When Delta Air Lines Inc. CEO Richard Anderson went to Capitol Hill to testify against the Export-Import Bank of the United States June 25, he brought an entourage.
His 100-or-so pilots and flight attendants provided a visual for members of the House Financial Services Committee of those Mr. Anderson said the bank is displacing by financing aircraft purchases by foreign carriers that compete with Delta on international routes serving the U.S. market.
Congress is debating the reauthorization of the bank, the charter of which expires Sept. 30. Backers say it “fills gaps” in export financing that allow U.S. sellers, especially small businesses, to compete on a global stage. Critics say it subsidizes wealthy corporations like Boeing Co. and Caterpillar Inc. at taxpayers’ expense and point out that only 2 percent of U.S. exports were supported by Ex-Im products.
For Delta, the issue is the bank’s loan guarantees and disbursements to state-owned airlines buying Boeing planes at below-market interest rates. While it might help one large U.S. company boost exports, it’s hurting another’s competitiveness, Mr. Anderson said. He challenged the committee to tell his employees that their jobs aren’t as important as those of Boeing factory workers.
“What the Export-Import bank is doing is putting our employees in the crossfire, because it’s U.S. airline jobs that are lost when heavily subsidized foreign airlines are able to then also get a subsidy from our treasury, and it has reduced the growth of our company,” Mr. Anderson told the committee.
He didn’t mention Emirates by name in the hearing, but the Dubai-based airline’s logo was front and center on a chart Mr. Anderson used to illustrate the difference between interest paid on an Ex-Im-backed financial transaction and one financed at market rates. According to Delta’s calculations, the discrepancy amounted to a $20.3 million advantage per plane over the life of the aircraft. (It should be noted that the chart compared two separate types of aircraft, Boeing versus Airbus).
“This is effectively a free airplane every eighth airplane,” Mr. Anderson said.
Mr. Anderson’s written testimony pulled no punches, going into detail about Emirates’ advantages, even estimating the total subsidy Ex-Im provides to the airline based on the number of Boeing planes it accesses through leasing companies.
Besides Emirates, Mr. Anderson listed Etihad Airways ($1.3 billion in assistance since 2009), Russia’s Aeroflot ($1.6 billion this year) and Air India ($3.4 billion for the purchase of wide body aircraft in 2011). Delta also published a list of the top 20 state-owned airlines, showing that 14 had received some kind of Ex-Im backing.
He said while serving as head of the International Air Transport Association, many airline CEOs have told him that Ex-Im financing is basically free money.
“They tell me: ‘I don’t really need the Ex-Im bank financing, but it’s so cheap I might as well take it,’” he said.
He specifically blamed Ex-Im’s assistance to Air India for driving Delta out of the New York-Mumbai route in 2008, saying that it cost Delta 1,000 jobs.
Lee Moak, president of the Air Line Pilots Association, said Ex-Im has provided $7.9 billion various forms of financing to foreign airlines in 2013, threatening not only airlines that benefit from long-haul routes, but also the airports they serve.
“International jobs at mainline carriers are in jeopardy, but so are jobs at the small regional airports that are U.S. destinations for many of these international passengers,” Mr. Moak said.
Some representatives questioned Delta’s assertions and brought up the fact that the airline had received government help of its own when emerging from bankruptcy in 2006. They also noted that Brazilian airline GOL, Delta’s customer on a substantial maintenance deal, received Ex-Im guarantees. Delta says that this is misleading because the financing came after its deal with GOL was finalized.
Other members of the House committee said a potential solution lies in understanding the nature of planes as a product.
Rep. Brad Sherman, D-California, said planes should be treated differently than stationary products like gas turbines.
“Planes are different; they fly, and whether a plane has been exported or not doesn’t or shouldn’t depend upon the headquarters building of the buyer. it should depend upon where the airplane will be used,” Mr. Sherman said.
Mr. Anderson said he would welcome true reform but noted that congressional mandates for the bank to reform the way it calculates economic impact after the last reauthorization in 2012 went unheeded.
“Our objection is a narrow objection. It is wide-body financing for creditworthy, state-owned and state-subsidized airlines,” Mr. Anderson said. “We have no objection to narrow bodies; we have no objection to small business. Our focus is on the policy junction of where U.S. jobs are destroyed by the bank, so if we’re serious about creating jobs, this bank needs to be reformed.”
For Mr. Anderson’s full testimony, click here.
Read about Delta suspending its New York-Mumbai route here.