Posts Tagged ‘airline competitiveness’

Delta Airlines sues US Ex-IM for supporting Boeing sales to foreign airlines

April 4, 2013

I think Delta doth protest too much and is clutching at straws. Loss of jobs at Boeing is of much more consequence to the US economy than Delta’s dubious claim of loss of competitiveness against foreign airlines.

Of course the real problem is that Delta is weak competitively. Its costs are too high and its service is too inferior. By the end of trading session, Delta Air Lines, Inc. shares slumped 8.06% to US$14.94 with more than 41.03 million shares traded, compared to its average volume of 12.11 million shares. Delta Air Lines’s unit revenues increased only 2% in March, and most of it came from its trans-Atlantic and Latin offerings.  Delta were expecting a March growth of 4 – 5%. And they are more than a little worried by the US Air merger with American Airlines.

(Reuters)Delta Air Lines Inc has sued the Export-Import Bank of the United States over loan guarantees given to support purchases of Boeing Co’s widebody planes by certain foreign airlines, according to a court filing.

Delta are claiming that Ex-Im bank’s guarantees (to Boeing) and/or buyers credits (to foreign airlines) for aircraft sales to foreign airlines, including Emirates Airlines, Etihad Airways and Korean Air Co Ltd, amount to subsidies and would cause a loss of competitiveness and adverse economic effects on Delta and its employees.

Ex-Im Bank, a government agency, provides loan guarantees and direct loans to help companies maintain and create jobs.

In a complaint filed in federal court in Washington D.C. late on Wednesday, Delta said one of the types of exports that Ex-Im Bank subsidizes is the export of aircraft by U.S. manufacturers, especially ones made by Boeing.

“In 2012, the bank’s total exposure to outstanding financial commitments was $106.6 billion. About 46 percent of this amount was for air transportation loans and loan guarantees, more than the three next largest industrial sectors combined,” Delta said in the filing.

Delta said the Ex-Im Bank loan guarantees help lower the cost of capital for foreign airline companies.

“These foreign airlines will recoup their investment in their new aircraft faster or reduce ticket prices on competing routes without adversely impacting their relative rate of return on those investments,” Delta said in the filing.

Delta argued that unsubsidized U.S. airlines will be forced to respond by “reducing their prices and reducing or altogether eliminating their capacity to serve those routes where they compete with bank-subsidized foreign airlines.”

I don’t think I will be buying any Delta stock any time soon.

 

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