More Hypocrisy By US Airlines on Subsidies: Where’s the Outrage Over the Latest Bailout?

US Open Skies treaties with other countries do not forbid airline subsidies, which is a good thing for US airlines who have received tremendous subsidies.

Those treaties do prohibit dumping of capacity, but US airlines have lobbied for a very narrow definition of dumping because they have often been accused of it themselves. If an airline charges prices which, if the planes fill up completely, cover their costs then it isn’t dumping.

United, American, and Delta have had absolutely no legitimate legal case as they’ve attempted to get government protection from competition against Emirates, Etihad, and Qatar. Their lobby shop even fabricated evidence in its white paper on Gulf airline subsidies. The Obama administration refused to act on their request to pick the pockets of American consumers through fewer flight options and higher prices.

Now they’re left appealing to the xenophobic elements within the Trump administration for another bite at the apple.

Sure American Airlines received federally subsidized loans for its first big aircraft order, just like Delta partner Saudia received planes from the government. No complaints are made. Etihad stopped subsidizing Alitalia, so the Italian government stepped in, but Alitalia shares revenue across the Atlantic with Delta so no complaints are made.

Now here’s another piece of evidence that the US airlines don’t have an issue with subsidies — it isn’t an issue of principle, it’s about looking for a lever to get the government to benefit their business. United partner South African Airways just got a new government infusion of cash.


Copyright: tupungato / 123RF Stock Photo

Yet there’s no call to abrogate our aviation treaty with South Africa. There’s not even a press release from the Partnership for Fair and Open Skies (which in Orwellian fashion opposes Open Skies).

Sure United and American don’t fly to South Africa. But US airlines really don’t compete directly with Etihad or Qatar, whose US flights mostly carry passengers to India (including many secondary cities in India), Pakistan, and the surrounding region. South African’s US flights are limited, but so are Etihad’s. Emirates does operate two US-Europe routes.

Of course complaints about government subsidies to South African Airways aren’t going to go very far with the U.S. government — since South Africa is giving its airline about half a billion dollars to pay back Citibank. And if there’s any industry as cronyist as the big US airlines it’s the big banks.

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. Hypocrisy has worked for republicans for the last 40 years.

    From “staunch family values and pro life” politicians that frequently turn out to be cheaters, pedophiles, and abortion advocates when it benefits them, to chicken Hawks that dodged draft but crave to send others to war zones.

    I guess it was just a matter of time for other groups of smart, unethical people to realize that this tactics work with a significant percentage of the population, uneducated, ignorant, entitled poor white people that feel they are losing the only edge they had in life – be able to look down at minorities.

    The us-3 are using the exact same approach, and it will probably turn out just as fine for them as it did for trump and so many other republicans.

  2. Speaking of hypocrisy, Hillary uses her perch in the State Department to sell uranium to Russian interests while using the Clinton Foundation as her personal piggy bank. Liberals wear pussy hats inn their march on Washington but are strangely silent while their Hollywood heroes come out as rapists. Obama runs up the National Debt by $10 trillion but a $2 trillion tax package that puts my own money back in my pocket has the liberals up in arms. The people that scream the loudest are the 50% who pay $0 dollars in Federal tax. There are scumbags everywhere and they are not restricted to one party or the other.

    The US- 3 are another example of why big government is a failure and corrupt on both sides of the aisle on nearly every issue.

  3. Thanks, Gary, for the spot on call regarding the blatant hypocrisy of the US Big 3 monopolist/oligopolist seeking airlines!

    When they operated “5th Freedom” (an allowance to carry locally originating passenger traffic between destinations in foreign countries) operations, be it at hubs in foreign capitals like Tokyo (as the former US “Chosen Instrument” Pan Am did before United took over their Pacific division, and Northwest did before it merged with Delta); as Pan did in Frankfurt, Berlin-Tegel during the Cold War, and to a lesser extent at London-Heathrow; as TWA did at Paris; or for the many other “5th Freedoms” Pan Am and TWA operated around the world, including Pan Am’s, later United’s, iconic ‘round the world flights that circled the globe in each direction beginning at a US gateway heading east to London, then onwards through Asia before returning to our shores and vice versa, or the “tag ons” between Rome, Athens, elsewhere and several cities in the middle east including Cairo and Tel Aviv (among others), and still do operate, albeit much smaller in scope “5th Freedom” flights between Tokyo-Narita and other cities in Asia, such as Delta and United, at their now diminished and fading hubs at that airport, all is good…

    …but when others, in this case, airlines based in Muslim majority countries, expand, or dare to operate a handful of “5th Freedom” routes where one carrier, Alitalia, has long been flailing, and where the US airlines either offered a weak schedule pattern, or only seasonal service, New York/JFK-Milan, or another city-pair not much better, New York/Newark-Athens, then suddenly it’s all unfair…

    Yep, blatant hypocrisy…exactly what our airlines have become exceptionally good at…

    Will somebody please call these crybabies a Wambulance…it’s all becoming so terribly tiresome to hear their whiny excuse-a-thons about how best to limit competition simply to better screw their passengers.

  4. Of course, Gary, the only hypocrisy is yours, by continuing to demagogue this issue.

    As you know — or at least should know as a “thought leader in travel” — aviation subsidies are common in the international aviation industry. The South African Airways story is, sadly, typical of this situation. Take mismanagement and government corruption and throw in some competition and, voila, you have a failing state-owned airline that runs to the government for more money.

    I’m sure the US airlines would, all things being equal, prefer that South African didn’t get this aid. If they didn’t, it might be possible, for example, for UA to launch new nonstop service from EWR to JNB. But this is small potatoes. In the scheme of things, the South African aid is distressingly COMMON. It’s not really market distorting; if SAA were run like a “real company” it could probably do what it does without more gov’t assistance.

    On the other hand, let’s suppose the South African gov’t was now planning on pumping $20 billion into the airline in an effort to somehow build a giant transportation hub to ferry people around the Southern Hemisphere on below-cost flights (I’m not exactly sure where they’d go, but whatever). And let’s say they did this to expand the glory of South Africa and somehow develop Jo’burg as the economic engine of the entire Southern hemisphere. In that case, I guarantee you the USA airlines would object (let’s assume that all flights to Australia from the USA were now going to be half price due to the new South African subsidy).

    All of this is painfully obvious to ANYONE who knows anything about int’l aviation. The reason the USA carriers object to the Middle East carriers is because the level of subsidy is so mind-boggling (tens of billions of dollars of petro-money) that it not only keeps those airlines afloat, but allows them to unnaturally expand into connecting markets(like the Indian subcontinent) where they can offer service that no “normal” for-profit airline can compete. Opposing these subsidies inn’t hypocrisy. It’s common sense and good business judgment. Your willingness to continue to ignore this reality just to support your free and subsidized luxury flights around the world is sad.

  5. @iaphx

    Your logic would work well for bribes too. Can’t bribe high officials, but sure, bribe away all the middle ones, they are not taking as much money!

    Do you re-read what you post or just barf it out?

  6. @iaphx your diatribe would make sense if the ME 3 werent on a cost cutting spree for the last 4 to 6 months. If they were infinitely subsidised by petro dollars, then they would have no reason to cut costs.
    Gary has been wrong on a number of issues, specifically, Dr Dao, but he is correct on this one,.

  7. Funny and ironic thing. When I was looking at travel options immediately after reading your post, and an SAA pop up shows (thank you Google), describing it as “the most awarded airline in Africa.” Guess it is kind of like being in the prime location when you live under a bridge.

  8. Sorry, but you have no idea what you are talking about. The Gulf carriers are receiving tremendous financial backing from their governments and therefore are operating flights that otherwise would be uneconomical. Leveling the playing field is necessary to fair competition.

  9. Poor article. The middle east airlines have massive government handouts
    and could not exist with out them. The passengers to India from the
    US should be on Indian or US carriers period. Change the agreement.

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