Boeing and Delta spend millions in fight over export-import bank’s existence
WASHINGTON » Last week, with little notice, a federal judge here tossed out Delta Air Lines’ longstanding claim that the government’s export credit agency — which, among other things, provides loan guarantees to overseas airlines for the purchase of Boeing jets — was helping international competitors at the airline’s expense.
Delta offered only a shrug. Judicial opinions aside, the continued existence of the Export-Import Bank turns more on bare-knuckle politics than on legal niceties.
"We pursued all our options in court, but we’ve known all along this is going to be won or lost in Congress," said Trebor Banstetter, a Delta spokesman in Atlanta.
The public faces of the Export-Import Bank battle may be mom-and-pop exporters walking the hallways of Capitol Hill in support of the agency, and the ideological spear carriers of the conservative, free-market movement, like Club for Growth and the Heritage Foundation, in opposition. But those message makers mask a behind-the-scenes slugfest between two heavyweights, Boeing and Delta, which have narrower, bottom-line interests and very deep pockets.
The normally obscure Export-Import Bank, whose main job is to help U.S. businesses sell their goods and services abroad, will cease to exist on July 1 if Congress does not renew its authorization. Delta has spent nearly $10 million on lobbying since 2012, at least in part to kill the Export-Import Bank or greatly diminish loan guarantees for Boeing customers abroad, according to lobby disclosure forms.
Boeing has already put up more than $69 million over that same period on the Export-Import Bank and other interests, according to the documents. "We have been lobbying a lot on this because it’s a very important issue for us," said Tim Neale, Boeing’s government operations spokesman. "We know our business, and we know there are customers even in times of good credit availability that need a government loan guarantee."
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What is at stake for Boeing is clear. The purchase of Boeing’s big jets can run to the hundreds of millions of dollars, and even wealthy state-run airlines like the Persian Gulf’s Emirates Air might demand a U.S. government guarantee to help them get private loans that large. Boeing is by far the bank’s biggest beneficiary, a situation that has led critics of the credit agency to deride it as a vehicle for "crony capitalism" and "corporate welfare."
But Boeing officials say the Export-Import Bank is crucial in allowing the company to compete against export credit agencies in France and Germany, which are only too happy to offer guarantees for the purchase of jets from Airbus, Boeing’s sole competitor in the wide-body market.
Delta’s stake is somewhat murkier. The airline claims that rivals like Air India and Emirates have used the bank’s guarantees to lower their borrowing costs, then used the savings to cut ticket prices on international routes that compete with Delta or buy still more new jets. U.S. District Court Judge Rudolph Contreras, in a 72-page ruling that may have ended four years of litigation, scoffed that $12 million in interest savings over 12 years would have that kind of power, calling Delta’s argument "unpersuasive and contrary to the record in this case."
Delta officials hotly dispute the judge’s math and his conclusions. But its efforts are also multipronged. The death of the bank would raise borrowing costs for competitors. A separate fight to revise "open skies" rules and impose new costs on state-owned Middle Eastern carriers would be another blow. Delta is even opposing efforts to lift a ban on the export of U.S. oil, hoping to keep jet fuel costs in the United States low.
Boeing, which, like Airbus, has supplied Delta with dozens of jetliners, seems to be more collateral damage than target.
In Boeing’s defense, an army has massed. The U.S. Chamber of Commerce and the National Association of Manufacturers, with Boeing’s help, have organized Exporters for Ex-Im, which has mobilized dozens of Boeing suppliers and other small businesses to knock on Capitol Hill doors, call lawmakers and generally do the public work that the biggest recipients of the bank’s help — Boeing, General Electric, Caterpillar and Applied Materials — avoid.
Small businessmen like William Schubert, president of a small infrastructure export firm outside Houston, flooded the hallways of Congress in February and confronted usual Republican allies on the other side of the bank divide. But the so-called fly-in, from hotel reservations to meeting schedules, was coordinated by professionals.
Hamilton Place Strategies, a Washington firm founded by a former Bush White House official, Tony Fratto, is playing quarterback for the campaign. Lobbyists include heavy hitters from both parties, among them former aides to the House speaker, John Boehner, and the House minority leader, Nancy Pelosi; Republican political strategists; former House members; and a senator’s son.
Delta has its own array of lobbyists, including a former top aide of Sen. Mitch McConnell, the majority leader, and Steve Elmendorf, a former top Democratic aide in the House and one of Washington’s pre-eminent schmoozers. The Republican lobbying firm Fierce, Isakowitz and Blalock was all-in for Delta until one of its chiefs, Mark Isakowitz, joined the staff of Sen. Rob Portman, R-Ohio and a crucial vote on the issue.
The renamed Fierce Government Relations soldiers on for Delta, with Kirk Blalock, a senior official in the George W. Bush White House, and Aleix Jarvis, a former aide to Sen. Lindsey Graham, R-S.C., leading the charge.
Delta says it could live with the bank, just as long as loan guarantees for wide-bodied jets are severely curtailed, if not eliminated.
"The bank would need to demonstrate when funds go to these aircraft there were no other options for the airline purchasing them," Banstetter said. "We have never said we are against reauthorization, or the bank’s mission, just this general piece of it."
But the airline’s conservative political allies — the Heritage Foundation’s political arm, Heritage Action, the conservative political action committee Club for Growth, and the Koch Brothers-backed Freedom Partners — do not care much about the nuances of twin-aisle airplanes versus narrow-body fuselages. They just want the bank to die.
"We are glad to be aligned with Delta," said Marc Short, president of Freedom Partners. "But we are not in this to pick and choose which corporations are beneficiaries of any particular government subsidy. We are trying to get rid of all of them.
"To us, this is not Delta versus Boeing," Short added. "It is a principled matter: If the newly elected Republican majority cannot do the simplest of tasks in repealing this corporate welfare, then how are we going to confront the bigger structural spending problems in Washington?"
On Thursday, Freedom Partners began radio advertising, sharply criticizing the bank in language that mirrored Delta’s: "Each year, America’s Export-Import Bank sends billions of your taxpayer dollars to foreign corporations that compete unfairly with American jobs," the narrator says. "That’s billions to countries like China, Russia, Saudi Arabia." (Unmentioned is that those foreign corporations are buying U.S. goods.)
Coordination between Delta and the conservative groups appears to be less extensive than the business alliance on the Boeing side. A senior Delta executive said the groups had called to discuss the particulars of Delta’s case. But it is not regularly holding conference calls that involve the conservative groups, to build a detailed game plan for how to continue to push the cause, which is what often happens in Washington, when different players share a similar legislative goal.
"These two companies care a lot and maybe they started the fire," said a corporate lobbyist working on the fight, who spoke on the condition he not be named. "But the fire is not in their control anymore."
Andy Roth, vice president for government affairs at Club for Growth, said that the various free-market groups and Delta were aware of what each was doing — but that they were not working from a single playbook in their push against the bank.
"There is sort of this spontaneous coordination going on, without any explicit coordination," he said. "We are all kind of rowing in the same direction and we are all doing it at different speeds."
But the purity of the groups’ argument against what they see as an unholy alliance of big business and big government is holding sway, at least for now, among powerful Republicans who will decide the bank’s fate.
"We ought to let it expire, just let it go," Rep. Paul Ryan of Wisconsin, chairman of the House Ways and Means Committee, said as Congress left for a two-week spring break. Ryan rejected the argument that without the Export-Import Bank, foreign customers will turn to other countries, like Canada, Japan, China and France, that have their own export credit agencies.
"Why should we say ‘Me, too’ on crony capitalism?" he asked.
Jonathan Weisman and Eric Lipton, New York Times
© 2015 The New York Times Company