Delta sues Ex-Im Bank over loan guarantees for foreign airlines

Thu Apr 4, 2013 12:44am EDT

A Delta Air Lines jet takes off past a Northwest Airline jets parked at gates at the Minneapolis St.Paul International Airport in Minneapolis, Minnesota October 30, 2008. REUTERS/Eric Miller

A Delta Air Lines jet takes off past a Northwest Airline jets parked at gates at the Minneapolis St.Paul International Airport in Minneapolis, Minnesota October 30, 2008.

Credit: Reuters/Eric Miller

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(Reuters) - Delta Air Lines Inc has sued the Export-Import Bank of the United States over loan guarantees given to support purchases of Boeing Co's widebody planes by certain foreign airlines, according to a court filing.

Delta said that Ex-Im bank's subsidies to foreign airlines, including Emirates Airlines, Etihad Airways and Korean Air Co Ltd, to help them buy Boeing planes would cause adverse economic effects on airlines and their employees.

Delta said in the filing that the bank did not properly analyze the adverse economic impact and has requested the district court in Washington D.C. block any loan guarantees.

The airline industry had its worst decade ever after the September 11 attacks on the World Trade Center and the Pentagon in 2001, racking up billions of dollars in losses and destroying share value in airlines that went bankrupt. However, airlines have cut unprofitable routes and raised ticket prices to recover in recent years.

Ex-Im Bank, a government agency, provides loan guarantees and direct loans to help companies maintain and create jobs.

In a complaint filed in federal court in Washington D.C. late on Wednesday, Delta said one of the types of exports that Ex-Im Bank subsidizes is the export of aircraft by U.S. manufacturers, especially ones made by Boeing.

"In 2012, the bank's total exposure to outstanding financial commitments was $106.6 billion. About 46 percent of this amount was for air transportation loans and loan guarantees, more than the three next largest industrial sectors combined," Delta said in the filing.

Delta said the Ex-Im Bank loan guarantees help lower the cost of capital for foreign airline companies.

"These foreign airlines will recoup their investment in their new aircraft faster or reduce ticket prices on competing routes without adversely impacting their relative rate of return on those investments," Delta said in the filing.

Delta argued that unsubsidized U.S. airlines will be forced to respond by "reducing their prices and reducing or altogether eliminating their capacity to serve those routes where they compete with bank-subsidized foreign airlines."

Ex-Im Bank officials could not be reached for comment by Reuters outside of regular business hours.

The case is Delta Air Lines vs Export-Import Bank of the U.S., Case No. 13-00424, U.S. District Court, District of Columbia.

(Reporting by Sakthi Prasad in Bangalore; Editing by Matt Driskill)

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Comments (1)
disater911 wrote:
So basically, Delta Airlines had 10 years to innovate and come up with a better product but instead they decided to focus on suing Export-Import Bank for providing financial assistance to American companies (Boeing) and better run foreign airlines. Delta didn’t mention that the foreign airlines’ purchase of these aircraft is supporting many American manufacturing jobs. The same jobs we constantly hear are being cut and outsourced to foreign competition. The US airline industry needs to accept that the years ahead will not reward companies who fail to compete and offer a better product. US airline companies have been hiding behind walls of protectionalism for too long. America is a world leader in the service industry, yet US airline carriers continually rank in the lowest categories of quality of service amongst global airlines. I think its time for more bankruptcies in the US airline industry to help spur new growth and new ideas.

Apr 04, 2013 3:15am EDT  --  Report as abuse
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