Italian court bans Emirates from flying Milan-JFK

[General Lee]

Here's what RA said about the ruling today in the DL conference call:



"Well, Fifth Freedoms under the Chicago Convention way back in the 1940s were never intended to be used the way that they were used in those circumstances. And so, we're optimistic that the decision of the Italian court will be a precedent that will be followed in other venues, because it was never the intention. The Fifth Freedoms were originally intended to take into account the range of airplanes to be able to fly nonstop, and it wasn't intended to in essence set up operations between two countries neither of which you are citizen of, so as standalone operations. So we're pleased with the result and we will be very vigilant as an industry and being certain that these kinds of unbalanced trade activities from state-owned subsidized enterprises don't create an unfair trade environment."



Bye Bye---General Lee

 

[General Lee]

Here is his view on the EXIM Bank and the lower rate loans to places like Air India and the Gulf Carriers, from the Conference call:


"Well, we have played a significant role opposing it, and it's not so much the reauthorization. It's the bank needs to be reformed. There is no transparency around what it does with tax payers? money in the United States and it creates a huge subsidy for state-owned carriers in the United States.

So in essence while we don't have any aviation Airline policy, co-gen airline policy in the United States, our treasury goes and we get a very good view of this, because the companies that we own interests in, down in Brazil and Aeromexico, we get a pretty good glimpse of the kinds of financings that the Ex-Im Bank provides and they're well below market. And they're competing against private marketplace, alternatives to capital and we believe there needs to be reform.

And there is a place for the Bank in the marketplace when the bank was originally setup, back 60 or 70 years ago. It was to provide seed financing in developing nations. And now we're providing, at a time when we run huge deficits in the United States, we're taking the United States Treasury, the United States balance sheet and we're financing investment grade state-owned airlines at borrowing costs that are probably around 300 basis points less than what Delta would pay, and that's just not right for our government to do that. So there's a place for the bank, but the bank needs to be reformed and it needs to be transparent and it shouldn't be providing financing in any instance where there's a private market alternative. And our concerns are only limited to widebody airplanes. Not narrowbody airplanes or industrial equipment or the like.

I will point out that both Valero Energy and Cleveland-Cliffs Steel have both also filed objections in their industries in instances where the Bank has financed their foreign competitors to compete against U.S. interests. In the end, it's about jobs, and I can tell you that when the Ex-Im does this, as in the case of Air India, it takes jobs away from the United States."



After being asked if he thought there was any traction being made, he responded:


"Yes, we are gaining traction. At the last ASU negotiation, we significantly increased the financing costs by a couple of hundred basis points. Second, in the last round of reauthorization, there were transparency requirements, which have been largely ignored, and there was a requirement that the United States, State Department and Treasury engage with EU authorities to negotiate an end to both the EU and the U.S. run these huge, huge deficits. And the last thing they need to be doing is further funding those deficits by financing airplanes."




Bye Bye---General Lee

 

[uba757]

General, welcome back. I think before jumping to conclusions we need to wait for the Ethihad/Alitalia investment deal to be finalized. Then I think we will have a clear answer to this situation!