US airlines sue ExIm over Air India loan

February 20th, 2012 - 7:43 pm ICT by IANS  

Washington, Feb 20 (IANS) US-based airlines, through their lobby the Air Transport Association of America, have sued Export Import Bank (ExIm) over its $3.3 billion in loan guarantees to a deeply-in-the-red Air India.

Air India used these US taxpayer subsidies to buy 30 Boeing jets for less than it would have paid in a free market, the association said in a revised complaint before a US court.

This, the US airlines lobby argues, gave Air India a competitive advantage over Delta, which was flying US-to-Mumbai flights just like Air India. Last month, Delta cancelled its service to Mumbai, surrendering to its foreign competitor.

The airline lobby argues that Ex-Im skipped its legally required study of the economic effect of its Air India subsidies.

“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,” the complaint said.

“Delta’s experience is illustrative. In 2006, Delta offered nonstop service between New York and Mumbai. Between 2006 and 2009, the Bank gave Air India loan guarantees totalling approximately $3.3 billion.

“Those guarantees allowed Air India to flood the US-India market with extra capacity and crowd out competitors like Delta. Delta stopped flying from New York to Mumbai in October of 2008 due to the Bank’s loan guarantees to Air India,” the court affidavit said.

ATAA also challenged the argument of the Obama Administration that orders placed by foreign airlines like Air India are increasing jobs in the US.

In fact the Exim Bank’s subsidies to foreign carriers have forced US airlines to cut between 4,100 and 7,500 jobs. The loss of those jobs has led to $372 million to $684 million in lost employee income, the complaint alleged.

Noting that the available seats on routes between India and the United States are in surplus, the complaint said the India-US overcapacity problem is so large that 41-90 percent of Air India’s total operating losses (which are substantial) came on routes to and from the US.

(Arun Kumar can be contacted at arun.kumar@ians.in)

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