 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 aircraft financing 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.
Air India is the flag carrier airline of India. It is
part of the government of India owned Air India Limited
(AIL). The airline operates a fleet of Airbus and Boeing
aircraft serving Asia, Australia, Europe and North
America. Air India has the fourth largest share in
India's domestic air travel market, behind Jet Airways,
Kingfisher and IndiGo |
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The
lawsuit follows an ATA letter to the Ex-Im Bank earlier this
month, which said that loan guarantees to Air India and other
foreign carriers fail to comply with specific statutory
mandates, including consideration of the impact from such
financings on U.S. industry and jobs, and ensuring that the
underlying loans have reasonable assurance of repayment. U.S.
taxpayers could be left to foot the bill for any default by a
foreign carrier on its loans.
ATA
asserted 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.
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. |