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Delta calls halt on aircraft subsidies

WASHINGTON, DC; Delta CEO Richard Anderson says it's time the U.S. Treasury-backed Export-Import bank stopped providing cheap loans to airlines owned by foreign governments.

richard anderson delta-air-lines-ceoTestifying before the U.S. House of Representatives' Financial Services Committee this week, he cited Emirates Airlines that "is essentially getting a free additional widebody plane for every eight new planes it buys [and it] may be receiving a total subsidy on all its bank-backed Boeing aircraft of up to US$188.7 million per year".

Anderson claimed the credit markets are well aware that Emirates is backed by Dubai's ruling family; that it is not subject to corporate or income taxes; and it is not subject to a wide range of fees and excise taxes in the UAE that are imposed on U.S. airlines in their home jurisdiction – and make up over 20 percent of an average domestic ticket price.

He said that while the lack of transparency by Emirates and the ExIm bank makes it impossible to know the true extent the subsidy, "that kind of deal is simply not available to airlines that must rely on market financing".

He added that using public money to finance foreign competition was harming U.S. airlines and noted that in the past five years 47 percent of all ExIm loans have been to the air transport sector.

They include financing to government-owned carriers such as Emirates, Singapore Airlines, Thai International, Etihad, Japan Air Lines, Turkish Airlines, Air China, Aeroflot, South African Airways, Air New Zealand, China Southern Airlines, Air India, Ethiopian and Pakistan International.

The Delta CEO declared that such subsidies, while applicable 50 or 60 years ago, had now "gone too far" and proposed the House committee adopt five reform measures including prohibiting the ExIm bank from financing widebody aircraft to airlines that are owned or supported by foreign states or creditworthy in their own right.

He said the bank also should be required to be completely transparent in its widebody aircraft financing; conduct a full economic impact analysis of every such transaction it finances and take into account any harm to U.S. airlines when doing so; allow U.S. airlines to comment on any potential transaction; and instruct the U.S. Treasury to negotiate with its European counterparts to eliminate such financing completely.

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