http://www.forbes.com/sites/lorentho...ndermines-boeing/?partner=yahootix

I guess to some extent I give them credit for trying anything to advantage themselves, but I'm not a fan of being hypocritical.

"The aim of Delta’s campaign is to prevent the Export-Import Bank, an independent federal agency, from providing financing for foreign purchases of widebody airliners built by Boeing. Delta management says such planes can be used to compete against U.S. carriers on international routes, and that a government agency should not be helping foreigners to do that."

"First of all, Delta’s concern about the market-distorting effects of aircraft export credits seems a bit disingenuous, since it is one of the biggest recipients of such credit in the world. The company has tapped billions of dollars in financing from the export credit agencies of Brazil and Canada to purchase hundreds of aircraft made in those countries. "

It should be pointed out that DL routinely uses the RJs they purchased using Canadian EXIM financing to compete with Air Canada in trans-border markets.

This is not to mention the other dirty trick many 'foreign' (to the US) carriers play: providing a far better standard of product...  

Quoting enilria (Thread starter): It should be pointed out that DL routinely uses the RJs they purchased using Canadian EXIM financing to compete with Air Canada in trans-border markets.

And, as you quoted above, DL is specifically talking about financing to purchase widebody a/c, not regional jets. I doubt if DL using RJs, transborder, is really hurting AC all that much.

Quoting ozglobal (Reply 1): This is not to mention the other dirty trick many 'foreign' (to the US) carriers play: providing a far better standard of product...

Well, that should simply be outlawed.  

Quoting mayor (Reply 2): I doubt if DL using RJs, transborder, is really hurting AC all that much.

Well, they compete head to head on the same routes. I'd say that airlines using EXIM financing of Boeing jets aren't hurting Delta all that much. LOL.

Delta is in a JV with KLM where it shares costs and revenues. KLM aircraft are financed with EXIM financing, so Delta receives the benefit of that financing on its own flights. I guess they can make the argument of "we do it because everybody else does, so we have to be able to compete". It's not a great argument, though.
http://www.ca-cib.com/news/major-dea...loses-exim-refinancing-for-klm.htm

Many of the carriers involved have Delta codes on their planes.
http://www.aircrafteconomics.com/Art...-Air-closes-ExIm-deal-for-777.html

Quoting mayor (Reply 2): And, as you quoted above, DL is specifically talking about financing to purchase widebody a/c, not regional jets.

They kind of have to limit themselves to only complaining about widebody jets for obvious reasons.

Quoting enilria (Reply 3): They kind of have to limit themselves to only complaining about widebody jets for obvious reasons.

Or maybe that's just where it hurts the most......on long haul, widebody flights. Besides, not ALL of the RJs that are used were purchased by DL but by the contracting carriers.

Quoting mayor (Reply 4): Quoting enilria (Reply 3): They kind of have to limit themselves to only complaining about widebody jets for obvious reasons. Or maybe that's just where it hurts the most......on long haul, widebody flights. Besides, not ALL of the RJs that are used were purchased by DL but by the contracting carriers.

What is your defense of JV participation by Delta using planes financed with EXIM loans? The world is so global now for the legacies, there is no moral high ground.

I think if the WTO outlawed all EXIM financing that might be OK, although it would lead to less new aircraft. If only the U.S. does it then it doesn't make much competitive sense.

Delta has no choice - how are they going to compete with other airlines like JetBlue who may not care about Exim financing?

Lufthansa has made similar complaints:

http://presse.lufthansa.com/fileadmi...ief-October-2010-ExportCredits.pdf

This is hardly limited to Delta.

Let's take a look at some of the points the article makes:


"Second, the Export-Import Bank doesn’t give subsidized loans to anybody for aircraft purchases. It can’t afford to because Congress requires it to be self-sustaining, so it must impose fees on users of its services to cover operating costs and loan reserves. Congress also prohibits it from competing with commercial lenders, which is why the foreign buyers who utilize Ex-Im credit typically are unable to access private-sector financing. The number of companies in that predicament tends to swell when economic conditions are weak and credit dries up, but there are also many carriers in countries with unstable economies or political systems who cannot obtain private financing for their aircraft purchases."

Yeah, they can't access private financing because they don't have the credit rating! The only one misleading anybody here is the author.


"Third, the reason Delta can’t get the same loan terms as some foreign carriers isn’t because of Ex-Im programs, it’s because Delta has a low credit rating. Under the most recent Aircraft Sector Understanding agreed to by U.S. and European nations, it costs borrowers significantly more to use government export credits for their aircraft purchases than it would to use commercial financing, but borrowers with good credit ratings like Southwest Airlines will always get better terms than borrowers with inferior ratings. So Delta’s real problem is its junk-bond credit rating, and what it is actually complaining about is the normal functioning of market forces — which favor companies with good credit histories."

If that was true, nobody would ever go to Exim for a loan.


"Finally, the idea of joining with European nations to abolish export credits for airliners is impractical because new aircraft exporters such as Brazil and China are entering the global market who would not be party to any such agreement."

Which is why Delta is focusing on widebodies first.


"Those countries already offer much more liberal credit terms to potential importers of their goods, and would quickly take market share from U.S. producers of aircraft if given the opportunity to tip the scales with predatory financing."

Another reason to try to negotiate a ban on these credit agencies: it hurts US and EU exports.


"It appears the company is trying to improve its position in the marketplace by leveraging conservative values it doesn’t even share. "

Why is the author trying to politicize the issue?


"The reason Boeing taps Ex-Im financing so frequently is because it makes the most expensive capital goods that the U.S. exports, and those goods are in demand in many places where private-sector lenders are reluctant to extend credit."

Because of credit risk. . .


" If Ex-Im programs didn’t exist, those buyers would still obtain planes, but they would all be purchased from Boeing’s main rival using European export credits — dealing a devastating blow to America’s biggest exporter."

The author already forgot about the part that involves the US and the EU he mentioned earlier in the article?


"Because the bank’s lending for widebody airliner exports has essentially a zero default rate, it is the most stable part of the institution’s loan portfolio. The low risk associated with financing aircraft exports enables the bank to take bigger risks in loaning to small businesses that wish to export. "

People used to say similar things about the Housing market.

Quote: "Third, the reason Delta can’t get the same loan terms as some foreign carriers isn’t because of Ex-Im programs, it’s because Delta has a low credit rating. Under the most recent Aircraft Sector Understanding agreed to by U.S. and European nations, it costs borrowers significantly more to use government export credits for their aircraft purchases than it would to use commercial financing, but borrowers with good credit ratings like Southwest Airlines will always get better terms than borrowers with inferior ratings. So Delta’s real problem is its junk-bond credit rating, and what it is actually complaining about is the normal functioning of market forces — which favor companies with good credit histories."

To take from the Lufthansa press release. .

"Emirates, by contrast, pays merely 3.5 percent interest for financing over 12 years through export credit guarantes. . "

Emirates should have little to no problem in getting very good private sector financing. . . yet they still went with the, yes, sweetheart loans provided by the likes of the Exim bank.

Quoting enilria (Reply 3): They kind of have to limit themselves to only complaining about widebody jets for obvious reasons.

Which is silly since they have a number of widebody a/c that were actually purchased from Airbus, now that they are one company I'm sure they can look up the financial arrangements the former NW had made when they purchased the a/c which still have maintenance and spare part addendum's running.

It is admirable that DL does not want to purchase Airbus a/c and want to stick with Boeing, what they should do is what other airlines do, go to Boeing and ask for a deal, rather than lambasting the US Government who is doing what it can to get US products sold. Private companies like DL could care less what the employment situation or trade imbalance is in their home country, quite rightly they are looking for the best deal.

DL is free to run a competition with Airbus and Boeing for its next order, if they squeeze hard enough the discounts may wipe out the imbalance of their lower credit rating.

Look who wrote the article... a defense contractor. What's the largest defense contractor in the states? Boeing.

Things that make you go hmmmm...

Quoting XFSUgimpLB41X (Reply 10): What's the largest defense contractor in the states? Boeing.

http://washingtontechnology.com/toplists/top-100-lists/2011.aspx
I think it still holds true as of today.
Boeing has been on the lossing end of the military stick for a number of projects, F-22, F-35, can't get additional F-18's or F-15's sold, good thing they are also in the sat business. The P8 program is on schedule and on budget so no rips there, as for the tanker contract, they are probably going to take a bath, so they better get their commercial sale in.

Quoting par13del (Reply 9):

From the link in Reply #6:

"They are also not permitted to draw on similar U.S. support when purchasing Boeing aircraft, be- cause the two countries are subject to what is known as the “home country rule.”"


If Lufthansa can't run to Boeing, I'm pretty sure Delta can't just run to Airbus either.

Quoting par13del (Reply 9): go to Boeing and ask for a deal, rather than lambasting the US Government who is doing what it can to get US products sold.

It is not Boeing who is handing DL the short-end of the stick. US and European airlines are being wronged by their own governments.

Quoting par13del (Reply 9): DL is free to run a competition with Airbus and Boeing for its next order, if they squeeze hard enough the discounts may wipe out the imbalance of their lower credit rating.

That's also incorrect:

"Southwest Airlines, which enjoys the best credit rating among all the airlines, can finance its aircraft at an interest rate of 10.5 percent over a period of three years. Emirates, by contrast, pays merely 3.5 percent interest for financing over 12 years through export credit guar- antees, even though the airline does not have an official credit rating."

http://presse.lufthansa.com/fileadmi...ief-October-2010-ExportCredits.pdf





[Edited 2012-04-23 14:24:54]