PrintOctober 11, 2010
Airlines Protest US Subsidies to Foreign Competitors
American taxpayers have been subsidizing foreign competitors of United States airlines for years. Maybe you had not noticed that U.S. and European governments have been providing export financing for many years (about 35) to aircraft manufacturers Boeing and Airbus, and that these loans are believed to help with about one-third of Boeing and Airbus sales. Under a side agreement between the U.S. and Europe, airlines from those areas can't get the export finance subsidies.
Amazingly, last week the US's and Europe's largest airlines banded together to oppose Export-Import loans from various governments to foreign carriers to purchase aircraft from Boeing & Airbus. What is amazing about this is that it took so long for anyone to recognize the inherent destructiveness and socialism in this arrangement.
A trade group for U.S. airlines (Air Transport Association) said Wednesday it plans to detail its case to U.S. government officials in the next few days. The loan guarantees are designed to help Boeing and Airbus sell planes and create manufacturing jobs. But big U.S. airlines say they suffer because they don't get the loans but many foreign competitors do. As a result, the U.S. airlines say, they must spend more than some foreign rivals on aircraft financing just when they're beginning to recover from a deep, 2-year slump.
Didn't anyone notice the demise of the world's premier overseas airline (PanAm) and the rise of numerous overseas-based competitors (Singapore Airlines Laker Airlines became the poster child for export financed airlines.
About 35 years ago the senators from Boeing (Henry Jackson and Warren Magnusson) managed to get aircraft loans in to the US Export-Import Bank charter. Ostensibly the ExIm Bank was formed to help create infrastructure in poor nations. This included such things as roads, dams, bridges, hydro-power, and more. The addition of aircraft initiated a whole new purpose for the Bank.
Over the ensuing years when the Bank's charter came up for renewal in Congress, one company would show up to argue for renewal -- Boeing. Boeing proved to be much more adept at garnering the Bank's support for its' customers, and the percentage of total sales financed by the Bank was largest for Boeing. No other company relied so heavily on the Bank's financing. Have you noticed that Boeing is the only commercial aircraft manufacturer in the U.S. now?
So the airlines have finally stepped up to protest this financing. I assume the survival instinct has kicked in. This will be an excellent case to watch the various forces in our economy at work. Will this country be able to shed this "little bit" of socialism, and allow free enterprise competition in aircraft? Or is this the equivalent of being a "little bit" pregnant.
As a nation we have come a long way in accepting socialism in increments. Can it be reversed?
