Us Airlines' Body Files Suit to Halt Loan Guarantees to Air India

 

NEW YORK (NNN-PTI) -- In a bid to stop a crucial loan guarantee for Air India's plane acquisition from Boeing, an American airlines' industry body has filed a lawsuit against the US Exim Bank opposing its US$3.4 billion support to India's national carrier to buy the much-awaited B-787 Dreamliners.

"In a suit filed with the US District Court of the District of Columbia, ATA asked the court to find the Air India loan-guarantee commitments unlawful, to prevent the loan guarantees from being issued, and to order injunctive relief requiring the Exim Bank to comply with its statutory obligations," the Air Transport Association of America (ATA) said in a statement in New York.

Asked to respond to the development, Civil Aviation Secretary Nasim Zaidi told PTI in New Delhi, "We have not received any communication on the matter as yet. We can take a call only after we get a formal communication."

The US Exim Bank had last month approved loan guarantees of US$1.3 billion to support Air India's fleet acquisition from Boeing and another US$2.1 billion preliminary commitment to support future deliveries of the US aerospace company's planes to the Indian national carrier.

ATA, an aviation industry lobby group representing all major US airlines, had then written a letter to US Export-Import Bank Chairman Fred Hochberg opposing the decision, saying Air India's financial ill-health should disqualify it from getting American help.

In its response, Exim Bank's general counsel was quoted in a US media report as saying that the bank stood by its decisions and processes, though it would investigate some of ATA's assertions about its procedures.

"Air India's borrowing is backed by a sovereign guarantee of the Indian government and its business plan has been vetted by Exim Bank staff," the report had quoted a US government official as saying.

The official said support to foreign buyers of Boeing planes was important since if the US planemaker could not sell airplanes to foreign buyers like Air India, its chief rival Europe's Airbus probably would.

Air India has pending orders for 27 Boeing Dreamliners, the deliveries of which are expected to begin by the end of this year. These are part of the 68 aircraft order placed by the national carrier with the US plane manufacturer.

In its statement, ATA claimed that the Exim Bank's practices "put US carriers at a commercial disadvantage to foreign carriers. Specifically, the US loan guarantees enable foreign carriers to obtain financing for aircraft at considerably lower rates, in some cases up to 50 per cent lower, than what US airlines must pay on the commercial market."

"Lower financing costs have allowed foreign airlines to add 12 per cent more capacity on US-international routes than they would have without Exim Bank guarantees. That overcapacity already has crowded out US airlines and forced some carriers to cut routes," it claimed, adding that "a reduction in capacity means fewer US airline jobs." -- NNN-PTI