SME Times News Bureau | 21 Feb, 2012
Rebutting claims of US-based airlines point by point, Air India Monday said it is not a party in the case filed against the American Export Import Bank (ExIm) for giving loan guarantees of USD 3.3 billion to the carrier for buying 27 aircraft from Boeing.

Air India also refuted the claims of the Air Transport Association of America, the airlines' lobby, saying the 27 aircraft bought with the loan are yet to be inducted. Air India said all its India-US flights were operated on Boeing 777s for which it did not seek the loan from the ExIm bank.

"We are not a party in this matter. We had entered into an agreement with US ExIm bank for long-term loans for buying 27 B-787 Dreamliner aircraft manufactured by Boeing," a senior Air India official told IANS.

"Our flights are operated by B-777s every day. Our service and capacity on the routes are well utilised. The aircraft for which the loan was sought have not even arrived till now."

The first batch of Dreamliners are due for delivery to the national carrier next month.

Air India was responding to reports that US-based airlines, through the Air Transport Association of America, have filed a revised complaint before a US court alleging that Air India got an undue competitive advantage by taking US taxpayers' money to buy Boeing jets for less than what it would have paid in a free market.

The association claimed that the loan advantage was used by the carrier to nix competition on the India-US routes.

The case pertains to Delta Airlines, which had to cancel its service to Mumbai as it was unable to withstand Air India's competitive edge in the sector.

The airline lobby argued that Ex-Im skipped its legally required study of the economic effect of its Air India subsidies.

"The Bank's support for foreign carriers puts ATA's operator members, including Delta, at a competitive disadvantage because, among other things, the Bank's foreign beneficiaries have access to cheaper capital to finance their aircraft purchases," the complaint said.

"Delta's experience is illustrative. In 2006, Delta offered a nonstop service between New York and Mumbai. Between 2006 and 2009, the Bank gave Air India loan guarantees totalling approximately USD 3.3 billion.

"Those guarantees allowed Air India to flood the US-India market with extra capacity and crowd out competitors like Delta. Delta stopped flying from New York to Mumbai in October of 2008 due to the Bank's loan guarantees to Air India," the court affidavit said.

ATAA also challenged the argument of the Obama Administration that orders placed by foreign airlines like Air India are increasing jobs in the US.

In fact the Exim Bank's subsidies to foreign carriers have forced US airlines to cut between 4,100 and 7,500 jobs. The loss of those jobs has led to USD 372 million to USD 684 million in lost employee income, the complaint alleged.

Noting that the available seats on routes between India and the United States are in surplus, the complaint said the India-US overcapacity problem is so large that 41-90 percent of Air India's total operating losses (which are substantial) came on routes to and from the US.