Foreign subsidies squeeze U.S. airlines

Foreign subsidies squeeze U.S. airlines

Would it surprise you to know that the U.S. government is harming U.S. employment by providing huge subsidies to foreign airlines? Due to financing from the Export-Import Bank of the United States (Ex-Im), it happens every year.

The U.S. airline industry can win a fair fight on the international stage, but the fight U.S. airlines face today is far from fair. Backed by government guarantees, Ex-Im commitments allow foreign airlines to purchase aircraft on below-market terms unavailable to domestic carriers. With those financial advantages come competitive ones: Foreign airlines can increase capacity and gain market share on international routes. Those capacity increases squeeze U.S. carriers out of markets in which they could otherwise compete. The result? As many as 7,500 lost American jobs and $684 million of lost annual income.

An example: In 2006, Delta initiated nonstop service between New York and Mumbai, competing with Air India’s one-stop service. But between 2006 and 2009, Ex-Im provided Air India $3.3 billion in loan guarantees, which the airline used to finance long-range aircraft at below-market rates. Air India then used its new subsidized capacity to flood the U.S.-India market, dropping ticket prices by more than 30 percent, a level at which Delta could not compete. When Delta lost that route due to Ex-Im subsidy, its employees suffered.

In recent months, history, unfortunately, repeated itself. Less than four months after Ex-Im awarded Air India its latest guarantees (to purchase 27 state-of-the-art Boeing 787 aircraft), American Airlines announced that it, too, would discontinue nonstop service between the United States and India and would be slashing 150 jobs. 

Ex-Im President Fred Hochberg recently stated that the bank’s mandate was to “create jobs through exports,” yet Ex-Im’s own documents indicate that this specific sale to Air India, accounting for more than 3 percent of Boeing’s 787 orders would create or support “0.00” U.S. jobs. Why then is Ex-Im involved in a transaction that harms airline employment and provides no positive impact for manufacturing employment?

Put simply, Ex-Im’s exclusive focus on exports causes it to turn a blind eye to how its loans and guarantees damage U.S. employment.

Ex-Im’s reauthorization is pending before Congress. While Delta supports Boeing’s efforts to sell its planes in the international market and Ex-Im’s mission to “contribute to maintaining or increasing employment of United States workers,” as a part of this proposed reauthorization Congress must ensure that the result of the bank’s financing provides benefit — not harm — to U.S. workers regardless of their industry. If it fails to do so, U.S. airlines and their employees will continue to suffer.

Ben Hirst is senior vice president and general counsel at Delta Air Lines.

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