Boeing, Delta CEOs Clash Over Future of Ex-Im Bank Subsidies
Posted at 1:32 p.m. on July 23, 2014
The corporate clash over congressional reauthorization of the Export-Import Bank was on display Wednesday in separate interviews with CEOs of two of America’s biggest transportation companies, Delta Airlines and Boeing.
Congress faces a decision this summer on whether to reauthorize the Export-Import Bank which provides direct loans, loan guarantees, and credit insurance to foreign companies to subsidize purchases of U.S goods and services.
In fiscal year 2013, according to the bank’s annual report, Boeing benefited from $8 billion in Ex-Im Bank loans and loan guarantees provided to airlines in countries ranging from Kuwait to Kazakhstan.
The bank’s supporters were taken aback last month when incoming House Majority Leader Kevin McCarthy switched his position from supporting the bank to opposing it.
Boeing CEO Jim McNerney told investment analysts and reporters in a conference call Wednesday that “my assessment is that the bank will be re-authorized.”
But he conceded that “there’s risk involved” that Congress might not do so. “Addressing that risk, the Ex-Im Bank has come down as a percentage of our customer base, in terms of what percentage relies on them.”
He said that reduced dependence on Ex-Im Bank financing reflected “a lot of liquidity in the capital markets. But there are times when the markets are less friendly” when Ex-Im Bank money “becomes a significant percentage” of aircraft purchase financing.
He said the pivotal issue is having “a level playing field with our competition,” that is, Airbus “than it is [that] Boeing goes under without the Ex-Im Bank.”
Many countries have export credit agencies similar to Ex-Im Bank.
McNerney criticized “this idea of unilaterally disarming U.S. manufacturers while European manufacturers continue to get copious kinds of Ex-Im-type support.”
The Boeing CEO also said that if Congress moves to reform Ex-Im Bank rather than killing it outright, it must not discriminate against loans provided for specific types of products, such as wide-body airplanes.
Earlier Wednesday, Delta CEO Richard Anderson told CNBC in an interview, “I don’t understand why my government finances my state-owned enterprise competitors in foreign countries that really are governments, not airlines.”
He said Airbus and Boeing “are in a huge duopoly. There’s only two manufacturers in the whole world for airplanes” and government-provided financing won’t make a huge difference in the profitability of that duopoly, he argued.
He pointed to Boeing’s robust quarterly earnings announced Wednesday as evidence that it can survive without Ex-Im Bank subsidies.
“This is about one issue,” Anderson said. “It’s about wide-body financing to state-owned enterprises that have easy access to capital markets at market rates.”