Jetrader - September/October 2013 - 37

the ﬁnancing. The bank responded that
its Air India commitment was ﬁnal. ATA
then sued Ex-Im Bank on behalf of its
member airlines. Six airlines, including
American Airlines and United Airlines,
declined to join. Delta Air Lines joined
as an individual plaintiff.
The Ex-Im Bank was established by executive order of President Franklin Roosevelt
in 1934. Its statutory purpose is to, “aid
in financing and to facilitate exports of
goods and services… and the exchange
of commodities and services between the
United States… and any foreign country…, and in so doing contribute to the
employment of United States workers.”1 In
deciding to make a commitment, the Ex-Im
Bank must, among other things, “…take
into account any serious adverse effect of
such loan or guarantee on the competitive

position of United States industry… and
employment… and shall give particular
emphasis to the objective of strengthening
the competitive position of United States
exporters and thereby of expanding total
United States exports.”2
The Ex-Im Bank implements these
statutory obligations through its economic
impact procedures (EIPs). These are ﬁve
“screens” aimed at identifying the potential
economic impact of prospective commitments.3 The Ex-Im Bank developed and
implemented the formal EIPs in the 1970s.
Any transaction not passing one of these
screens must go through a more extensive
review process.
The lawsuits claim the Ex-Im Bank violated its statutory obligations by failing to
consider whether the Air India commitments
would have an adverse effect on the U.S.
domestic airline industry. They also claim
the Ex-Im Bank is prohibited from providing
export support if it will cause, “substantial
injury to United States producers of the
same, similar, or competing commodity.”
Finally, they claim the Ex-Im Bank failed to
provide notice and solicit comment before
approving the commitment and further
failed to provide a reasoned explanation
for its decision.
The crux of Delta Air Line’s main argument is that the “commodity” or “good”
they produce is seat capacity. By ﬁnancially
supporting the export of seat capacity
through the sale of aircraft to competitors,
the Ex-Im Bank is causing injury to U.S.
airlines. Delta Air Lines argued that the
Ex-Im Bank ﬁnancing practices, “skewed the
competitive playing ﬁeld sharply in favor
of foreign airlines.” 4 It permits competing
airlines to obtain ﬁnancing at below-market
rates (backed by the full faith and credit
of the U.S. government) as opposed to
U.S. domestic airlines that must rely on
their credit rating alone. Delta Air Lines
claimed that a foreign carrier would pay
about $5 million less per year in interest
payments on a typical 777 ﬁnancing than
a U.S. carrier.
As a result, there is an oversupply of
aircraft and a permanent oversupply of seat
capacity in international markets. Delta Air
Lines argued that Ex-Im Bank-subsidized
airlines have put about 12 percent more
capacity into service in competition with
U.S. airlines than they would have if Ex-Im
Bank guarantees had not been available.

In turn, this caused a 4.1 percent decline
in international U.S. airline seat capacity.
Delta Air Lines cancelled nonstop New YorkMumbai service when Air India ﬂooded that
market with seats, they argued.
In applying their EIPs, Delta Air Lines
alleged the Ex-Im Bank did not consider,
among other things, seat capacity as an
“exportable good.” The screening process
was therefore flawed by automatically
exempting the ﬁnancing commitment from
a proper and then more detailed analysis. In
essence, the seat capacity that U.S. airlines
“produce” is no different from the aircraft
that Boeing produces. Supporting the sale
of Boeing aircraft does not aid a competitor
of Boeing. However, Delta Air Lines argued,
supporting the sale of aircraft to Air India
aids a competitor of U.S. producers of air
transport seat  capacity.
The U.S. District Court hearing the
case conceded in its opinion that the case
brought “… signiﬁcant and probing challenges to the Bank’s procedures.” In the
end, however, the court concluded that seat
capacity was not an “exportable good” or
an “export,” but rather a service. As such,
it was within the Ex-Im Bank’s discretion
to automatically exempt the Air India
commitment from a more detailed impact
analysis through the application of its EIP
screens. While the Ex-Im Bank conceded
no heightened review was accomplished
in connection with the Air India support,
they said that consideration of the impact
was implied by the application of the EIPs
and therefore no further consideration
was  required.

The crux of Delta
Air Line’s main
argument is that
the “commodity” or
“good” they produce
is seat capacity.
“The Bank Act … leaves it to the
Bank—not the courts—to determine both
how the ’adverse effects’ of a transaction
on domestic industry and employment
ought to be identified and when a more
detailed inquiry is merited … It is not for
the Court to determine the advisability of
these Commitments ...” The court said it
Jetrader • September/October 2013 37
Jetrader - September/October 2013

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