Tuesday, July 15, 2014

Boeing and the Ex-Im Bank

Joe Nocera has another post in support of the Ex-Im Bank. It's titled "Helping Big Companies Compete," which I found amusing enough. He comes out boldly in support of subsidizing Boeing, and laments the damage that will be done if the Ex-Im Bank isn't re-authorized. 

A Boeing source told me that it is hearing from customers and potential customers about the fate of the Ex-Im Bank. “It’s a big deal,” my source said, especially in places like Africa, where conventional financing for aircraft is hard to come by.
According the Ex-Im Bank's 2013 annual report Boeing's customers received $8 billion in loan guarantees. That compares to about $109 billion in commercial aircraft orders Boeing received in 2013. It's also slightly less than the $10 billion share buy back Boeing announced on December 16, 2013. Boeing has $10 billion to prop up its stock but can't afford that as a reserve to provide low-cost loans to its customers? Please.

Poor Boeing. What would they do without the Ex-Im Bank? Where would Transportation Partners, owned by Lion Air, Indonesia's largest private airline get a $1.1 billion loan guarantee? Where would China Air get a $558 million guarantee. And the African customers Nocera is worried about? The largest loan guarantee to an African customer (excluding the Middle East) was to Ethiopian Airlines for $125 million. The only other African customers were Royal Air Maroc in Morocco and Comair in South Africa. These three loans totaled $254 million, or 3.19% of the total loan guarantees for Boeing customers. That $254 million is 0.23% of the $109 billion in commercial aircraft orders for Boeing in 2013.

Nocera finds it "mind boggling that anyone in Washington would want to pursue a path that is so clearly destructive to the economy."I don't think the numbers support his conclusion.

It is mind boggling to me as well. But I take the opposite side.

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