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Judge Tosses Coalition’s Suit Against Ex-Im Bank

(CN) - A Delta-led coalition cannot advance claims that U.S. Export-Import Bank policies that help foreign airlines get cheap loans hurt U.S. airlines and their workers, a federal judge ruled.

The Export-Import Bank is the United States' official export credit agency, whose main role is to promote U.S. exports by giving loans to foreign buyers of U.S. goods and services.

The Export-Import Bank Act of 1945, which sets guidelines for the bank's financing decisions, was slated to expire in September 2014, but Congress has extended it through June 30, 2015.

Delta Air Lines, Hawaiian Airlines and the Air Line Pilots Association, filed three different lawsuits challenging the bank's policies, which, they claimed, gave foreign airlines a competitive advantage over domestic ones.

While the bank's loans to foreign airlines help U.S. aircraft manufacturers sell their planes, they create unfair competition for U.S. airlines, the coalition claimed in the complaints.

A previous lawsuit filed by Delta in 2011, and later joined by ALPA and the Air Transport Association of America, was dismissed after a D.C. federal judge concluded that the bank's decision to guarantee $6.3 billion in loans for Air India's purchase of Boeing aircraft was neither arbitrary nor capricious.

The D.C. Circuit reversed, asking the bank to explain the basis of its exclusion of aircraft transactions from detailed economic impact analysis, known as the exportable goods screen.

In November 2012, the bank adopted new guidelines, which no longer excluded transactions resulting in the foreign provision of services, such as airline services, from in-depth economic impact analysis. The guidelines, which took effect in April 2013, are still the governing rules today.

Delta, Hawaiian and ALPA challenged the validity of the bank's aircraft-specific procedures in a February 2013 lawsuit. Since the revised guidelines were not yet in effect, that lawsuit challenged only the facial validity of the procedures, and not any specific financial decision.

The coalition claimed the revised procedures and guidelines violated the Bank Act and the Administrative Procedure Act, and asked the court to vacate them.

U.S. District Judge Rudolph Contreras dismissed those claims Monday, noting they were not ripe for judicial review. The court cannot determine the effect of a rule that has not yet been applied, the judge said.

Moreover, the airlines failed to establish an imminent injury resulting from the bank's adoption of the new guidelines, which were not yet in effect when the plaintiffs filed the lawsuit, according to the 36-page ruling.

Contreras found that "plaintiffs can offer facts that only demonstrate market conditions historically and generally, not any particularized and concrete competitive harms that have resulted or imminently will result from a specific financing commitment made by the bank under the new EIPs [economic impact procedures], as no such commitments existed. These market conditions suggest only hypothetical risks that may or may not materialize depending on when, how, and to whom the bank applies the 2013 EIPs and guidelines for a future financing decision; consequently, they 'do not get [plaintiffs] all the way there.'"

Even if the airlines could show an imminent increase in competition due to the revised procedures, they cannot prove the type of harm required for claims under the Bank Act, the March 30 ruling states.


"Specifically, the relevant harm under the Bank Act is not whether Ex-Im Bank financing will lead to increased competition between airlines, but rather whether the bank's financing will cause a 'serious adverse effect' to U.S. industry and employment," Contreras wrote.

Because ALPA, which represents thousands of pilots who work for various U.S. airlines, including Delta and Hawaiian, is not in direct competition with foreign airlines, its alleged injury is derivative of the plaintiff airlines' injury, the judge said.

Since the claims under the Bank Act are not ripe for review, related procedural challenges under the Administrative Procedure Act must also be dismissed, the ruling adds.

The court also dismissed a separate lawsuit in which ALPA and the airlines challenged the Ex-Im Bank's approval of five aircraft financing transactions between October 2012 and February 2013. The transactions involved the purchase of Boeing aircraft by airlines from the United Arab Emirates, Poland, South Korea, Chile and Brazil.

The bank had initially approved the loan guarantees under its 2007 guidelines, but later reviewed the approvals under the revised 2013 guidelines. Both times, it concluded that the financing commitments were not likely to cause serious harm to the U.S. industry and employment.

Contreras agreed that the bank had acted reasonably when it originally approved the five transactions under the 2007 guidelines, which were the governing rules at the time.

The 2007 procedures, which excluded airline services from in-depth economic impact analysis, were a reasonable policy choice under the Bank Act, according to the 62-page ruling.

The judge noted that the bank, which has used economic impact procedures since 1979, "accumulated decades of expertise regarding the airline sector and other industries, and critically, the bank has long used that expertise to develop various procedural filters, including the exportable goods screen, that block from further in-depth analysis categories of transactions that the bank, in its considered judgment, deems to be unlikely to produce a substantial adverse impact on domestic industry and employment."

The bank adopted the exportable goods screen in 2001, after financing 440 U.S.-manufactured aircraft between 1990 and 1999, with a total export value of $22 billion, according to the ruling.

Given its experience, the bank reasonably concluded that aircraft financing was unlikely to harm U.S. airlines, which often benefit from superior private financing, the opinion adds.

The airlines failed to show that Ex-Im Bank financing sways foreign airlines to buy new aircraft they would not otherwise consider, increasing competition, according to the opinion. The availability of financing can, at most, influence an airline's choice of aircraft brand. However, foreign airlines that buy Airbus aircraft instead of Boeing may still compete with U.S. airlines, the court noted.

The airlines' challenge to the bank's explanation of its previous guidelines, including the exportable goods screen, also fails, Contreras concluded Monday in a separate opinion.

After the D.C. Circuit reversed the decision in the Air India litigation, the bank submitted two responses, showing that the benefits of approving the Air India transactions outweighed any potential harm to the U.S. industry and employment.

Contreras refused to vacate the Air India loan guarantees, agreeing that the bank proved that its approval of those loans under its previous guidelines was reasonable.

"Specifically, the court finds that the bank reasonably interpreted the Bank Act as permitting the agency to consider only direct competition when determining whether adverse effects are likely to occur," Contreras wrote in the 72-page opinion. "In addition, the bank explained that the relevant Air India commitments did not, and were unlikely to in the future, result in such direct competition with U.S. airlines."

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