A year ago Delta, American, and United started beating the drum that the US government ought to shut down our markets to Emirates, Etihad, and Qatar because of subsidies.
In the mythology promoted by US airlines, the big Gulf carriers Emirates, Etihad, and Qatar don’t care about economics, they only care about winning market share and providing luxurious products in the sky that US airlines cannot match. So they irrationally throw planes one routes at low prices and lure US customers (that ‘belong’ to US airlines) with quality product that no ‘sane’ airline would offer.
Gulf carriers dispute they’re subsidized. Etihad claims to be profitable, Emirates really is profitable. Unquestionably the UAE and Qatar have strong pro-aviation policy biases that benefit their home carriers.
And US airlines are hugely subsidized, too. They constantly lobby for subsidies. Delta, which is cutting back its Tokyo hub, inherited the ‘beyond rights’ there with their acquisition of Northwest which gained a Tokyo hub as part of the spoils of World War II. US Airways, United, and Delta offloaded about $20 billion in pensions from their books and onto the government Pension Benefit Guaranty Corporation through the bankruptcy process. US Airways and America West got billions from the Air Transportation Stabilization Board. The Reconstruction Finance Corporation funded American’s first major aircraft order.
While I’m no fan of state-backed airlines, I’ve been a consistent critic of the US airlines for 3 main reasons.
- This is really a call for protectionism that hurts US consumers. It limits their choices and would raise fares. Delta’s CEO was actually explicit that the goal was fewer flights and higher fares.
- Open Skies agreements don’t obviously preclude the financial assistance that some of these airlines have received, just as they don’t preclude the financial assistance US airlines have received. The US airlines were born in subsidy and continue to receive subsidies themselves. The US airlines tortured the definition of subsidy to try to claim the Middle East carriers get government support while they don’t, which is just wrong. They also fabricated quotes in their white paper purporting to detail subsidies received by Gulf carriers.
- It’s completely hypocritical to call out the subsidies of some of your competitors, as a pretext for government crackdowns, while continuing to partner with other airlines that receive similar subsidies and benefit from Open Skies agreements with the US. Saudia, for instance, is a Delta partner in SkyTeam and the US and Saudia Arabia have an Open Skies treaty. Saudia’s aircraft were gifted to them by the government. Indeed, Delta is now part-owner of China Eastern which is the most-subsidized Chinese airline (though the US and China do not have an Open Skies agreement). Delta is in a joint venture across the Atlantic with Alitalia, sharing revenue with the Italian carrier that’s controlled by…Etihad. And American is in a joint venture with British Airways and Iberia, part-owned by.. Qatar.
But it’s actually because I love the US airlines that I don’t want them to become profitable through government protection, I want them to get better and compete successfully.
In many ways, US airlines offer as good or better a hard product as the Middle East ones do. By focusing on getting government protection, the airlines are sealing their own fate. If they’d step up to the plate and compete, they could win.
American’s 777-300ER, retrofit 777-200s, 767s, and 787s are all four-across fully flat in business class. They offer direct aisle access from every seat. These are world-leading products (though I’m not a fan of business on the narrower 767).
American Boeing 787 Business Class Seat: US Airlines Have Generally Better Business Class Products Than Gulf Counterparts
Delta offers similar all-aisle access, though again I hate the 767. They’re retiring their 747s which have the best business seats in their fleet. But the 777s still offer a good product.
United is due to announce a new business class seat. But at least they’re fully flat on international flights to and from their hubs. The old dorm-style fully flat 777 from the legacy United operation notwithstanding, they have a decent albeit not world-leading product.
In contrast, Emirates has a fully flat business seat on their Airbus A380s but is angled on their 777s (and was an early adopter of 10-across seating in coach).
Emirates hardly invests in product irrationally. They have a top quality first class, but their suites are some of the tightest space-wise, squeezing in 14 into their A380 cabins. And their showers don’t trade off with space that would otherwise be able to hold more passengers.
US Airlines Believe Emirates Showers in the Sky are Unfair
Meanwhile, they move aircraft around to match demand. They pulled the A380 from Houston, temporarily from Dallas, and cancelled plans for Panama City service. That’s not the caricatured behavior the US carriers would have you expect.
Emirates will finally be unveiling a fully flat business class seat for their Boeing 777s. But far from ‘all aisle access’ 4-across seating they’ll be going with 7-across, two-three-two.
And while new Boeing 777-300ERs will get this seat, they won’t even be retrofitting existing 777s which they’ll start to retire in 2020.
As the late Fred Thompson said in Die Hard 2, “Stack ’em, pack ’em, and rack ’em.”
US airlines are making record profits, nearly half the world’s airline profits even. The American public doesn’t have sympathy for claims that their having to compete is unfair, especially when they are asking the public to accept less choice and higher prices.
It’s time for the US airlines to promote the investments they’re making. When they whine about unfair competition from the Gulf carriers, they promote the view that the Gulf carriers are better and they need protection. The Gulf carriers aren’t necessarily better, US airlines don’t need protection, and consumers shouldn’t take it on the chin to subsidize American carriers further.