Subsidizing Boeing
The Export-Import Bank is a subsidy organization. The federal government guarantees the loans made by foreign banks to foreign importers of American goods. If the importer defaults, the U.S. government bails out the foreign lender.
This allocates capital away from profit-seeking firms to government-protected firms.
The standard defense is thus: “This costs the government nothing . . . most of the time.” It should cost the government nothing all of the time.
Another defense: “It creates jobs.” What does? “The loans.” Why were the guarantees needed? “Because there was risk.” Why should taxpayers bear this risk? “Because America needs jobs.” Why not let lenders decide which jobs to create, in terms of risk and reward? “Because there is too much risk at the low interest rate.” So, the interest rate is fake. “Yes.” Then other companies must pay more for their loans. “Yes.” Why is that a good deal? “It’s a good deal if your company gets the guarantee.”
Boeing got 80% of the Ex-Im guarantees last year.
Nice work if you can get it. And if you get it, tell me how.
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Published on December 4, 2012. The original is here.
This subsidy helped the company roll out the 737 MAX.
In March 2019, aviation authorities around the world grounded the Boeing 737 MAX passenger airliner after two new airplanes crashed within five months, killing all 346 people aboard. After the first accident, Lion Air Flight 610 on October 29, 2018, investigators suspected that a new automated flight control, the Maneuvering Characteristics Augmentation System (MCAS), repeatedly forced the aircraft to nosedive. Boeing had omitted MCAS information from flight manuals and pilot training. In November 2018, Boeing and the U.S. Federal Aviation Administration (FAA) sent airlines urgent messages to emphasize a flight recovery procedure, and Boeing started redesigning MCAS. In December 2018, studies by the FAA and Boeing concluded that MCAS posed an unacceptable safety risk. On March 10, Ethiopian Airlines Flight 302 crashed, despite the crew's attempt to use the recovery procedure. The airline grounded its MAX fleet that day.On March 11, the Civil Aviation Administration of China was the first regulator to ground the MAX. The FAA publicly reaffirmed the airworthiness of the aircraft on March 11, but grounded it on March 13 after receiving new evidence of accident similarities. By March 18, all regulators worldwide banned the airliner. The groundings affected 387 MAX airplanes making 8,600 weekly flights for 59 airlines.
After the second accident, the U.S. Congress and Department of Transportation began investigating how the FAA certified the airplane, especially the delegation of self-approval authority to Boeing. In April, Boeing admitted that MCAS played a role in both accidents. In October 2019, Indonesia's Lion Air accident report concluded that airplane design flaws, inadequate certification and safety regulation, maintenance errors, and flight crew actions contributed to the crash. In November 2019, the FAA revoked Boeing's authority to issue airworthiness certificates for individual MAX airplanes.
Affected airlines canceled thousands of flights. Boeing suspended deliveries and reduced production of the MAX. The company had not anticipated related problems and regulators concerns that prolonged the grounding, which became the longest ever of a U.S. airliner. As of November 2019, Boeing had lost over $10 billion in revenue and compensation expenses to airlines and bereaved families, and faced lawsuits from pilots and victims' families. In December 2019 Boeing forced its CEO to resign over mismanagement of the crisis. With more than 400 MAX aircraft awaiting delivery, Boeing planned to temporarily halt MAX production in January 2020 until regulators clear the airliner to fly again.