Airlines Resort to Legal Action to Stop Aircraft Financing of U.S. Export-Import Bank
On 29.11.11, In Legal Industry, by Blake Houser
The industry trade group for leading U.S. airlines, the Air Transport Association of America or ATA, today filed a lawsuit against the United States Export-Import Bank (Ex-Im Bank) to stop a pending deal amounting to $3.4 billion in loan guarantees for aircraft financing to Air India, pointing out that the deal failed to meet statutory requirements, including a consideration of the impact on the airline industry in the United States and corresponding airline jobs.
The Ex-Im Bank approved the $1.3 billion in taxpayer-backed loan guarantees recently for Air India and is also putting into consideration an additional $2.1 billion in loan guarantees to finance the purchase of 30 aircrafts, including 27 Boeing 787s to be delivered between 2011-2015.
In a lawsuit filed with the U.S. district Court of the district of Columbia, ATA has asked the court to declare the Air India loan-guarantee commitments illegal, to stop the loan guarantees from being released, and to order an injunctive relief requiring Ex-Im Bank to fully satisfy its statutory obligations.
The lawsuit was filed after ATA sent a letter to the Ex-Im Bank early this month, which stated that loan guarantees to Air India, as well as with other foreign carriers, failed to comply specific statutory mandates, which includes the consideration of the impact from such financing deals on U.S. industry and jobs. The ATA also claimed that the deal failed to ensure that the underlying loans have a reasonable assurance of repayment. The U.S. taxpayers could potentially be left to pay the bill in case a foreign carrier defaults on its loans.
The ATA pointed out that the methods of Ex-Im Bank put carriers in the U.S. at a commercial disadvantage to carriers from other countries.