The Airline Industry May Have Just Truly Gone Crazy

In “Just to Show You How Complicated the World Is, British Airways and Iberia Pull Out of European Airline Lobbying Group” I noted that some of the ironies in the spat between American, United and Delta on the one hand and Emirates, Etihad, and Qatar on the other where the US airlines as asking for government protection from the flights and low fares of the Middle East airlines.

  • British Airways and Iberia (along with Finnair) are in a joint business venture on routes across the Atlantic with American Airlines.

  • American, along with Delta and United, is a prime driver of complaints against the 3 largest Gulf carriers on this side of the Atlantic.

  • American, British Airways, and Iberia are members of the oneworld alliance with Qatar, and Qatar has a 9.99% ownership stake in the corporate parent of BA and Iberia.

  • Etihad is a partner of American which just increased its codesharing relationship with American.

  • Etihad owns substantial stakes in oneworld carrier airberlin, and Skyteam member Alitalia.

  • Alitalia and Delta are partners in an immunized joint venture across the Atlantic. So while the US airlines are specifically worried about competing across the Atlantic with Middle East carriers, Delta is sharing revenue across the Atlantic with an Etihad venture.

  • Emirates recently placed a $9 billion order for aircraft engines from Rolls Royce to fit onto their Airbus A380s

Amidst all of this, Air France — which lost a bundle when it invested in Alitalia — is clamoring for government protection as well.

But the government of France just awarded Qatar CEO Akbar al-Baker the French Legion of Honor.

In all of this, Qatar Airways CEO warns of spreading protectionism in the industry.

Is he right?

Virgin Atlantic is now seeking government protection from the British Airways acquisition of Aer Lingus.

Virgin Atlantic is looking for government help to safeguard competition if IAG buys Irish carrier Aer Lingus, Virgin Atlantic’s Chief Executive Craig Kreeger told reporters.

…”We expect that the transaction will ultimately reach conclusion, but we’d certainly love to see a hard look at what kind of remedies might be appropriate to allow competitive connectivity to Ireland to continue to exist,” Kreeger said.

And British Airways, which is taking the side of the Middle East carriers in their dispute with American, Delta, and United, is now calling for a government probe of aircraft manufacturers, suggesting that since there are only two companies offering viable large jets (Boeing and Airbus) it’s likely anti-competitive.

Airlines are seeking legal advice to examine whether they are being gouged on the cost of the equipment they buy, including jetliners and the engines that power them, according to Willie Walsh, chief executive of British Airways parent International Consolidated Airlines Group SA.

…Airline officials worry that the duopoly among large aircraft makers Boeing Co. and Airbus Group SE and lack of competition among engine makers and other items has left them paying more for the equipment than necessary.

“We have asked the team at IATA to engage external legal counsel to start looking into this issue,” Mr. Walsh said. The group will explore whether manufacturers and aftermarket parts suppliers are complying with competition rules.

Mr. Walsh said airlines have the perception they are “not getting a fair deal” from equipment makers. That is why the airlines want more choice.

Public calls here are apparently based on ‘perception’ and Walsh suggests that the government ought to require aircraft manufacturers to offer planes with more than one engine type to facilitate competition. (The President of engine maker GE Aviation says they can’t afford to offer an engine for each model of plane where they may only sell a few, given high development costs.)

They really ought to be a bit careful in their calls for government review, because if fewer competitors in aircraft is harmful, why aren’t fewer competitors on airline routes? And if airline consolidation requires government review and protection for Virgin in the case of BA and Aer Lingus, why should the government allow immunized joint ventures in the case of Virgin and Delta (I was always amused by the Virgin planes painted ‘No Way BA/AA’ on the side)? And for that matter shouldn’t the BA/AA joint ventures be revisited?

Sometimes these airline CEOs remind me of the children who just have to touch the stove because their parents tell them it’s hot. And while ‘consistency may be the hobgoblin of little minds’ I’m not sure it’s postmodern irony that they’re going for here.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Airlines crying unfair duopoly?? Hahahahahahahahahahahahahaha. That’s rich.
    Buncha babies.

  2. The Russians will be glad to sell some Il-96s to BA. Not sure BA will be that glad to pay their fuel costs.

  3. The Tourism Boom of last few years has inflated the self-esteem of airlines. They are getting bigger than their skins. I don’t know how long their good days will last, but I remember their bad days.

  4. This makes my head spin. It sounds like the modern day disfunctional family. No one understands the relations other than those involved.

  5. THIS is why … through it all…. I still love you man. Let them have it. God knows they deserve it.

  6. Oh and “for the record” not that anyone cares or anything , lol,

    I’m SO sick of everybody acting like I’m their personal piggy bank, and then jumping in and out of the dumb logic holes they keep digging for themselves with absolutely zero concern for anything other than their own sitsheee ashon, that I’m officially changing my linkedin occupation as well as my twitter profile to “Wizard of the nether realm . Eternal deep pockets for the glory of all until such day as the Anagram shall declare me null and void”.

  7. It’s supply and demand; what a bunch of whiny airlines. If they don’t want to pay asking price for a new airliner then they don’t have to buy it. Eventually the market will dictate price and it will drop as less airlines buy planes.

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