In coronavirus aftermath China threatens takeover of US aviation: Ex-Cheney Deputy National Security Adviser

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Among the key takeaways for U.S. leaders from the current coronavirus crisis is the importance of supply chains and the need to protect them from bad actors willing to use them against us. Top concern on the minds of most Americans at this point is the government of China.

Much attention has been given, appropriately, to medical and technology supply chains as the coronavirus pandemic has swept across America. A lesser-known supply chain vulnerability exists, with similar potential impact on our economy and way of life, in the airline industry.

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United Airlines sold 22 of its planes to the Bank of China in April because it was starved for revenue during the pandemic. This could be just the beginning.

Unless Congress acts, most of the commercial aircraft operating in America could be owned by Chinese companies.

China is exploiting two of the U.S.’s greatest strengths: Massive economic might and openness to world commerce. The coronavirus is providing an opportunity for a long-term play to weaken us.

For now, American aviation is the envy of the world. A majority of the world’s commercial planes are made in the U.S. Commercial flights here are frequent, inexpensive and safe. In fact, English is the universal language of aviation because America’s engineering and economic dominance anchor the industry.

But the pandemic-caused economic slowdown threatens to change all that.

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More than half of the 7,000 commercial airliners flown in the U.S. are owned not by U.S. airlines but by companies that lease the aircraft to them. Airlines might initially buy the planes themselves, but they often later sell them to finance companies that lease them back to the airlines. These “sell and leaseback” transactions generate capital that is routinely used to buy new aircraft and pay for a variety of infrastructure improvements.

This back-and-forth arrangement, which has become embedded in the aviation system over the past 25 years, has helped keep the cost of air travel low enough for tens of millions of Americans to fly both regularly and safely.

Many of the ultimate owners of aircraft leasing companies are U.S.-based public employee pensions, university endowments and other institutions whose shareholders are middle-class Americans.

These days, many airplanes are parked unused on tarmacs across the country and are rarely in the air.

As a result, nearly all passenger airlines have asked their lessors – the leasing companies that actually own the idled aircraft – for financial assistance. Leasing companies are being forced to restructure leases and accept delayed rent payments.

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The Coronavirus Aid, Relief and Economic Security (CARES) Act failed to address leasing companies’ vulnerability.  That needs to be fixed or China will win.

Here’s how China wins. When U.S. airlines can’t pay their monthly rent on aircraft, leasing companies are left holding the bag. These companies stand to lose up to 95 percent of their income.

Because they have financial support from the federal government, airlines won’t go out of business. But the companies that actually own the aircraft they fly will.

What will happen to these aircraft if the companies that own them fail? One likely scenario is that they will be purchased for pennies on the dollar by Chinese leasing companies. Since there really is no “private sector” in China, the Chinese government will own the plane you are flying on.

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In 2006, no aviation leasing companies existed in China. Today, there are more than 40 of them. They receive the active support of the Chinese Communist Party (CCP). In January 2019, CCP-supported Chinese leasing companies owned more than 20 percent of global commercial aircraft by value. Today, the Chinese share has increased to 26 percent.

According to flightglobal.com, these companies are “closely tied to Beijing’s policy agenda.” That agenda includes undermining and then taking over key U.S. industries ranging from health care to computers. Aviation is a huge part of that plan. Chinese leasing companies manage 16 percent of the U.S. passenger airline fleet, a number that could skyrocket.

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Unless the federal government steps in to assist America’s aviation leasing industry, commercial aviation will be at the mercy of Chinese predators.

Aircraft leasing companies aren’t asking for a lot.  All they need is access to CARES Act loans, which would be fully repaid. In the end, taxpayers wouldn’t lose a dime, but America’s essential aviation industry would be protected from a hostile takeover by China.

Wouldn’t it by ironic if the Chinese coronavirus that got us all sick, caused thousands of deaths in America, wrecked our economy and, in turn, we rewarded them by turning over control of our aviation industry as well?

Congress shouldn’t let that happen.

Stephen Yates is a former deputy national security advisor to Vice President Dick Cheney.

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