US Airlines Hit Out At Government Subsidies To Foreign Rivals

 

A coalition of US commercial airline companies have written to the US Export-Import Bank to express their outrage at government subsidies given to foreign purchasers of Boeing aircrafts, reported the Wall Street Journal on Monday.

 

A coalition of US commercial airline companies have written to the US Export-Import Bank to express their outrage at government subsidies given to foreign purchasers of Boeing aircrafts, reported the Wall Street Journal on Monday.

In its letter to Ex-Im Bank Chairman Fred Hochberg earlier this month, the Air Transport Association (ATA), a trade group representing America’s biggest commercial airlines, chastised Ex-Im Bank for approving more than $3.4 billion in guarantees for loans to India’s national carrier Air India last month, and demanded that the federal agency should reverse its decision while cutting all future subsidies for foreign airlines.

“The bank’s support for foreign airlines injures US carriers,” said ATA’s attorney Michael K. Kellogg in the letter. Air India, the letter claims, was “one of the most shakiest, riskiest, and most poorly-run airlines in the world”, and should not have been eligible for government subsidies given its long-running financial losses.

Ex-Im Bank, on the other hand, have defended its decision, claiming that it was a necessary step to ensure that Boeing remains competitive against its chief European rival Airbus.

[quote]”It’s not credible or reasonable to say that the sole US manufacturer of large aircraft shouldn’t be competing on a level with Airbus,” said a senior U.S. government official familiar with Ex-Im Bank’s policies. “The US is not going to unilaterally disarm.”[/quote]

Boeing and Airbus are the two largest commercial aircraft producers in the world, with both companies receiving subsidies and support from their respective governments on a regular basis in order to keep afloat.

As the official export credit agency of the US government, Ex-IM Bank’s sole purpose is to support US jobs by boosting American exports. Export-credit financing, as the funding is known, was developed decades ago as a way to allow credit-worthy foreign buyers to purchase American goods without the high borrowing costs normally required. Last year, the US and European Union provided guarantees and loans for more than 30 percent of planes delivered by Boeing and Airbus, valued at more than $20 billion. These subsidies, however, do not extend to local purchasers, leading to domestic outrage. 

“Foreign airlines are starting to flood international routes, including routes to the United States, with excess capacity, subsidized by the US government,” said Richard Anderson, chief executive of Delta Air Lines Inc. and the ATA’s current chairman, in a written statement supporting the ATA’s letter to Ex-Im Bank. Subsidized competition “is crowding US carriers out of these markets and costing American jobs,” he added.