The Delta double-take on Ex-Im

 

I disagree with the “crony capitalism” critics all the rage right now.  My experience in the physics of government is that government acts on business – taxing them, regulating them -- and business seeks the equal and opposite reaction of relief from government. There’s nothing nefarious about that.  In fact, petitioning your government for redress is a protected right there in the very first amendment to the Constitution. 

But rational and constitutionally protected or not, the anti-crony critics seem to object to firms lobbying government for specific protection from otherwise broadly-applied laws for their own narrow gain – and presumably at someone’s expense (“taxpayers”, “consumers”).

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If that’s the definition, then it’s bizarre how the anti-crony crowd selected Delta Airlines and Richard Anderson as their celebrity victim.

Delta’s criticism of Ex-Im Bank goes something like this: in some cases the Ex-Im Bank finances purchase of U.S. exports.  Some of those exports are widebody aircraft sold to foreign airlines, and that benefit helps foreign airlines compete against U.S. airlines, like Delta.

It’s the kind of story that seems so logical in the telling that otherwise smart people, already inclined to be critics of the Ex-Im Bank, just accept it at face value. 

I’ll explain why the story is a myth in a minute, but what’s most bizarre is how the anti-crony crowd has allowed itself to be captured by the croniest of agendas. 

Ex-Im programs are generally available to all U.S. exporters.  There are some limits on buyers, and exporters need to meet certain standards (like the 80 percent domestic content requirement), and there are requirements for helping small exporters.  But Delta is lobbying for a very specific carve-out in the law that it claims, in no uncertain terms, will benefit its own business: blocking Ex-Im assistance to certain buyers who want to purchase widebody aircraft from Boeing.  

If this doesn’t meet the critics’s definition of “crony capitalism”, I don’t know what does.

But Delta knows a thing or two about hypocrisy.  After all, this is a company that is based in the U.S., the world’s single most lucrative and protected market for air carriers, received government support after 9/11, dumped billions of dollars of pension obligations on the American taxpayer, …and wait… also benefitted from export credit assistance, both U.S. and foreign!

The other problem with the Delta double-take is their story fails on examination.  Here’s why:

1)    There are only two global suppliers of widebody jets in the world: Airbus, the EU created and favored industry, and the U.S.’s Boeing.  Airbus offers generous export credit assistance for its exports to emerging markets.  A foreign airline – say, Air India -- has the choice of buying either Airbus with export credit assistance, or Boeing with export credit assistance.  Either way, Delta is no better (or worse) off: Air India is going to have new widebody jets.  But Boeing and thousands of its U.S. suppliers will be much worse off if Ex-Im is eliminated.

2)    Delta implies that the foreign airlines get a better deal than U.S. airlines.  They don’t.  In addition to all of the other huge advantages U.S. airlines have, they also enjoy a substantial cost-of-financing advantage over foreign carriers for purchasing aircraft.  U.S. carriers have access to commercial financing with better terms than what is available to emerging market airlines using  export credit assistance. 

3)    Export credit assistance for customers of Airbus, Boeing, and other aircraft manufacturers is guided by specific OECD rules requiring that assistance be as close as possible to market rates.  For Delta to claim some special harm is completely unfounded.

The global air market is rapidly growing – especially in Asia and other emerging markets, and Open Skies agreements among governments will continue to expand the market and competition – and that’s a great outcome for the world’s air travelers. 

Fratto, deputy assistant to the president and deputy press secretary to President George W. Bush from September 2006 to January 2009. is managing partner at Hamilton Place Strategies, a strategic communications and crisis management consultancy based in Washington, DC.