Delta CEO Richard Anderson testified this morning before the U.S. House Financial Services Committee regarding the reauthorization of the Export-Import Bank of the United States. Mr. Anderson’s testimony can be found here (along with the testimony of the other witnesses): http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=385048.
Mr. Anderson’s testimony focused on the harmful effect the Bank’s loan guarantees for widebody aircraft have on U.S. airlines and their employees. As part of his testimony, Mr. Anderson provided an illustration, based on two recent financings, that shows how one of Delta’s most significant international competitors can save over $20 million using Ex-Im financing. This subsidy amounts to our foreign competitor getting a free additional widebody plane for every eight new planes it buys.
Delta supports substantial and effective reform to the Bank’s charter to ensure U.S. airlines and our employees are not put at a further competitive disadvantage through U.S. government subsidies to foreign airlines. Delta’s concerns are specific to ExIm’s continued financing at better-than-market rates of widebody aircraft to airlines that are creditworthy and/or receive subsidies from their home country.
Any reauthorization of the Bank must – at minimum – contain reforms to address this issue as well as address transparency deficiencies and a failure to conduct required impact analyses. For airlines that are not screened out on the basis of creditworthiness, state ownership, or state support, Delta recommends ExIm be required to (1) conduct real analysis on the benefits and harms of its widebody financings on US airlines and our employees and (2) provide complete transparency on the financings in which the bank is participating.
Delta was encouraged by the number of Members from both sides of the aisle who shared their support for just such reforms.
Supporters of the Bank again sent out misleading information about Delta, all of which was addressed in Mr. Anderson’s testimony and is also addressed below:
ExIm Provides a Subsidy to Foreign Carriers
Ex-Im provides a significant subsidy to foreign airlines. The strong continued demand for Ex-Im financing alone demonstrates that a significant gap continues to exist between market and Ex-Im supported rates for widebody aircraft. Were this not the case, foreign airlines would have no reason to come to the Bank so often. ExIm provides financing for global carriers at rates below which they could otherwise borrow in the market, and that puts U.S. airlines and their employees at a significant competitive disadvantage.
The chart that Mr. Anderson shared with the Committee and provided in his testimony is an example of this - - a real world comparison between an ExIm transaction and a private market transaction by the same foreign airline at the same time, where the ExIm transaction provides a $20 million benefit per plane vs. what that airline could get in the private market. As Mr. Hochberg said today, “I’d rather the private sector do everything.” Mr. Anderson’s testimony illustrates that these foreign airlines can and do access the private sector for financing and therefore shouldn’t be able to access the subsidy available from ExIm.
ExIm’s Financings for GOL Airlines Occurred Without Any Involvement From Delta Air Lines
Mr. Anderson addressed that issue in his written testimony today: “Contrary to the Bank’s public pronouncements . . . [the GOL] financing did not support, much less create, a single job at Delta TechOps. The guarantees helped GOL to issue cheap debt in 2012, ostensibly to pay the costs of a Delta TechOps contract to provide maintenance service for GOL’s narrowbody aircraft engines. The truth is that the contract was signed in 2010 and the Bank’s support arrived only after the contract had been finalized, the work was underway, and payments were being made. If the Bank is willing to publicize a deal where it is so wrong on the facts, it raises the question of what the Bank is doing in the vast majority of transactions as to which it discloses little if any information.”
Specifically regarding the claim of 400 jobs, the Bank shared the following in a letter to Delta dated May 5, 2014: “ExIm Bank’s jobs estimate is based on … jobs-calculation methodogy … which is in turn based on employment data computed by the Bureau of Labor Statistics. The jobs-supported figures that are derived from this methodology are economy-wide jobs and include direct, indirect and induced jobs, not simply jobs at the specific exporter involved in the transaction.” That is a long way of saying that ExIm guessed at job number and never called Delta to ask.
Delta’s Use of Canadian and Brazilian Export Financing
The Bank has also tried to deflect attention from its consistent support for Delta’s foreign competitors by pointing to Delta’s use of Brazilian and Canadian export financing. As Mr. Anderson also explained in his written testimony today, that financing supports the purchase of regional jets used for purely short-haul routes. Delta’s competitors on these routes are other American carriers, all of whom have equal access to the same kinds of financing. That is a level playing field - which has nothing in common with the Bank’s unqualified support for our foreign competitors, support no American carrier has access to.
ExIm’s Record on Economic Analysis
Contrary to what was shared earlier today, here’s what Chairman Hochberg shared during Senate testimony earlier this year:
- In approximately 17,000 ExIm transactions over the past five years, the Bank has conducted a detailed economic impact analysis on the impact to U.S. jobs only 24 times.
- In the nearly 170 aircraft transactions that occurred in the same time frame, the Bank has conducted a detailed economic analysis only once.
As shared by Mr. Anderson today on several occasions, Delta stands ready to work with Congress to find solutions that don’t place any job in the U.S. at a disadvantage.