Jan. 6 (Bloomberg) -- U.S. pilots and airlines asked a federal judge to stop the Export-Import Bank of the United States from giving Air India $1.3 billion in loan guarantees to buy Boeing Co. aircraft.
U.S. District Judge James Boasberg in Washington today heard arguments by trade associations for the largest U.S. airlines and pilots requesting that he block the guarantees while he considers their legal challenge. Boasberg said he would rule on the request by Jan. 13, three days before Boeing is scheduled to deliver one of its aircraft to Air India.
“It’s highly likely that Air India will put these airliners on routes in competition with American airlines and records show zero jobs would be created,” Robert Bailey, a lawyer for the Air Line Pilots Association, told the judge.
The Air Transport Association of America Inc., now called Airlines for America, filed the lawsuit in November claiming the bank didn’t seek public comments or consider the impact on the U.S. airline industry before approving $1.3 billion in loan guarantees and $2.1 billion in preliminary commitments to support the sale of 30 Boeing aircraft to Air India.
At least 27 of those aircraft are the 787 Dreamliner, which lawyers for the trade groups said are “dramatically efficient.”
Air India is getting “access to the very best planes in the world at a subsidized rate,” Michael Kellogg, a lawyer for the Air Transport Association, told the judge.
The groups asked the court to find the loan-guarantee commitments unlawful, to prevent them from being issued and to require the Export-Import Bank to study the guarantee’s potential impact on U.S. industry and jobs.
The Export-Import Bank is a federal agency that provides loans, loan guarantees and insurance to foreign companies. According to the lawsuit, the bank’s loan portfolio is “overwhelmingly devoted” to financing the purchase of airplanes for export. In fiscal year 2010, air transportation loans accounted for 47 percent of the bank’s $75.2 billion in total outstanding loans, the lawsuit claims.
The Air Line Pilots Association intervened in the lawsuit in the airlines behalf.
The bank argued that the association lacks any legal basis to challenge the loan commitments and that blocking the commitments would be disastrous for the 77-year institution.
“It would send a signal to the market that it could no longer rely on Ex-Im as a guarantor,” Ian Gershengorn, deputy assistant attorney general in the Justice Department’s civil division, told the judge.
If the Export-Import Bank didn’t guarantee the Air India loans, the airline would have sought financing elsewhere and purchased aircraft from Airbus, the world’s largest passenger- jet maker, Gershengorn said.
“Boeing was awarded a contract of $5 billion with Air India in large part because of efforts by the bank,” he said.
Gershengorn argued that Congress gave the bank wide discretion to operate much like a commercial bank.
He also noted that several of the trade group’s largest members, such as United Air Lines Inc., Continental Airlines Inc., American Airlines Inc., Atlas Air Inc., Federal Express Corp. and United Parcel Service Inc., didn’t join the lawsuit.
Chicago-based Boeing isn’t a party in the case.
The case is Air Transport Association of America Inc. v. Export-Import Bank of the United States, 11-cv-2024, U.S. District Court, District of Columbia (Washington).
--With assistance from Eric Martin in Washington and Karthikeyan Sundaram in New Delhi. Editors: Fred Strasser, Mary Romano
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