GAO report on ‘Boeing’s bank:’ The US Government Accounting Office, a non-partisan investigating agency, completed a study of the funding and guarantees provided by the US ExIm Bank, which is under criticism from Congressional Republicans, and concluded non-US airlines do benefit from what amounts to subsidies.
These put US competitors at a disadvantage, GAO concludes. The full 29 page PDF may be found here.
The study period covered the global financial crisis, during which a good deal of private capital funding dried up. Airbus and Boeing each relied more heavily on export credit agencies for customer financing–ExIm in Boeing’s case and collectively European Credit Agencies, or ECAs, for Airbus.
The GAO found that ExIm funded or guaranteed financing for 789 Boeing wide body aircraft while the ECAs supported 821 Airbus wide-bodies.
Parenthetically, this statistic alone should demonstrate to Congress the need for ExIm to continue to be available for Boeing airplanes.
As could be expected, export credit support spiked in 2009, the year immediately following the global financial meltdown.
PDF page 14 in the GAO report segments the dollar amounts received by countries. Airlines operating in the United Arab Emirates, India and South Korea each received more than $3bn in US support. Customers from 34 countries were backed by ExIm financing support.
Delta Air Lines is leading the fight against ExIm practices because it believes it’s at a competitive disadvantage to carriers whose airplanes are funded by ExIm. Tea Party Republicans in Congress want to kill ExIm entirely, calling it corporate welfare. Although ExIm funds a wide variety of industries, the largest chunk of backing goes to Boeing, hence the moniker that it is “Boeing’s Bank.”
Long time readers of this column know that we support reauthorization of ExIm and view its termination as something that will put Boeing at a competitive disadvantage. We call attention to the number of airplanes ExIm and ECAs financed, noted above.
During the Air New Zealand Boeing 787-9 event July 9, we had the opportunity to speak with Boeing’s head salesman, John Wojick, for a few minutes. Although the event was for ANZ, we talked about ExIm. Wojick told us Airbus is using the cloud over the continued existence of ExIm in its sales campaigns against Boeing.
While Delta’s campaign is directed at wide-body funding, ExIm also supports 737 sales. When Asia’s LionAir ordered hundreds of 737NGs and 737 MAXes, President Obama–who was present for the announcement in Indonesia–pledged ExIm support. If the Bank is not reauthorized, this funding support goes away, putting at risk billions of dollars in sales by Boeing.
Wojick told us Boeing is looking at alternatives, though he declined to be specific. Rating agency Standard & Poor’s concluded that Boeing would have to dramatically step up customer financing in the event ExIm is not reauthorized.
ExIm’s current authorization expires in September. We think the Bank will be reauthorized, but in Congress, nothing is a sure bet. What is a sure bet that failure to do so will harm Boeing, American jobs and American exports.
COMAC C919: While Boeing is fending off allegations of US government subsidies for its airplanes, China’s government-funded competitor, the COMAC C919, continues to make progress. French news agency AFP has this report detailing the current status of China’s competitor to the Boeing 737 and Airbus A320.
Airbus’ wide-body strategy: Flight Global has a rather damning analysis of the Airbus wide-body strategy compared with Boeing’s. Flight Global’s incredibly annoying and cumbersome free registration is required.