1) What is the Export-Import Bank?
According to EXIM Mission Statement the mission of the Export Import Bank is to assist in financing for export US goods to international markets. "Ex-Im Bank enables U.S. companies — large and small — to turn export opportunities into real sales that help to maintain and create U.S. jobs and contribute to a stronger national economy." 85% of their transactions go to benefit U.S. small businesses.
2) What is its relation to the aviation industry?
The relation that Export-Import Bank has with the aviation industry is terrible for US carriers and awesome for foreign carriers. The whole point of the ExIm bank is to create jobs in the US by exporting materials/airplanes to foreign countries for cheaper loans. According to senator DeMint Ex-Im costs U.S. airline industry up to 7,500 in job loss. "Delta estimated that ExIm cost the U.S. airline industry up to 7,500 jobs and $684 million a year." ExIm makes it so foreign carriers can buy newer and better aircraft cheaper than any U.S. competitors which is extremely ridiculous.
3) Why has it been in the news lately?
ExIm bank has recently been in the news lately due to the new purchase of aircraft of Air India. Air India according to Business Standard is in "deep red" and without the help of ExIm there is no way they would purchase these 30 brand new Boeing Aircraft. This is extremely bad news for competing US airlines such as Delta Airlines who is competing with Air India for certain Middle Eastern routes. According to the Business Standard "The Bank's support for foreign carriers puts ATA's operator members, including Delta, at a competitive disadvantage because, among other things, the Bank's foreign beneficiaries have access to cheaper capital to finance their aircraft purchases."
4) What is the ATA stance on this? What about Boeing?
ATA stance on this Export Import bank issue is very strong. On November 17th ATA sued the Export Import Bank of the United States seeking to halt the $3.4 billion in loan guarantees for aircraft financing for Air India according to Business Week. ATA is obviously not happy that airlines like Air India who are getting these great loans for Boeing newest aircraft such as the 787, which is going to cost US Airlines a ton of money not to mention a loss of employees. This statement for Business week really sums up the whole problem "“When ATA’s operator members purchase such aircraft, they must do so without the United States as a guarantor for their financing,” the association said in the lawsuit. “As a result, ATA’s operator members pay substantially more than the bank- backed foreign carriers pay to finance the same Boeing aircraft.” Boeing on the other hand is on the other side of the street. Boeing believes that if the there were no Export Import Bank that these new purchases by foreign air carriers would not be purchased. According to WCARN "Boeing said in a statement that the bank is "vital to helping level the playing field" globally." This is a very tough situation, where as Boeing is creating more jobs to build these new aircraft for foreign air carriers, U.S. carriers is throwing a fit because they are losing money, and not getting these beneficial loans such as Air India.
It's interesting to see the disparity between Boeing and the ATA. One thing that's interesting is that Boeing had always had a 'gentlemen’s agreement' per say (before the Northwest acquisition) to purchase Boeing aircraft. That gentlemen’s agreement has somewhat gone by the wayside, now, since they've acquired Northwest and subsequently Northwest's airbus aircraft. However, it's interesting to see the effect Boeing has (in an indirect way) on Deltas revenue and route structure.
ReplyDeleteIt is interesting the power of lobbying. According to http://www.forbes.com/sites/chrisbarth/2011/12/14/29-companies-that-paid-millions-for-lobbying-and-didnt-pay-taxes/ GE paid $84.35million, and Boeing paid $52.29 million for lobbying last year. That provides a great return on investment when you consider the low amount in corporate taxes they pay and their lobbying power. With that being said, I see these two main aviation exporters influencing the EX-IM bank to keep it still functioning.
ReplyDeleteThat brings up two further points. Government programs with good intentions have bad intended consequences which you've pointed out. Secondly, our country is badly in debt, and various programs need to be examined as to their worth or cut.
I would have to agree with the WCARN article you mentioned. I see the Export- Import Bank as a major asset to the economy domestically and internationally. Although there a many debatable issues at hand overall Congress has a major situation and I am interested to see how everything pans out.
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