The Export-Import Bank is a government-chartered U.S.export credit agency that provides financing for foreign buyers purchasing American-made goods. They also insure the sales for American companies should the foreign buyer default on the payments. The Ex-Im Bank is willing to accept the risk in financing international deals that most private creditors are not willing to take. The Export-Import Bank does not compete directly with the private sector creditors, its goal is to boost the U.S. economy and create and support American jobs. Credit is available for any American company with a more recent concentration on small businesses. The bank has made $3.4 billion in profits since 1934, and only 2% of its loans have failed in that same amount of time.
The Export-Import Bank is often referred to as "Boeing's Bank", because Boeing creates the largest number of transactions for the bank. Being that Boeing manufactures airliners to be sold and flown in a global market, of course the majority of customers are going to be foreign airlines. The Export-Import bank allows several developing foreign airlines, which otherwise wouldn't be able to, the ability to purchase Boeing aircraft, ultimately supporting U.S. jobs.
The bank has been in the news lately because for the first time in its nearly 78 years of existence, the Senate has voted against re-chartering the bank before its current charter expires on May 31st. The bank is close to reaching its current $100 billion lending limit, and lawmakers are seeking an increase to $140 billion on the new charter. According to Reuters, the bank supports about 290,000 jobs annually in the export industry, and a loss of the bank would be a big blow to Boeing and other exporters. Unfortunately, this normally uneventful reauthorization has become yet another case of politics. In another attempt to tarnish the Obama Administration before the upcoming elections, conservative Congressional Republicans have decided to vote 'no' on the bill unless they get it written their way, citing the bank as being "corporate welfare" and disagreeing with the general idea of the bank. They also cite the bank as giving huge cost breaks to foreign businesses while U.S. businesses end up having to pay much more for the same product. A Delta Air Lines executive was quoted in the Seattle Times saying that if they could use the bank like foreign carriers then "it could have saved approximately $100 million a year in financing costs and we could have used that money to hire more workers or even purchase additional aircraft from Boeing". Other Republicans are working to create a bipartisan extension for the Import-Export Bank which includes reforms and accountability measures.
The ATA stands against the Ex-Im Bank, filing a lawsuit against them in November of 2011. The lawsuit is over a $3.4 billion loan guarantee to Air India to finance 27 B787s for the airline. The ATA is trying to halt the deal, citing that the bank "fails to meet statutory requirements, including consideration of the impact on the US airline industry and US airline jobs”-CAPA. The ATA claims that the Ex-Im Bank is offering financing to a poorly run airline with very risky credit. They say that the company's poor financial status should disqualify them from the financial assistance.
Boeing has paid two of Washington's top lobbying firms to persuade lawmakers to reauthorize and expand the bank's charter. This lobbying is an attempt to overpower U.S. airlines' objections to the bank, who say they are hurt when our government helps foreign rivals buy airplanes-Bloomberg, as well as Tea Party lawmaker opposition. Anyone can see why Boeing would have an obvious interest in reauthorizing the bank. It helps them to sell a lot of airplanes all around the world, and may end up enabling a huge Air India 787 deal.
Saturday, March 24, 2012
Friday, March 16, 2012
The Corporate Aviation Boom in China
Business Aviation is expected to boom in China over the next decade and onward. In January 2011 there were 116 business aircraft registered in China, including Hong Kong and Macau. Of that 116 aircraft, 86 were manufactured within the last ten years according to Flightglobal. The number of total corporate aircraft is expected to grow by about 600 by 2019. Aviation businesses in China are seemingly popping up overnight. Fifty new aviation companies were started in China in 2011, and Chinese companies have purchased Cirrus Design and Teledyne-Continental, with more acquisitions expected to come in the future.
Even until recent years, China has suffered from a lack of business aviation infrastructure, strict airspace regulations, and a lack of knowledge about business aviation, all of which prevented growth in the sector until recently. Even until current times the Chinese low altitude airspace (below 13,000 feet) has been very restricted to privately owned aircraft. Flights over China must have prior approval by the military and flight plans must be filed well in advance. The Chinese government is reportedly committed to opening up that low altitude airspace to general aviation aircraft within the next five years, however. Business flights above that altitude will still require prior government approval, though. They also are committed to creating a network of general aviation infrastructure by the year 2020.
China is a country that has had a growing economy for some time. As the communist country's industrial economy has continued to grow and its GDP rises, the wealth has began to trickle downward. China now has more emerging millionaires and billionaires than ever before. Like it used to be in the United States, a corporate aircraft is a great way to show off your wealth, not to mention an important business tool. Over time as the economy grows, more infrastructure emerges, and regulations continue to loosen up, China's corporate aircraft fleet will only continue to grow.
All business aircraft manufacturers are turning their attention to China, whose economy continues to grow while the rest of the world's struggles. Jason Liao left Bombardier Aerospace to found the Asian Business Aviation Association, which helps potential business jet owners in China choose the right business aircraft for them to purchase. His company has been very successful to this day. His jump is a sign of the strength and confidence people should have in the nation's corporate aviation industry. Bombardier planned to open a regional support office and parts depot in Hong Kong in the first quarter of 2011, and Deer Jet opened the first fixed-base operation in southern China in the past year and a half. With all of the growth of the industry, there will be countless people needed to run FBOs, market aircraft, and of course fly the airplanes. China had a total of 8,800 civilian pilots several years ago, but now has over 10,000 ATP certified pilots alone, according to the NBAA. The job opportunities appear limitless in China.
More information on Chinese corporate aviation can be found in these articles:
Unlocking Opportunities in China, The Industry's New Frontier
Even until recent years, China has suffered from a lack of business aviation infrastructure, strict airspace regulations, and a lack of knowledge about business aviation, all of which prevented growth in the sector until recently. Even until current times the Chinese low altitude airspace (below 13,000 feet) has been very restricted to privately owned aircraft. Flights over China must have prior approval by the military and flight plans must be filed well in advance. The Chinese government is reportedly committed to opening up that low altitude airspace to general aviation aircraft within the next five years, however. Business flights above that altitude will still require prior government approval, though. They also are committed to creating a network of general aviation infrastructure by the year 2020.
China is a country that has had a growing economy for some time. As the communist country's industrial economy has continued to grow and its GDP rises, the wealth has began to trickle downward. China now has more emerging millionaires and billionaires than ever before. Like it used to be in the United States, a corporate aircraft is a great way to show off your wealth, not to mention an important business tool. Over time as the economy grows, more infrastructure emerges, and regulations continue to loosen up, China's corporate aircraft fleet will only continue to grow.
All business aircraft manufacturers are turning their attention to China, whose economy continues to grow while the rest of the world's struggles. Jason Liao left Bombardier Aerospace to found the Asian Business Aviation Association, which helps potential business jet owners in China choose the right business aircraft for them to purchase. His company has been very successful to this day. His jump is a sign of the strength and confidence people should have in the nation's corporate aviation industry. Bombardier planned to open a regional support office and parts depot in Hong Kong in the first quarter of 2011, and Deer Jet opened the first fixed-base operation in southern China in the past year and a half. With all of the growth of the industry, there will be countless people needed to run FBOs, market aircraft, and of course fly the airplanes. China had a total of 8,800 civilian pilots several years ago, but now has over 10,000 ATP certified pilots alone, according to the NBAA. The job opportunities appear limitless in China.
More information on Chinese corporate aviation can be found in these articles:
Unlocking Opportunities in China, The Industry's New Frontier
Thursday, March 8, 2012
The FAA Modernization and Reform Act of 2012
The FAA Modernization and Reform Act of 2012, or FAA Reauthorization Bill as it is commonly known by, was signed into law by President Obama on February 14, 2012. This bill provides the FAA with $63.4 billion in funding through 2015. It also sets forth new requirements on the industry and the FAA. The Bill creates several changes and FAA projects that I believe are important in the industry such as more stringent standards for carrying lithium batteries on aircraft, short-term runway incursion reduction goals, researching installation of cockpit doors on cargo aircraft, authorizating transpacific alternate airports to stay open, data protection for safety reporting programs, weather and aircraft spacing research, the researching of alternative fuels, and rules for inspecting Part 145 repair stations and foreign repair stations. I believe that the three changes brought by the bill that will have the most impact are the increased funding and establishment of standards for the Next Generation Air Transport System (NextGen), the stance taken against the European Union Emissions Trading Scheme (EU ETS), and the renewing of the Essential Air Service (EAS) program.
First and foremost, the Reauthorization Bill gives a huge boost to the development of NextGen. Prior to this bill, the FAA's NextGen program was becoming critically underfunded, far behind schedule, and lacking of any sort of project master schedule or definitive project leadership. Until the Reauthorization Bill, a 5-10% decrease in government funding for NextGen was expected, which would have delayed the project even farther than its present 5 years behind schedule. One of the main components of NextGen, En Route Automation Modernization, or ERAM, has been found to be seriously flawed during live traffic testing. ERAM is the new ATC computer system that will replace the aging HOST computer system and will be the first step in implementing NextGen. Now having adequate funding from the federal government, the FAA should be able to get the bugs worked out of ERAM faster and more thoroughly, giving a huge boost to the program. The bill also mandates that the position of 'Chief NextGen Officer' be appointed by the Administrator, and will serve 5 year terms. The responsibilities of the Chief NextGen Officer include creating an annual NextGen plan, creating a budget for the program, and general coordination and oversight of the program. More about the Chief NextGen Officer's duties can be found in the FAA Modernization and Reform Act of 2012, page 28. This position means an overall more clear mission and timeline, and greater efficiency of the project. Additionally, the act states that the ADS-B technology to be required for NextGen be identified by the FAA.
Beginning this year the European Union began tracking the carbon emissions of aircraft flying to or from Europe, causing aviation to become a part of the ETS. If the EU gets their way, they will be collecting a bill from all applicable airlines for a large percentage of their total carbon emissions, plus fines for any emissions over their allotted amount. This has caused outrage around the world including in the United States, particularly because the EU will be taxing for the entire duration of a flight to or from Europe, even that portion outside of EU airspace. I believe that the government's stance on this topic in the Reauthorization Bill will be monumental in the outcome of the ETS controversy. It states that the EU should not implement their carbon trading scheme on the aviation community without going through the ICAO. It also states that the "US should use all political and diplomatic tools available to prevent ETS from being applied to US aircraft operators."- arentfox.com . This portion of the Act further strengthens the US's opposition to airline ETS implementation. I believe the inclusion of this subject in the Act is so important because this would be such a huge financial burden to US airlines, and the outcome of the arguments may well determine the future financial health of US airlines, impact ticket prices, and impact future international relations including a possible trade war.
As I mentioned above, the final element of the three most impactful sections of the Reauthorization Bill is the changes to the Essential Air Service program. EAS is a program that grants government subsidies to airlines that operate to select smaller communities that are not necessarily profitable for the airline to operate to on its own. The program greatly enhances air transportation opportunities for those populations not located near a major US airport (not to mention probably provides a few more jobs for us pilots). It is a very successful program, but it has been under some scrutiny by lawmakers. There was an attempt made to completely eliminate EAS, but the Reauthorization Bill has preserved it. In compromise for keeping the program, it will see as much as $50 million less in funding, with reductions every year- $143 million total funding in 2012, $118 in 2013, $107 in 2014, and $93 million in 2015, as seen in a summary of the Act. The legislation also limits the EAS program to airports with 10 or more operations per day and must be located within 175 miles of a large or medium hub airport (except in Alaska or Hawaii), and prohibits any more airports from applying to the EAS program. I do believe it is important that many communities located far from hub airports maintain the availability of commercial air transportation. It is a service that I do believe should be easily available to all Americans. I believe that this program does raise the standard of living of America as a whole. With the reduction in funding for EAS, airline service to some small airports will inevitably be cut, leaving many travelers with a much longer journey. The cut in funding and stricter requirements may reduce the profitability of some regional airlines being that they were receiving basically free money to sell seats on their aircraft. This will also leave some people without the jobs that the airlines previously created in their towns, and tax revenues will decrease. It is however better than the alternative of this program ending altogether.
First and foremost, the Reauthorization Bill gives a huge boost to the development of NextGen. Prior to this bill, the FAA's NextGen program was becoming critically underfunded, far behind schedule, and lacking of any sort of project master schedule or definitive project leadership. Until the Reauthorization Bill, a 5-10% decrease in government funding for NextGen was expected, which would have delayed the project even farther than its present 5 years behind schedule. One of the main components of NextGen, En Route Automation Modernization, or ERAM, has been found to be seriously flawed during live traffic testing. ERAM is the new ATC computer system that will replace the aging HOST computer system and will be the first step in implementing NextGen. Now having adequate funding from the federal government, the FAA should be able to get the bugs worked out of ERAM faster and more thoroughly, giving a huge boost to the program. The bill also mandates that the position of 'Chief NextGen Officer' be appointed by the Administrator, and will serve 5 year terms. The responsibilities of the Chief NextGen Officer include creating an annual NextGen plan, creating a budget for the program, and general coordination and oversight of the program. More about the Chief NextGen Officer's duties can be found in the FAA Modernization and Reform Act of 2012, page 28. This position means an overall more clear mission and timeline, and greater efficiency of the project. Additionally, the act states that the ADS-B technology to be required for NextGen be identified by the FAA.
Beginning this year the European Union began tracking the carbon emissions of aircraft flying to or from Europe, causing aviation to become a part of the ETS. If the EU gets their way, they will be collecting a bill from all applicable airlines for a large percentage of their total carbon emissions, plus fines for any emissions over their allotted amount. This has caused outrage around the world including in the United States, particularly because the EU will be taxing for the entire duration of a flight to or from Europe, even that portion outside of EU airspace. I believe that the government's stance on this topic in the Reauthorization Bill will be monumental in the outcome of the ETS controversy. It states that the EU should not implement their carbon trading scheme on the aviation community without going through the ICAO. It also states that the "US should use all political and diplomatic tools available to prevent ETS from being applied to US aircraft operators."- arentfox.com . This portion of the Act further strengthens the US's opposition to airline ETS implementation. I believe the inclusion of this subject in the Act is so important because this would be such a huge financial burden to US airlines, and the outcome of the arguments may well determine the future financial health of US airlines, impact ticket prices, and impact future international relations including a possible trade war.
As I mentioned above, the final element of the three most impactful sections of the Reauthorization Bill is the changes to the Essential Air Service program. EAS is a program that grants government subsidies to airlines that operate to select smaller communities that are not necessarily profitable for the airline to operate to on its own. The program greatly enhances air transportation opportunities for those populations not located near a major US airport (not to mention probably provides a few more jobs for us pilots). It is a very successful program, but it has been under some scrutiny by lawmakers. There was an attempt made to completely eliminate EAS, but the Reauthorization Bill has preserved it. In compromise for keeping the program, it will see as much as $50 million less in funding, with reductions every year- $143 million total funding in 2012, $118 in 2013, $107 in 2014, and $93 million in 2015, as seen in a summary of the Act. The legislation also limits the EAS program to airports with 10 or more operations per day and must be located within 175 miles of a large or medium hub airport (except in Alaska or Hawaii), and prohibits any more airports from applying to the EAS program. I do believe it is important that many communities located far from hub airports maintain the availability of commercial air transportation. It is a service that I do believe should be easily available to all Americans. I believe that this program does raise the standard of living of America as a whole. With the reduction in funding for EAS, airline service to some small airports will inevitably be cut, leaving many travelers with a much longer journey. The cut in funding and stricter requirements may reduce the profitability of some regional airlines being that they were receiving basically free money to sell seats on their aircraft. This will also leave some people without the jobs that the airlines previously created in their towns, and tax revenues will decrease. It is however better than the alternative of this program ending altogether.
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