Aircraft Manufacturers Say Falling Sales Show Need For Ex-Im

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Peter Fricke Contributor
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Airplane manufacturers are calling on Congress to reauthorize the Export-Import Bank, saying they need government assistance in light of declining aircraft sales in the first quarter.

In the first three months of 2015, shipments of general aviation aircraft dropped by 15.2 percent and revenues fell 12.6 percent compared to the same period last year, according to the General Aviation Manufacturers Association.

“Our industry is focused on regaining momentum, but we need the U.S. Congress to be a strong partner and reauthorize the Export-Import Bank before the June 30 deadline,” GAMA President and CEO Pete Bunce said in the press release. (RELATED: Is the Export-Import Bank Done?)

“It is time to stop playing political games with industry jobs,” Bunce argued. “Congress needs to move ahead and pass reauthorization quickly to ensure a level global playing field and provide needed stability in a difficult market.”

Ex-Im, an independent government agency that provides financing to U.S. exporters, is currently the subject of acrimonious debate in Congress, creating uncertainty over whether lawmakers will reauthorize the bank’s charter before it expires on June 30.

The looming showdown is a product of the previous fight over reauthorization, which was settled last September with a short-term extension designed to let Congress consider the issue independently of larger matters such as funding the government or raising the debt limit.

Supporters argue that Ex-Im provides significant benefits to the U.S. economy by providing financing that would not be available from the private sector, but opponents describe it as an exercise in corporate welfare that primarily benefits large corporations like General Electric and Boeing. (RELATED: Is the Export-Import Bank Crony Capitalism?)

Indeed, while aircraft sales account for a large portion of the bank’s annual authorizations, this is primarily due to its extensive support for sales of Boeing aircraft, which have a much higher price tag than general aviation craft.

According to research by Veronique de Rugy of the Mercatus Center, “Boeing remains the primary beneficiary of the bank’s taxpayer-backed financing,” receiving over $15 billion of financing in 2014, or about 40 percent of Ex-Im’s total authorizations.

However, Ex-Im also extends loans to smaller aircraft manufacturers, providing about $2 billion in financing and loan guarantees for general aviation aircraft sales since 2012, Forbes reports. These small firms depend even more heavily on Ex-Im than do larger firms such as Boeing, the article claims, because they have fewer attractive financing alternatives available to them.

Moreover, since most large countries maintain their own export-credit agencies, American manufacturers worry that they will face a disadvantage relative to their foreign competitors if Congress fails to reauthorize Ex-Im.

Airlines, however, advance the exact opposite line of reasoning, arguing that Ex-Im financing of aircraft sales distorts competition among air carriers, making it more difficult for them to compete with foreign airlines that can purchase planes at a subsidized price. (RELATED: Boeing, Delta Square Off on Export-Import Bank)

Delta, for instance, has claimed that Ex-Im loans allowed Air India to undercut its fares between New York City and Mumbai, eventually compelling Delta to abandon the route.

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