Corporate Cronyism At Its Finest

Congress is poised to renew the Import-Export Bank and while Delta Airlines is lining up their lobbyists to oppose the reauthorization they were caught with their hands in the cookie jar.  

Flight Global reports that Delta Air Lines has received export credit financing from Export Development Canada (EDC) for its order of up to 70 Bombardier CRJ900s, even as it opposes similar support from the Export-Import Bank of the US (US Ex-Im) to certain foreign carriers.

EDC agreed to provide between Canadian dollars (C$) 500 million ($484.4 million) and C$1 billion in financing for the order, under an agreement that was signed in December 2012 and disclosed by the export credit agency (ECA).

Atlanta-based Delta ordered 40 firm CRJ900s with options for another 30 aircraft the same month. At list prices, the firm order is worth $1.85 billion and the entire order $3.29 billion.

Delta-subsidiary Endeavor Air took delivery of the first aircraft on 29 August and will have 12 in its fleet by the end of the year, Flightglobal’s Ascend Online database shows. The regional carrier already operates 41 CRJ900s.

EDC declines to comment on the structure or tenor of the financing.

Delta’s use of export credit comes as it opposes similar financing to certain foreign competitors. The carrier filed a lawsuit with Hawaiian Airlines and the Air Line Pilots Association (ALPA) against US Ex-Im in April claiming negative economic consequences of the ECA’s loan guarantees for widebody aircraft.

“It's really investment grade companies that are owned by the government where the president of the country, the chairman of the board and the president of the airline are one in the same,” said Richard Anderson, chief executive of Delta, in a May speech.

While Delta is not government-owned, it is rated near investment grade and capable of securing competitively priced debt on commercial markets. It rejoined the Standard & Poor’s (S&P) 500 index on 10 September after being dropped in 2005 and maintains B+, B1 and B+ ratings from rating agencies Fitch Ratings, Moody’s and S&P.

In addition, Delta’s claim of negative economic consequences stems from its having to compete with foreign carriers, such as Emirates, Etihad Airways and Korean Air, that benefit from US Ex-Im loan guarantees.

Air Canada could make a similar argument towards Delta’s use of EDC financing. The carriers compete on routes between Canada and the USA, including between Atlanta and Toronto Pearson where Delta flies CRJ900s as well as other Bombardier aircraft, according to Innovata FlightMaps Analytics.

American Airlines acknowledges some form of double standard between Delta’s claims and actions. Will Ris, senior vice-president of government and regulatory affairs at the Fort Worth, Texas-based carrier, told Flightglobal that American does not take a position on US Ex-Im financing to foreign carriers as it uses export credit itself, at an event in Washington DC on 24 September.

The airline has used financing Brazilian development bank BNDES for the Embraer regional jet fleet at its subsidiary American Eagle Airlines.

Delta did not immediately comment on its use of EDC financing while objecting to US Ex-Im guarantees.

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