The biggest beneficiary of Ex-Im Bank financing is Boeing. Boeing is the largest U.S. exporter, a great company that makes great products and employs 169,000 people (including 83,400 in commercial aviation) who -- thanks partially to the influence of the International Association of Machinists -- are fairly compensated for their work.
Many subtleties have emerged since 2010, when I first wrote about Delta's problems with the Export-Import bank. At the time, Delta was upset that in 2009 it financed three Boeing 777s at an interest rate of 8.11% over nine and a half years. Also in 2009, Emirates bought three similar aircraft, paying interest at 3.4% over 11.9 years.
The difference? Emirates could finance through the Ex-Im Bank and Delta could not.
Has anything changed? Boeing assures that it has. In an email, Boeing spokesman Tim Neale wrote: "The rates that government export credit agencies now charge airlines for loan guarantees make the all-in cost of financing with such guarantees comparable to commercial loans without a government loan guarantee."
In particular, Neale said, "US airlines have increasingly come to rely on enhanced equipment trust certificates for funding new aircraft. EETCs are bonds backed by the aircraft. Rates are low because the market for nearly new aircraft is healthy, even if the aircraft have been repossessed."
But since United (UAL) first utilized the EETC market in 2013, more and more airlines, including Air Canada and Emirates (using an affiliated company) have been able to access it. Then investors, not taxpayers, bear the risk, however limited it might be, if airplanes need to be repossessed.
In an Aug. 21 letter to Rep. Jeb Hensarling, chairman of the Committee on Financial Services, which is considering the Ex-Im Bank's charter renewal, Delta lobbyist Andrea Fischer Newman wrote that "when our government backs our competitors, it tells our employees that their jobs don't matter."
It is just unfortunate that in Washington, to win traction for a logical position, Delta must ally itself with an illogical movement.
Written by Ted Reed in Charlotte, N.C.
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