A trade group for U.S. airlines has sued the Export-Import Bank of the United States over a $ 3.4-billion loan to Air India.

The lawsuit filed by the Air Transport Association Wednesday asserts that the U.S.-backed loans are hurting many American workers. It says the low-interest credit assistance to foreign carriers violates federal law and Air India should be disqualified from further financial assistance since it is in financial trouble.

Air India
In Trouble: Air India Sued

The lawsuit said since Ex-Im Bank guaranteed low interest rates to foreign airlines to save money on purchasing new planes, it led to unfair competition. American and Delta Airlines stopped flying from New York to Mumbai in October 2008 as Air India flights flooded the India-U.S. route.

The lawsuit sought to prevent the Ex-Im from guaranteeing upto $3.4 billion in loans for Air India to buy 30 Boeing planes.

ATA chief executive Nick Calio said the Ex-Im Bank refused to provide any information about the timing and details of the Air India delivery. Having no choice, the trade group sought judicial intervention in order to prevent American airlines from suffering irreparable injury, he said.

Ex-Im Bank spokeswomen Maura Polivelli said the lawsuit filed by the ATA in District of Columbia federal court, was without merit. "Export credit financing ensures American companies and American workers have a level playing field in the increasingly competitive and challenging global markets," she said.