Hypocrisy Watch: American Airlines to Benefit from Transatlantic Subsidy

Nashville is expected to get a British Airways flight to London.

Nashville International Airport is poised to land a direct flight to London on British Airways, culminating a multiyear effort by government, business and tourism leaders to secure the flight.

American Airlines used to fly Nashville – London unsubsidized but the flight didn’t work economically, indeed American’s Nashville hub operation didn’t survive.

However it’s expected this new flight will be subsidized.

In order to secure the deal, incentives are likely to be included. Gov. Bill Haslam, whose administration has bulked up tourism marketing to lure international travelers to Tennessee, is expected to be at the center of the announcement.

American Airlines shares revenue with British Airways across the Atlantic through a joint venture and will benefit from these subsidies.

The campaign by American, Delta, and United to limit flights by Emirates, Qatar, and Etihad and increase fares has always been about protectionism and using government to redistribute income from consumers to their bottom lines. The only way to do that persuasively has been to make disingenuous claims of subsidy (and in Delta’s case, to ‘other’ the opposition).

If you’re interested in the history of cronyism and subsidy for major US airlines, I lay that out 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. I wouldn’t put an incentive to fly an unprofitable route for the benefit of a community in the same basket as gulf subsidies.

  2. This isn’t even close to $50B in subsidies. Apples and Oranges. If the route can’t be profitable, then tax incentives help. The ME3 routes can be profitable without incentives. One route on AA is tax incentives vs ALL routes in ME3.

  3. @Jason — I detail the extensive subsidies received by the major US legacy airlines in a post linked to in this one. This post isn’t about all of the subsidies received, just about this one route, but it’s merely one example of how the US airlines continue to be subsidized and have no problem with that. They aren’t unsubsidized. They haven’t sworn off subsidies. Are we really just doing forensic accounting to see which is more subsidized? because the US airline white paper on Gulf carrier subsidies was a fake (http://viewfromthewing.boardingarea.com/2015/05/01/turns-out-the-us-airline-white-paper-trashing-the-gulf-carriers-did-some-very-naughty-things/)…

  4. @GaryLeff. That is just snarky. Gulf carriers are 100% government owned and financed. There is no comparison. Why we don’t tariff the heck out of them I am shocked.

  5. Gary all airports do this including your beloved AUS in small government business friendly TX. Based on the editorial slant of your posts in the last 18 months it stands to reason you are a big government guy so this should make you happy.

  6. @garyleff. I always admire your blog. There are people out there that will defend and are loyal to whatever they deemed is right.. subsidies are subsidies no matter if it’s one dollar or a million dollar. If you brag or said you do not take any government subsidies then do not do it.. you are trying to kill of your competition and cry poverty and do not want to offer service but take subsidies, then keep your mouth shut. It’s not comparing apples to oranges. It’s do you take or not. To me it’s a joke. American Big 3 want to make or take money but do not offer anything of quality, and then complain about how other country or companies are subsidized. But it’s okay when they do it.. it’s not a lot it’s a little. You know what try breaking the law and say you only took a little bit.. lol, that’s why the big American 3 airlines treat you this way, and guess what you deserve it. Go and defend them. Continue and fly them, because you deserve it.. I do not care who or what airlines I fly because I want quality and i expect quality when I PAID for it because I was not subsidized. Thank you.

  7. The fact no other airlines are allowed to compete in domestic US Marley is a subsidy that keeps the fares on shifty airlines high.

  8. @Josh G – that is the POINT, American takes subsidies from a huge number of small and medium sized airports they fly to. So do United and Delta. The idea that they aren’t subsidized is silly, as you observe.

  9. @Ted what about the government-owned Pakistan International Airlines, Air India… Saudia… Heck Air France is still part-owned by the French government, with its partial privatization only done as a condition to acquire KLM. And the massive subsidies over the years for Alitalia.

    And what about the US government deciding for most of the history of the airline industry which airlines would fly which routes and at what price for the explicit purpose of ensuring the airlines remained profitable? And outright funding American’s first major aircraft purchase?

  10. Don’t argue in public with trump deplorables, there’s always the risk bystanders won’t be able to tell which one is the deplorable…

    And no matter how incontrovertible (most will need a dictionary) your point is, alternate reality will still win with them.

  11. I always wondered if KLM and Airfrance were subsidized by Boeing to fly their planes in Europe instead of Airbus planes.
    All national carriers are to some extent subsidized. Singapore, Thai, Quantas, Air NZ, and in China even the corporations there are Governments owned. That’s not just subsidization that is subordination.

  12. Yeah, but I bet if it were Vladimir Putin gunning for our aviation industry by flooding global routes with $50b of subsidies and another $100b of capital in planes on order, you’d be singing a much different tune over the exact same set of circumstances.

  13. @Credit: It’s not a subsidy that foreign carriers aren’t allowed to fly domestic routes because our carriers aren’t allowed to fly domestic routes in other countries either.

  14. “I wouldn’t put an incentive to fly an unprofitable route for the benefit of a community in the same basket as gulf subsidies.”

    Right, but Gary Leff would. And that’s what’s so wrong about his position on this issue.

    It’s kind of like the difference between buying your congressman a soda and buying him a yacht.

    As a taxpayer, I probably wouldn’t support 95% of route-specific subisidies.
    (Just like I don’t support tax breaks for building sports stadiums.). But they don’t distort the international aviation marketplace. They just allow a city to receive a flight where the economics wouldn’t support the risk of launching non-subsidized service.

  15. @iahphx they only don’t distort the aviation marketplace because the entire US market is protected already (ie distorted).

    You do realize, right, that subsidies aren’t a violation of Open Skies — and that Delta, American, and United have refused to state what section of the Open Skies agreement is supposedly being violated…

  16. In the case where an airport waives landing fees or rent for new service, it is not a subsidy. It is an incentive to try new service that an airline otherwise probably would not offer. It reduces the risk to the air carrier of financial loss making them willing to take on the route. Those incentives by law are limited in time and nature and without them the community in question would not have the air service at all.

    When there is a revenue guarantee, that is provided not by government or by an airport as that is prohibited by law, but by local business or community organizations. No government / tax payer dollars involved.

    The only situation that comes to mind that is an actual subsidy would be Essential Air Service, which is extremely limited in scope, and without it, the communities in question would simply have no air service at all. Maybe that is the way to go then…..remove the EAS payments and let those communities fend for themselves if that would make you feel better and not see the US carriers as being hypocritical.

  17. big difference here is that no airline wants to fly BNA-LHR. there are lots of carriers willing to fly passengers on routes ME3 fly and they would prefer to do it directly instead of making folks change planes in Abu Dhabi, Qatar, and Dubai.

  18. This is not hypocritical of American Airlines. The subsidies given to the Middle Eastern airlines are open and shameless giveaways for their airlines as projects of national prestige. Nashville isn’t a nation and it’s not giving subsidies for the prestige of Nashville. It’s making an economic calculation of the costs and benefits.

  19. There is a difference between a subsidy and an incentive. There are regulations in place in the US that dictate exactly what can and can not be done in order to begin new service in terms of incentives. Subsidies are entirely banned. Interestingly, these same incentives are usually available to foreign air carriers as well as they tend to be route specific and include waivers of rent or landing fees during the start up period of the route only. They are not indefinite. Sometimes local dollars are also allocated for revenue guarantees, but that is NOT government money. It is typically local chamber of commerce or tourism board money. Without the incentives the routes would not be started. You are not making an accurate comparison.

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