US airlines sue over Air India deal

Last Updated 18 November 2011, 05:49 IST

The loan comes at entirely too high a price and "puts us at a competitive disadvantage", the Air Transport Association of America (ATA) President and CEO Nicholas E. Calio remarked.

The ATA filed a suit with US District Court here, asking the court to deem the Ex-Im Bank's loan-guarantee unlawful.

According to ATA officials, the Ex-Im Bank has already approved a $1.3 billion loan for Air India, with an additional $2.1 million pending consideration; the loans would support the carrier's acquisition of 30 aircraft, including 27 Boeing 787s for delivery between 2011-2015.

The lawsuit follows an ATA letter to the Ex-Im Bank earlier this month, which said that loan guarantees to Air India and other foreign carriers fail to comply with specific statutory mandates and US taxpayers could be left to foot the bill for any default by a foreign carrier on its loans.

With this lawsuit, ATA officials hope to prevent foreign carriers from receiving drastically lower - up to 50 percent - financing rates than US airlines. After all, an ATA spokesman said, the discounts afforded to these carriers have certainly added up.

"Having received more than $52 billion in US taxpayer-funded loan guarantees over the last 10 years, foreign carriers have added capacity and gained market share," he remarked. In fact, such Ex-Im Bank guarantees have enabled these airlines to increase their capacity on US routes by 12 percent, he said.

The overcapacity has also forced some American carriers to reduce their flight schedules and cut jobs, two actions Calio hopes to prevent with this injunction.

"ATA has no choice but to seek judicial intervention in order to prevent our members from suffering irreparable injury," he said in a statement.  "While we support the goal of expanding US exports, it cannot come at [this] expense."

"Commercial aviation in the United States drives $1.2 trillion per year in economic activity and more than 10 million jobs; we cannot do that if we continue to face a harsh and punitive tax and regulatory environment that, along with this proposed action, puts us at a competitive disadvantage," Calio said. "It's time to level the playing field."

(Published 18 November 2011, 05:42 IST)

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