ATA Writes Secretary Geithner Supporting New Terms in the Aviation Sector Understanding Under the Organization for Economic Co-operation and Development

Commercial aviation helps drive more than 10M American jobs and 5 cents of every dollar of U.S. GDP
Commercial aviation drives more than $1 trillion per year in economic activity
In 2012, U.S. airlines moved more than 48,000 tons of cargo per day
In 2012, the value of a kilogram of U.S. merchandise exported by air averaged 121 times the value exported by sea
For every 100 airline jobs, some 360 are supported outside of the airline industry
Federal taxes constitute $61 – or 20% – of the price of a typical $300 domestic round-trip ticket
In 2011, U.S. airlines carried 16 percent more passengers and cargo using 10 percent less fuel than in 2000
Domestically, airlines drive 5% of economic activity but account for 2% of man-made GHG emissions
From 2000-2011, airlines reduced GHG emissions by 11% while transporting 16% more passengers and cargo
From 1975-2011, U.S. airlines and their partners reduced significant noise exposure by 99%
Commercial air travel is the safest form of intercity transportation in the United States
In the most recent decade, scheduled air service on U.S. airlines was seven times safer than in the 1970s
From 2000-2012, U.S. airlines improved the on-time arrival rate from 72.6% to 81.9%
From 2000-2012, U.S. airlines reduced the flight cancellation rate sharply from 3.30% to 1.29%
Airfares are a bargain: From 2000-2012, U.S. CPI rose 33% while average domestic fare rose just 14%
Adjusted for inflation, the average round-trip domestic airfare fell 15% from 2000
2007 domestic flight delays cost the United States approximately $31 billion
In 2012, the value of U.S. merchandise exported by air reached an all-time high of $427B
In 2012, U.S. exports of air-travel services reached an all-time high of $39.5B, driving a $5.1B trade surplus
In 2012, U.S. passenger and cargo airlines spent more than $50B on fuel, averaging 36% of operating expenses
In 2012, U.S. airlines posted the lowest annual rate of mishandled baggage ever recorded
FAA projects U.S. air travel demand to top 1 billion passengers in 2027
In 2012, US airlines flew 83.4 million passengers in scheduled international service - a record high
In 2012, the total value of merchandise exported from or imported to the United States by air exceeded $927 billion
In 2012, 7.15 teragrams of merchandise was exported from or imported to the United States by air

	ATA Writes Secretary Geithner Supporting New Terms in the Aviation Sector Understanding Under the Organization for Economic Co-operation and Development
	PubZone1 August 16,2010 The Honorable Timothy F. Geithner Secretary U.S. Department of Treasury 1500 Pennsylvania Avenue, NW Washington, DC 20220 Dear Secretary Geithner: The Air Transport Association (ATA), representing the leading U.S. airlines, strongly supports President Obama's National Export Initiative. We applaud the President's ambitious goals of doubling exports and creating millions of new jobs over the next five years. The administration correctly emphasizes that achieving these goals will require contributions from U.S. service, as well as manufacturing industries. U.S. airlines already are major contributors to U.S. travel and tourism exports. The appointment of two of the chief executives of ATA member companies to the National Export Council, along with other aviation representatives, affirms the critical role that the U.S. air transport industry already plays in the U.S. economy, and the contribution our industry can make to creating good U.S. jobs through the continued growth of our international business. We welcome this challenge and responsibility, and we are well-positioned to play our part. According to The Economic Impact of Civil Aviation on the US. Economy, published by the Federal Aviation Administration in December 2009, nearly half of the Americans employed directly in commercial aviation are employed by U.S. airlines. International aviation accounts for a large and growing share of U.S. carrier revenues. In 2009, international traffic constituted roughly one-third of total industry revenues and almost one-half of the output of the largest U.S. international carriers. Including air cargo operations, 24 percent of the 534,000 workers employed by U.S. airlines in 2009 were attributable to international operations. Hence, undermining the international competitiveness of U.S. airlines has substantial adverse consequences for U.S. jobs growth. Our industry can do more, particularly with the administration's continued support of a market-oriented, "Open Skies" policy that opens foreign markets to U.S. passenger and cargo service. The recent Open Skies agreement with Japan is yet another important addition to the competitive framework created by the nearly 100 Open Skies agreements negotiated over the past two decades. These agreements have opened foreign markets to U.S. airlines, but they have also eliminated barriers to entry and largely deregulated access to the U.S. market, fostering wide competition among airlines globally for U.S. passenger traffic, with substantial benefits to consumers. U.S. airlines are the most efficient competitors in the airline world. We welcome competition with foreign carriers in an open market on a level playing field free from governmental subsidies. We write to express our deep concern, however, that the ability of U.S. airlines to continue their contribution to the growth in U.S. exports and the economic recovery is being profoundly threatened by a flood of official export credits for large civil aircraft purchases by our foreign competitors. These credits, by significantly lowering the financing costs of foreign airlines, put U.S. carriers at a competitive disadvantage and create wholly artificial incentives for the acquisition of new aircraft, flooding the global market for passenger traffic with uneconomic capacity. We are particularly concerned that the damage to U.S. airlines caused by such export credits may be worsened by the outcome of the current negotiations to achieve a new "Aircraft Sector Understanding" (ASU) within the OECD Arrangement on Officially Supported Export Credits. The magnitude and competitive impact of government subsidies in this sector is stunning: Over the past decade (FY2000-2009), the U.S. Export-Import Bank (Ex-Im Bank) provided guarantees backing $45.7 billion in financing for large civil aircraft. The total number of aircraft so financed exceeded 800 - more than the mainline fleets of every individual U.S. airline. In FY2009 alone, Ex-Im Bank announced $8.6 billion to support sales of 143 aircraft to 17 foreign airlines and five leasing companies. Ex-Im Bank has already approved a large number of new transactions in FY2010. The level of Ex-Im Bank support has been roughly matched by credit supplied by the export credit agencies (ECAs) of the United Kingdom (ECDG), France (Coface) and Germany (Euler Hermes). ECDG alone announced financing for Airbus aircraft amounting to £6.319 billion from FY2000-FY2008, over $9.6 billion at the current exchange rate. The foreign airline beneficiaries of these Ex-Im Bank and ECGD subsidies compete directly with U.S. airlines. They include nine of the 10 most profitable airlines based outside of the United States and the three European countries noted above. Beneficiaries include such airlines or leasing companies as Korean Airlines, Qantas, Singapore Airlines, Turkish Airlines, LAN, Emirates Air, Air New Zealand, COPA, Air Canada, WestJet, Cathay Pacific and Japan Airlines, all of which compete with U.S. airlines for U.S. passenger traffic. With the growth of their fleets supported by U.S. government financing, our foreign competitors have been taking market share away from our airlines on routes to and from the United States, where foreign airlines now operate more than 50 percent of the capacity. ECA support ensures that beneficiaries receive below-market financing worth hundreds of millions of dollars in savings. For example, in 2009, both Delta Air Lines and Emirates Air obtained financing for three Boeing 777 aircraft. Ex-Im Bank support enabled Emirates to obtain its financing at an interest rate almost five percentage points better than Delta, which is one of the financially strongest U.S. airlines. Ex-Im Bank financing also supported a much higher loan-to-value ratio for Emirates, enabling Emirates to realize over $100 million more in loan proceeds than Delta. As you know, about half of Ex-Im Bank guarantees are made for one purpose: to support sales of Boeing aircraft to foreign air carriers or leasing companies. The National Export Initiative emphasizes the need to focus support on medium and small businesses that are not yet major exporters. Today, however, the stark fact is that through the Ex-Im Bank, the U.S. government is providing vast amounts of subsidized financing to competitors of U.S. airlines, thereby undermining their ability to generate both exports and American jobs. The undisciplined competition among ECAs to support aircraft sales by their home country manufacturers is causing direct and substantial competitive harm to U.S. airlines. It is widely reported by industry observers that this credit race has contributed to a glut in global capacity. We estimate that U.S. and European export credits have resulted in the subsidized carriers acquiring at least 11 percent more capacity than if they had to pay market rates. Ex-Im Bank support has literally helped to create strong new foreign competitors for U.S. passenger traffic. For example, Canada's Westjet, which was founded only in 1996, has received nearly $1.7 billion in Ex-Im Bank guaranteed financing since FY2002. Since then, Westjet has gained significant market share in passenger seats serving the U.S. market, largely at the expense of U.S. airlines. The damage caused by subsidized financing is exacerbated during declines in the business cycle because ECA credits and guarantees immunize borrowers from market conditions. During the recent economic downturn, U.S. airlines cut capacity by 8 percent and were forced to lay off thousands of employees; yet, large aircraft production remained at record highs and the large aircraft market grew by over 10 percent. This happened because the ECAs stepped in to help many foreign airlines to expand and to modernize their fleets. For example, in the 2009 transaction involving Emirates described above, when credit markets were effectively closed to almost all U.S. carriers, Ex-Im Bank created a novel bond financing structure that permitted Emirates to buy several additional Boeing jets worth over $400 million under exceedingly favorable credit terms. Emirates is based in the UAE, which last year had a per capita GDP of over $42,000 - 17th largest in the world. The average age of Emirates Air fleet is now about five years. By comparison, the average age of mainline aircraft of the five largest U.S. passenger airlines with international service, is nearly 14 years. We appreciate that the ASU was conceived as a means to discipline ECA competition, to create "a level playing field" among Boeing and Airbus. And we applaud efforts to bring other countries, including Canada and Brazil, into broader, more uniform commitments. But the reality today is that the combination of an Open Skies policy and the ASU (with its informal "Home Market Rule") has produced a very unlevel playing field for U.S. airlines. It is critical to understand, moreover, that the distortion of airline competition lies not just in access to competitive financing on equal terms - the fundamental problem is the unfettered and undisciplined supply by ECAs of credit to meet competition among themselves and the manufacturers they support, not to solve a lack of credit availability in the market. This unrelenting drive to prop up aircraft sales forces uneconomic capacity into the market, and the distortion it causes will only be made worse if the current ASU negotiations results in a further expansion of government-supported credits to domestic borrowers. Accordingly, as the administration determines the outcome that it seeks to achieve in the ASU negotiations, we urge you to take a comprehensive view of the interests of all stakeholders and work toward creating a truly level playing field that rolls back the heavy market distortions that ECAs now cause - not to expand them. Specifically, the ATA: Supports negotiation of rules to curb all ECA support for aircraft financing to the greatest extent possible. As recent experience has shown, government loan guarantees are potentially costly to taxpayers and the risks from current practices are doubly apparent when such guarantees are driving even more over-capacity into a major global economic downturn. Thus, ECA support should be available only to airlines in the poorest countries for which market financing is demonstrably foreclosed as a result of either political or credit risk and a careful assessment has been made regarding the expected deployment of those aircraft into the market. At a minimum, ASU terms must ensure that airlines in all developed countries and relatively advanced developing countries no longer are eligible for ECA-supported financing, either directly or though aircraft leasing companies. ASU terms should also closely align with - and be no more favorable than - financing terms available in the market to U.S. airlines. Strongly opposes the creation of new or expanded "domestic windows" though which government credit is offered to support purchases by airlines of aircraft from their "home country" manufacturers. In this regard, all of Europe should be treated as the Airbus "home country." If the parties to the ASU are able to reach agreement on a revised ASU that substantially achieves the outcomes stated in point one, then the need for the Home Market Rule would be largely eliminated. If ECA financing is not substantially curbed, however, and such government support remains available to airlines that are otherwise able to access commercial markets for financing, then to maintain a level playing field within the United States among U.S. airlines, it would be necessary to keep the Home Market Rule in place, at least between the United States and the Airbus home countries. We hope that will not be necessary. To be clear, even in that circumstance we would oppose changing current law or practice regarding the provision of U.S. government loans or guarantees to domestic buyers of U.S.-made aircraft. Finally, we want to emphasize that well-managed airlines worldwide are generally able to finance their aircraft purchases from commercial sources and that ECAs are simply displacing market-based financing, thereby permitting some aircraft buyers to obtain more favorable financing than others. This market distortion must be seen for what it is: At best, it is a trade-off between job gains at aircraft manufacturers and job losses at airlines (and related suppliers) based in the ECA home countries. We do not underestimate either the challenge of restraining demand for official credits or the dynamic of the competition among the few aircraft manufacturing countries to supply that credit. But, the United States should not support either an international or a domestic framework that blesses an expansion of the current subsidy war. To do so will only ensure failure of the President's goals to create net new jobs through exports. Respectfully, James C. May cc: The Honorable Gary Locke The Honorable Hillary Rodham Clinton The Honorable Lawrence Summers The Honorable Fred P. Hochberg PubZone2	A4A advocates measures to support aviation safety, security and well-being.