I’ve written extensively about the protectionism that US airlines are seeking from the government in bashing Emirates, Etihad, and Qatar — and about the hypocrisy as US airlines lobby for and take huge subsidies while attacking only those competitors they’re worried about for doing the same thing while ignoring the even greater subsidies offered to state airlines that they partner with (Think for instance Delta and Saudia, United and Air India).
Gulf Carriers Receive Subsidies and So Do US Airlines
There are certainly subsidies that have at various times helped to prop up the various major Gulf airlines, as we’ve seen with airlines around the world. Sometimes those subsidies have seemed larger than life, though it’s easy to forget the privileged position over time of British Airways at Heathrow and the gifting of Concorde. And it’s easy to forget that the birth of the US airline industry was laid out in industrial policy conducted by the Postmaster General who decided in essence which airlines would fly what routes profitably. Not to mention the huge anti-consumer subsidies embodied by the Civil Aeronautics Board which set prices at a level, and kept out competition, to allow airlines to earn profits.
Even today US airlines receive subsidies that have gone as high as $2 billion a year as part of the program which makes aircraft available to the government in the unlikely future event of national security needs. And those same airlines take fuel tax subsidies. Delta received nine figures for its oil refinery. The US aviation industry is one of the most heavily regulated and subsidized in the country.
Clearly US airlines go to the government not as exponents of the virtues of free markets, but hat in hand looking for still more cronyist handouts.
US Airlines Should Understand the Nature of the Competition
US airlines really should compete, but not in the way most people suspect. For the most part they don’t even fly overlapping routes now, although US airlines are trying to make it sound like they do. US carriers barely serve India and don’t serve Bangladesh or Pakistan. They don’t serve North Africa. They don’t offer much service to the Middle East.
But they’re worried about fifth freedom flights (Emirates flies New York – Milan now, though the US airlines of course do not worry about Kuwait flying New York – London).
They can realistically compete against Gulf carriers across the Atlantic, at such time as those carriers actually offer meaningful service on those routes. They just need to understand the nature of the competition.
The Big Gulf Carriers Aren’t That Great, They’ve Just Convinced You They Are
Etihad and Emirates have impressive first class offerings that US airlines don’t have. They do sell those seats, more than US airlines, and not just because the product is quality.
- They are serving markets where those seats have greater demand — ultra-long haul with installed client base that will pay for it.
- Etihad is more aggressive than virtually any carrier in the world in monetizing their premium cabins through aggressive online auctions for upgrades and cash upgrades at check-in (I’ll often see signs suggesting you ask about cash upgrades at the counter). Etihad first class regularly goes out full — and not with non-revs the way that US carriers have experienced when offering three-cabin first class (where it becomes known as “employee class”).
Apart from the sales of the products, they have a marketing strategy that does work. By becoming known for over the top offerings like showers and multi-room suites, they develop a reputation for quality that gives them a halo effect for their other cabins.
Emirates A380 First Class Suite
In much the same way that world recognition for Australia’s Penfolds Grange as one of the top wines around created a reputation for the country as able to produce great wine which filtered down to an acceptance and openness to standard Cabs and Chardonnays — the top premium services experienced by a very few create the impression of quality which permeates down even to economy.
The Big Gulf Carriers Aren’t Offering on Average a Better Hard Product than US airlines
The idea that the Gulf carriers have hugely subsidized hard products that US carriers can’t keep up against is a rather strange notion. The part of aviation that’s really expensive, the hard product, is actually better in economy and business class on US carriers in many cases.
- Emirates puts 10 across in coach on its 777s. Delta and United each have 9 seats across (though United is rumored to be looking at going to 10). That makes the US carrier hard products superior in coach for that aircraft.
- Emirates and Qatar offer angled business class seats on many planes. In fact, outside of the large Emirates fleet business class is generally angled.
- In contrast Delta, United and American (which still lags through end of year) are ahead in offering full flat seats. That makes most US carrier products better in business class. (Although United’s legacy 777 8-across business class is a sorry excuse for a long haul product, and they deserve to be beaten up in international competition for it.)
American Airlines Fully Flat Business Seat
The Gulf Carriers Are Fierce Competitors… But Mostly With Each Other
These three flag carriers are fiercely competitive… with each other. Abu Dhabi has to up its game because it’s only an hour’s drive from Dubai. So they offer complimentary car service for premium passengers and complimentary bus service for coach. They want to be a viable option for the Dubai financial center. In much the same way Newark, Baltimore, and Oakland were once backwaters.
Etihad also has to match Emirates service and so they throw themselves into markets like Dallas, and then Emirates ups its game with an Airbus A380. Prices fall as all 3 compete with each other, but none are willing to give up. It’s not dissimilar from how the major US airlines have historically behaved when new market entrants have come along — think Vanguard or Legend. American started flying planes that matched Legend’s all premium seating model, and then eliminated the configuration as soon as Legend was spent out of business.
Gulf Carriers Do Offer Marginally Better Service, and US Airlines Could Gain A Lot By Following Their Plot
Qatar, Emirates, and Etihad service is actually not stellar by world standards, which is to say they aren’t even close to the best in the world. The US airlines aren’t railing against Singapore Airlines service (who could credibly present ad campaigns like this one). They’re railing against carriers whose crews often offer confused and forgetful service.
Compared to the service offered by US airlines, though, it’s top notch.
US airlines shouldn’t be making huge investments in 3-bedroom first class residences or onboard showers. They shouldn’t be building out entire levels of airport terminals dedicated to first class passengers (although the Emirates first class lounge in the A terminal at Dubai isn’t one of the world’s best). Those are big capital investments which likely wouldn’t repay themselves in the US context.
Emirates First Class Lounge, Dubai
They should be taking a cue from their world counterparts though in offering friendly and consistent, well-executed service.
Good Service on US Airline Flights is Because of Good Flight Attendants, Not Good Airlines
I’ve had some amazing flights with truly top notch crews onboard US airlines. But those are the exception rather than the rule. And most importantly when there are great service-oriented crews it is because of the inner drive and commitment of those individual flight attendants rather than because of anything systemic coming from their companies. In other words, they choose to offer good service rather than offering good service as a matter of course. They deserve far more kudos in those cases as individuals than others do.
On the whole flight attendants at US airlines are not personally better off providing good service than they are providing mediocre service. The incentives just aren’t right. There’s little consequence most of the time for poor performance, and little benefit to giving a little something extra to treat passengers well. At US airlines, most of the time, flight attendants are there ‘primarily for your safety’ and it shows.
It’s worth noting that this isn’t even a union issue, per se, although the particulars of the status quo are certainly entrenched into current union contracts and would be difficult to dislodge.
- Scheduling of who works what routes and when, and in what position on the aircraft, shouldn’t be simply a function of seniority.
- Great service should be embedded in the culture, from training to regular re-training. And it should be constantly evaluated and remarked upon.
- Poor performers should be weeded out, and great performers should be rewarded with pay and with route and schedule flexibility.
These are merely a few of the things that ought to be in place in order to develop a reputation for top service. That’s a level on which US airlines should compete with all airlines around the world (and not just their targeted ‘Gulf 3’ who really don’t have that much of an advantage here to start with).
US Protectionism Makes US Airlines Worse, Unprepared for World Competition
US government action against the Gulf carriers, to protect US airlines, just entrenches the poor service and high prices we’ve become used to.
The truth is that we need the Gulf carriers to shake US airlines out of their complacency and help them to imagine a world where they can be better — not by making huge investments that don’t earn their cost of capital. US airlines are already making big investments in their international fleets at least in premium product offerings.
Protectionism stands in the way of disruptive innovation. US airlines need to re-orient their cultures and incentives to offer service levels commensurate with their capital investments. Then they’ll build the kind of real reputation that the Gulf carriers today enjoy on a very thin basis.