News Backgrounder
Boeing fights to re-instate “crucial” U.S. Ex-Im bank
The U.S. airline industry has reacted fiercely to the failure of the U.S. congress to renew the charter of the U.S. Export-Import Bank and is lobbying hard for the bank’s re-instatement. Boeing’s rivals still have access to their own Ex-Im funds that put U.S. aerospace manufacturers at a disadvantage, said Boeing.
September 1st 2015
When Ray Conner, Boeing vice-chairman and president and CEO of Boeing Commercial Airplanes, recently handed Vietnam Airlines the keys to its first B787 Dreamliner in Seattle, he had more than the delivery of a new aircraft to Asia on his mind. Read More »
The hot topic of the day was the U.S. Congress’ refusal to renew the charter of the U.S. Export-Import Bank, effectively putting it out of business.
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| Boeing vice-chairman and president and CEO Boeing Commercial Airplanes, Ray Conner: Boeing is at a huge sales disadvantage without Ex-Im support |
Ex-Im financing has been a crucial industry trade tool for decades, helping airlines around the world buy new aircraft at reasonable interest rates. For Boeing in particular, the news was bad.
The U.S. bank is in limbo, but its counterparts in Europe and elsewhere continue to operate their own Ex-Im banks. And that, said Conner, put Boeing “at a huge competitive disadvantage”. Its rivals - he did not name names but he meant Airbus in particular - have access to such financing support.
“We absolutely need the Ex-Im Bank to compete on a level playing field,” Conner said. “Some competitors were capitalizing on the situation by highlighting the possibility that Boeing’s customers would no longer have access to trade credits,” Boeing said.
Last year, U.S.Ex-Im financing supported 11% of Boeing commercial aircraft deliveries. European Ex-Im financing funded 8% of Airbus sales. A 2014 report from the U.S.bank said it was an essential resource for American exporters and workers in an increasingly competitive global environment.
“The past year has seen Ex-Im continue to support U.S. job growth, which allowed American businesses to create or maintain 164,000 jobs, generating a $675 million surplus for taxpayers,” the report said.
Director general of the Association of Asia Pacific Airlines, Andrew Herdman, said: “Ex-Im financing is used by many of the region’s carriers, including big airlines. “It’s a significant source of funding. I can understand why Boeing is concerned because Airbus has similar arrangements.
“So do all the other manufacturers. There’s a lot of commercial funding available, but that’s something additional. Ex-Im is part of the market place and the loss of it is a concern, especially as it’s a political issue.”
“It was another source of financing that kept the market honest in terms of the various options. It is part of the mix”, said Herdman. He, too, hoped the bank’s charter would be renewed by Congress. “Congress may rethink and the bank could be reinstated. If not, airlines will have to shop around for the best financing they can get,” he said.
Is it really the end of the bank? Conner hoped Congress, in summer recess at press time, would reinstate the bank’s charter. But he conceded that the fact it was allowed to lapse created doubt about its future.
Democrats and moderate Republicans plan to restore the bank to full operations by attaching its charter renewal legislation to a “must-pass” highway and rail transit funding bill. U.S. Deputy Secretary of Commerce, Bruce Andrews, said the Obama administration is concerned about the lapse of the bank’s charter and hoped it could be restarted soon.
“By unilaterally disarming and shutting down the Export-Import Bank, an advantage was created for our competitors from countries such as China, Germany and Japan,” Andrews said.
U.S.Ex-Im chairman, Fred Hochberg, told Reuters news agency the bank’s staff was proceeding with an orderly liquidation plan and was completing approved transactions. The bank will stay open to service its $112 billion in existing obligations. Its operating budget has been approved until the end of this month.
