U.S., Europe airlines cry foul over export loans

Published 10/07/2010, 09:13 AM
Updated 10/07/2010, 09:16 AM

* Campaign to scrap limits on jetliner export credits

* Emirates dismisses claims from older rivals as 'nonsense'

* Government export credits growing due to credit crunch

By Tim Hepher and Tamara Walid

PARIS/DUBAI, Oct 7 (Reuters) - U.S. and European taxpayers are subsidising foreign airlines to the tune of billions of dollars by helping them buy Airbus and Boeing jets with loans denied to domestic carriers, airline lobbyists said on Thursday.

The claim marked the start of a concerted lobbying campaign by airlines on both sides of the Atlantic challenging the rules for government export measures which have smoothed the sales of jetliners to high-growth markets in Asia and the Gulf.

The reason for airline anger is an agreement which allows the home governments of U.S. manufacturer Boeing and Europe's Airbus -- France, Germany, Spain and the UK -- to give export financing to some but not all carriers.

World trade officials say export credits -- effectively discounted loans -- do not necessarily contravene trade rules.

But an informal trade agreement between the five countries means the export credits cannot be offered to airlines in any of the five countries where Boeing and EADS subsidiary Airbus are based, executives said.

That means an airline in an Airbus home nation, such as British Airways, would not qualify for U.S. credits when buying a Boeing in the same way that a U.S. airline buying an Airbus would not secure the European export credit, the Association of European Airlines said.

"There is a situation here whereby European taxpayers are funding the sale of planes to our global competitors who are getting conditions that we can't get," said the association's spokesman David Henderson.

Major airlines in all five countries are making separate but coordinated protests asking for the ban to be lifed, he added.

The countries include some of the world's biggest airlines including U.S. majors Delta and United, many of whom have slashed jobs during a severe industry downturn.

EMIRATES DISMISSES 'NONSENSE'

Proponents of the change did not name airlines or countries, but their resentment is clearly directed at major carriers in the Gulf and Asia which have grabbed market share from older rivals by filling large new jets with people bound for new hubs.

The shift in industry power was dramatically highlighted when Dubai-based Emirates ordered 32 Airbus A380 superjumbos, the world's largest airliner, at the Berlin air show in June in a challenge to Air France-KLM and Lufthansa.

But Tim Clark, president of Emirates airline, dismissed the lobbying campaign and said U.S. and European carriers would do better to question why so many of them struggle to make money.

"We are an airline and these are government initiatives that have been in place for a very long time," Clark told Reuters.

"If the governments decide to change the home rules it's up to them. To say we shouldn't take advantage of those is absolute nonsense," he said, adding Emirates did not in any case always take advantage of financing from Export Credit Agencies (ECA).

"To say we are successful because we get cheap credit is complete nonsense," Clark added.

The row is separate from a larger trade fight pitting Airbus and Boeing against each other over mutual accusations that they received illegal subsidies from the United States and the same four European nations involved in the export credit dispute.

The role of export credit financing has increased sharply as private financing dried up during the financial crisis, pushing the contribution of ECA financing as high as one third of the value of aircraft sales, according to Airbus.

Analysts say a key factor affecting Airbus and Boeing is the extent to which these export credits will be available as governments look for savings in their budgets.

The issue has also been brought to a head by the entry of smaller competitors such as Canada's Bombardier and Brazil's Embraer into the market for larger planes, challenging a duopoly held by Airbus and Boeing.

European airlines said the changes meant the restrictive "home country rule" limiting credits no longer made sense. (Editing by David Cowell)

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