Exim Bank shutdown puts Boeing sales in jeopardy

US–based Export Import Bank (EXIM Bank) which provides loans and guarantees to foreign airlines for buying aircraft shut down on Wednesday putting Boeing sales in jeopardy.

The US-based aircraft manufacturer which has been in advanced talks with several airlines in India will now find it hard to take the negotiations to the next level until the issues concerning the bank are resolved by the US Congress. The Exim Bank is a major lender for overseas airlines to buy Boeing aircraft.

Exim Bank has already provided a loan guarantee of $3 billion to Air India to help it to buy 30 aircraft from Boeing. The other domestic airlines which have Boeing aircraft in their fleet include Jet Airways and Spicejet.

“A suspension of the Bank’s ability to do new business after June 30 is a boon to overseas competitors at the expense of thousands of US exporters and the jobs they support,” a Boeing spokesperson told BusinessLine .

Joanna Pickup, Asia Pacific & India Sales Communications, Boeing Commercial Airplanes, said inaction by Congress to reauthorise Exim makes it harder for the company to compete with Airbus and other competitors with access to multiple export credit agencies.

Exim Bank has been the target of several US Congressmen and even American Airlines which have accused it of unfairly subsidising rival international airlines. Early this week, the US Congress let the Bank’s authority to lend, to expire on June 30.

Incidentally, some of the US-based airlines had sued Exim Bank for extending financial support to Air India claiming that it hurt their business interests. However, the US Court of Appeals in its order rejected the petition by the airlines.

Air India, which deploys mostly Boeings for its international flights said the current situation will not hurt the airline. “The expiry of the authorisation of the US Exim bank will not in any way affect Air India in respect of its current transactions wherein the guarantees have already been issued by US Exim,” S Venkat, Director (Finance), and Joint Managing Director told the paper. However, the US Exim bank will take up request for issue of future guarantees only on receipt of the necessary authorizations which we are confident that US Exim will obtain in due course, he said. An analyst with consultancy firm Ernst & Young, Kuljit Singh, however, said those domestic airlines which are on the growth path have Airbus in their fleet.

“Because of the current development, it will become simpler for Airbus to push their aircraft more. If there are larger orders, then there is a possibility of Boeing helping airlines with some funding,” he said.

But for Boeing, the bank shut down is being seen as a major setback. Joanna Pickup of Boeing said that lost overseas sales negatively impacts their more than 1,50,000 employees and the approximate 15,000 US suppliers that support 1.5 million jobs across the country.

“Boeing works to assist foreign airline customers secure the financing they need to buy and take delivery of American aerospace products. In the absence of Exim, we may need to provide more financing assistance directly but there is a limit to how much we can do.”

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