In reauthorizing the Export-Import Bank of the United States, Congress has a turning-point opportunity to make certain the agency’s below-market financing helps all American workers, including those of the Boeing Company. But the U.S. aircraft manufacturer’s current resistance to any reforms won’t fly. As so many from both parties in Congress and from U.S. companies maintain, reform is imperative because the Ex-Im Bank must help all U.S. businesses compete internationally.
That U.S. airlines and Boeing share a common desire to compete and prevail in the marketplace has never been in doubt, but it was recently affirmed when Raymond L. Conner, president and chief executive officer of Boeing Commercial Airplanes, said, “The realities of our business require us to constantly renew and refresh our focus to ensure we can compete and win.” Take it from me, the U.S. airlines and their employees are on the exact same page.
Incredibly, the U.S. government adds to these advantages by providing below-market financing that saves U.S. airlines’ competitors approximately $20 million over the life of an aircraft. To get a sense of the savings, this per-aircraft advantage must be multiplied by the dozens of aircraft that have received export credit agency financing. In an industry with razor-thin competitive margins, this gives our foreign competitors a tremendous advantage.
Unsurprisingly, foreign airlines use this economic advantage to undercut U.S. airlines on international routes. In short, an already distorted marketplace is further tilted against U.S. airlines by the U.S. government’s own unnecessary financing of widebody airplanes for wealthy state-supported foreign airlines.
This scenario harkens back to 2008, when China systematically distorted the steel market by subsidizing its companies with advantageous tax rates and labor rule exemptions and then flooded the market with steel at an unfairly low price.
In the U.S. airline industry, this practice is called “seat dumping,” and it creates excess capacity in U.S. markets and job losses for U.S. airline industry workers. Not only does Ex-Im Bank financing set the stage for seat dumping on international routes, it also artificially shifts industry economics by allowing foreign airlines to make business decisions outside of the normal capital markets and economic conditions that influence U.S. and European airlines.
The Air Line Pilots Association, Int’l (ALPA) supports the core mission of the Ex-Im Bank as a lender of last resort to help U.S. businesses export U.S. goods when private market capital is not available. We support the Bank’s reauthorization as long as reasonable, narrow, targeted reforms eliminate the financing of widebody aircraft to credit-worthy foreign, state-owned or state-supported airlines. This will advance fair competition for all U.S. workers, including Boeing’s, while safeguarding U.S. airline industry jobs and continuing the Bank’s work to promote U.S. goods and services.
Many of ALPA’s more than 50,000 members operate Boeing airplanes on the routes we fly, myself included. We recognize that Boeing is a national asset and, along with all U.S. manufacturers, plays a critical role in the health of the economy and defense and in maintaining U.S. jobs. To reflect this, ALPA’s moderate reforms will help the Bank to assist even greater numbers of U.S. manufacturers by expanding its limited resources outside the aviation sector, which currently dominates the Bank’s resources.
Airlines contributed almost twice the economic activity and more than twice the jobs of civil aerospace manufacturing in 2010. No single company should be allowed to hold Congress and the Bank’s reauthorization hostage by claiming that it will suffer financial harm without the Bank’s reauthorization but at the same time refusing to negotiate targeted reforms that will direct a federal agency to better assist all U.S. businesses.
If Boeing will advance the throttle rather than stall the effort, the United States can renew and refresh our focus at the Ex-Im Bank to reflect business realities. Together, we can create a reauthorization that helps to level the playing field for U.S. airlines, protects U.S. aviation and manufacturing jobs, and expands export opportunities for U.S. small businesses.
Moak is president of the Air Line Pilots Association, International, the world’s largest pilots union, representing more than 51,000 pilots at 31 airlines in the United States and Canada.