Air India Loan Case Sent Back to Ex-Im Bank for Review

The domestic impact of U.S. Export-Import Bank loan guarantees for Air India’s purchase of Boeing Co. (BA) aircraft weren’t adequately explained, a federal appeals court ruled in a challenge by Delta Air Lines Inc.

The agency failed to comply with its governing law when it provided Air India with $3.4 billion in guarantees and other support without specifically detailing its assessment of how it might affect U.S. business, a three-judge panel of the U.S. Court of Appeals in Washington said today. It sent the matter back to the bank for further explanation.

“The bank has not reasonably explained its apparent conclusion that loans and loan guarantees to help a foreign company provide a service (as opposed to a good) can never cause adverse effects to U.S. industries and U.S. jobs,” the court wrote.

Delta sued in 2011 to block the financing, arguing that the bank didn’t consider the effect cheaper loans for a foreign carrier would have on U.S. airlines. The judges said the ruling didn’t overturn “any part of the bank’s actions in this matter to date.”

“The bank now will be required to take the complaints of industry participants seriously before proceeding with potentially harmful subsidies to foreign airlines,” Atlanta-based Delta said in an e-mailed statement.

International Aircraft

“Export-Import financing for wide-body international aircraft puts thousands of U.S. airline jobs at risk by subsidizing foreign carriers that compete directly with Delta and other U.S. airlines on key international routes,” Delta said.

The bank hailed the decision as a victory, saying in an e-mailed statement that the ruling left in place financing for the Air India deal.

“I am gratified by the court’s recognition that these transactions should not be impeded by litigation,” Fred P. Hochberg, chairman and president of Export-Import Bank, said in the statement. “This represents a victory for tens of thousands of American aerospace workers.”

The bank approved the guarantees and other support for the sale of 30 Boeing aircraft, including the new 787 Dreamliner, to Mumbai-based Air India.

A spokesperson for Air India couldn’t be immediately reached for comment after regular business hours.

The case is Delta Airlines Inc. v. Export-Import Bank of the U.S., 12-5294, U.S. Court of Appeals for the District of Columbia (Washington).

To contact the reporter on this story: Andrew Zajac in Washington at azajac@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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