US Carriers and European Airlines Reach Agreement on Curbing Aircraft Subsidies

Strategic Insights -

US carriers have reached an agreement with nine European airlines, including British Airways, Air France, and Deutsche Lufthansa AG, to reduce government export subsidies that allow airlines in other nations to finance aircraft from Boeing and Airbus at below-market rates. The agreement aims to influence negotiations over the subsidies at the Paris-based Organization for Economic Cooperation and Development (OECD). The US carriers, led by United Continental Holdings Inc. and Delta Air Lines Inc., want to prevent export credits from giving airlines an unfair advantage.

Key Takeaways:

  • The US carriers, led by United Continental Holdings Inc. and Delta Air Lines Inc., have reached an agreement in principle with nine European airlines, including British Airways, Air France, and Deutsche Lufthansa AG, to curb aircraft subsidies.
  • The agreement aims to influence negotiations over the subsidies at the OECD, which represents 33 nations and coordinates policies on export credits.
  • The US carriers want to prevent export credits from giving airlines an unfair advantage, particularly in countries where Airbus or Boeing planes are manufactured.
  • The Export-Import Bank provided almost two-thirds of its long-term loan guarantees, approximately $10 billion, to Boeing in fiscal 2007 and 2008.
  • Eight of the top 10 overseas airlines benefiting from the loan guarantees serve US markets, including Air India, Emirates Airline, Korean Air Lines Co., and WestJet Airlines Ltd.
  • Boeing has defended the subsidies, stating that curtailing financing would jeopardize the US aerospace industry's ability to compete with subsidized companies in other countries.
  • Airlines in countries where Airbus or Boeing planes are manufactured, including the US, UK, Germany, Spain, and France, are not eligible for subsidies.

Statistics:

  • The Export-Import Bank provided almost two-thirds of its long-term loan guarantees, approximately $10 billion, to Boeing in fiscal 2007 and 2008.
  • Eight of the top 10 overseas airlines benefiting from the loan guarantees serve US markets.
  • Boeing has a significant share of the global aerospace market, with the US industry accounting for approximately $10 billion in subsidies.

Sources:

  • [Euclid Infotech Pvt. Ltd., distributed by Contify.com, 2010]
  • [ATA (Air Transport Association) - organization]
  • [United Continental Holdings Inc. - company]
  • [Delta Air Lines Inc. - company]