According to market sources, premium air transportation
Delta Air Lines
) has taken legal action against the Export-Import Bank of the
United States to block loan guarantees being advanced to certain
foreign airline firms for purchasing wide-body aircraft
The Boeing Company
). In this legal battle, Delta is joined by Hawaiian Airlines
Inc. and the Air Line Pilots Association.
The Bank is estimated to provide guarantees over $100 million to
Emirates Airlines, LOT Polish Airlines, Etihad Airways, Latam
Airlines Group (LFL) and Korean Air Lines. Last year, the bank's
outstanding financial commitments netted $106.6 billion, of which
46% was directed as loan and loan guarantees toward the airline
In a lawsuit filed against the Bank in a federal court in
Washington, Delta stated that the subsidies to foreign airlines
will have an unfavorable effect on domestic business. The loan
guarantees are expected to reduce the cost of capital for the
companies, allowing them to invest more in upgrading fleet
dynamics or lower ticket prices. These measures will render the
foreign air companies a competitive edge over the American firms.
Delta commented that in such a scenario, the unsubsidized
domestic airline entities will be compelled to retort through
fare reduction and capacity cuts. This will likely lead to
economic instability within the industry and adversely affect the
activities of the companies and their employees.
Following the attack on the World Trade Center and the Pentagon
in Sep 2001, the U.S. airline industry faced the toughest decade
with losses reaching billions and carriers going bankrupt. But
with the support of various strategic initiatives ranging from
fleet restructuring, optimization of routes, addition of
innovative and advanced products and services as well as trimming
of operating expenses, most of the carriers including Delta,
Southwest Airlines Co.
JetBlue Airways Corp.
) have recovered in the recent years.
This is the third legal action against the bank by the U.S.
airlines in an effort to maintain their commanding position
within the business circle.
BOEING CO (BA): Free Stock Analysis Report
DELTA AIR LINES (DAL): Free Stock Analysis
JETBLUE AIRWAYS (JBLU): Free Stock Analysis
SOUTHWEST AIR (LUV): Free Stock Analysis
To read this article on Zacks.com click here.
Delta, currently, holds a Zacks Rank #3, implying a Hold