Bangladeshi airline set to receive loan guaranteed by US government
American taxpayers have forked over enough cash to our own unprofitable airlines, but now the Obama administration looks set to provide a bailout guarantee for a failing foreign air carrier.
The U.S. Export-Import Bank will meet in Washington on Thursday to discuss providing $285 million in loan guarantees for the purchase of several Boeing aircraft by Biman Bangladesh Airlines, a carrier with a shoddy safety record, poor reliability and an inability to turn a profit.
That means if Biman fails to repay the loan and the Bangladeshi government refuses to step in as obligated, the taxpayer-backed Export-Import Bank would be on the hook. And Biman seems like a particularly risky bet.
The United Nations told its staff to avoid Biman flights, citing safety violations and concerns over rampant delays. Customers complain that unexplained four-hour delays are commonplace and service is abysmal. “The level of chaos and basic customer service is diabolical from the minute you check in your luggage,” one reviewer wrote.
Unsurprisingly, Biman has struggled to turn a profit, hemorrhaging tens of millions of dollars for the last five years. The company claims to have staunched the bleeding, announcing in early October that they expect to break even this year.
But rather than consolidate its tepid gains, Biman chose to expand, announcing plans to double the size of its aircraft fleet in the coming years. But without a profit margin, what creditor would provide them with the hundreds of millions needed to purchase large passenger aircraft?
Enter the Export-Import Bank, a New Deal institution that backs loans to foreign companies seeking to purchase goods and services made in the United States. Its website claims the Bank “enables U.S. companies — large and small — to turn export opportunities into real sales that help to maintain and create U.S. jobs and contribute to a stronger national economy.”
88 percent of the Bank’s loan guarantees went to small business in 2012. But The Washington Examiner reports that $12.2 billion of the Bank’s $14.7 billion in long-term loan guarantees went to just one company: Boeing.
The connection between the aerospace giant and the Obama administration is strong. President Obama tapped Boeing CEO James McNerney to head the President’s Export Council, the company donated overwhelmingly to the Obama campaign in 2008 and 2012, and many current and former Obama administration officials — including John Podesta, Bill Daley and David Plouffe — have worked or are working for the company.
“The reason companies like [Biman] get loan guarantees from the taxpayers is because a normal lender wouldn’t give them,” said Barney Keller, communications director at the Club for Growth, in a statement to The Daily Caller News Foundation. “It’s a prime example of why the government needs to get out of the export finance business.”
But Phil Cogan, vice president of communications at the Export-Import Bank, disputed this characterization. “We were created by Congress to do precisely what [Keller] is saying,” he told TheDCNF, “which is to make sure loans are approved that would fail without our participation because they are riskier.”
He added that taxpayers have never suffered a loss on the Bank’s airline financing and that their current loan default rate is around 0.25 percent.
Correction: The Export-Import Bank loan guarantee is $285 million.
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