US Airlines Have Brought on Newt Gingrich to Pick Your Pockets

For two and a half years the major US airlines American, Delta, and United have been arguing through their lobbying group Partnership for Fair & Open Skies for greater protectionism against rival airlines Emirates, Etihad, and Qatar because it’s somehow unfair for the most profitable airlines in the world to have to compete against much smaller airlines because they contend those arriers they contend are too subsidized. I’ve pointed out several inconvenient facts.

  • The US airlines are themselves heavily subsidized. Their losses are greater than even the most inflated subsidy claim, and they continue to receive significant support from state and local government.

  • These subsidies aren’t against US treaties. While not what I like to see, subsidies have existed across the world in aviation since the beginning of the industry both here and abroad. Our treaties simply require that airlines can set schedules and pricing on the same terms as local carriers.

  • The US airlines don’t mind it when foreign airlines are subsidized — when it benefits them. Delta owns a stake in the most heavily subsidized Chinese airline, China Eastern. Delta has a joint business venture with Alitalia which shared revenue across the Atlantic and was subsidized and controlled by Etihad. American shares revenue across the Atlantic with British Airways and Iberia whose largest owner is Qatar.

  • Any crackdown is really a move against US consumers. Without as many flights and low fares offered by Gulf competitors, Americans would have to pay more for air travel and buy their air travel from these US airlines. They’re calling for a direct tax on the American people, not the UAE or Qatar.


Copyright: idealphotographer

With their best ally — Steve Bannon — gone from the White House, Delta along with American and United have enlisted Newt Gingrich to push for their cause.

Newt Gingrich leads with his historical support for free trade, hoping you won’t realize this is blatant protectionism, using the government to take money from consumers and give it to Delta, United, and American Airlines shareholders (by limiting the flights passengers can choose, and outlawing low prices). Here, Newt, fixed it for you:

Of course Gingrich is not in fact a small government guy he wanted government to install mirrors in space to light highways and expose criminals while warning that the country is being taken over by “gay and secular fascism.”

Let’s look at what Newt has to say here.

For open markets to work as intended, however, all parties need to be operating on the same, level playing field.

As a matter of economics that’s not even true, but let’s assume that it is. Newt might then be making an argument to end US government subsidies to air traffic control (government-run), airports (government-run) and fuel (big tax subsidies to American, Delta, and United at the state level). In much of the world too there’s no equivalent of US bankruptcy, where obligations to creditors are shed and where the government (in the case of Delta, United, and US Airways) picks up billions in pension obligations as well.

One of the biggest challenges advocates of free trade must confront in the 21st century is the growing number of countries using nation-state resources – often in violation of trade deals – to give their state-owned companies huge advantages.

Note the slippery game he plays here, ‘often’ in violation of trade deals because subsidies aren’t a violation of US Open Skies treaties. That’s because airlines all over the world, from the U.S. to Pakistan and Saudi Arabia (none the subject of US airline lobbying campaigns) are subsidized.

The model Open Skies agreement, in force between the US and Qatar and between the US and the UAE, says that subsidies are only a problem when they lead to dumping, something that US airlines have long argued means pricing at a level where the carrier would lose money even at a 100% load factor. (Are these fares from U.S. airlines artificially low?)

In these cases, international competition does not create the greater efficiencies, innovation, and new demand for services that leads to a growing economy for all. Instead, since the unsubsidized competition cannot possibly compete, it leads to a hemorrhaging of jobs and wealth in the countries that do not cheat, as well as fewer options for consumers.

Except that airline jobs are at a peak. Boeing is more successful than ever in part on the backs of large orders from the Gulf airlines (notably Delta does not buy new Boeing aircraft). And the United, Delta, and American are making massive profits, indeed American’s CEO says they will never lose money again.

Open Skies agreements allow airlines, rather than governments, to make decisions about international routes, pricing, and capacity. The goal is to allow market demand rather than politics to drive these decisions, which saves customers money.

Open Skies agreements are all about limiting government interference in who can fly where and at what price. Delta, United, and American are arguing that the federal government should abrogate this agreement and place limits on Etihad, Emirates, and Qatar flying to the U.S. and the prices they can charge.

They want the Trump administration, rather than consumers, to drive these decisions which will cost consumers more money.

Of course Emirates substantially shifted its flying in the face of falling U.S. demand resulting from the US travel and laptop bans. Etihad announced the end of San Francisco service, followed by a reduction in Los Angeles frequency, and an end to Dallas Fort-Worth service. Etihad’s inflight service has seen substantial cuts as revenue has dried up and they’ve tried to stem losses from their investments in air berlin and Alitalia. And Emirates refuses to upgrade most existing Boeing 777 angled business seats and even their new luxe first class suites are set to go on only 9 planes.


Emirates Boeing 777

Qatar meanwhile is forced to maintain its flying via subsidy in the face of a massive economic blocked by the UAE, Saudi Arabia, and other neighbors which US foreign policy emboldened. Cracking down further on Qatar, the site of a major US military installation, could further destabilize the region.

Open Skies agreements allow airlines, rather than governments, to make decisions about international routes, pricing, and capacity. The goal is to allow market demand rather than politics to drive these decisions, which saves customers money.

And let’s not forget that Alaska Airlines and jetBlue benefit significantly from codesharing with Emirates, and that Fedex is able to operate its Dubai hub thanks to Open Skies.

Open Skies agreements allow airlines, rather than governments, to make decisions about international routes, pricing, and capacity. The goal is to allow market demand rather than politics to drive these decisions, which saves customers money.

That report was intellectually dishonest even fabricating quotes.

And by the way US airlines continued to operate routes while losing over $50 billion themselves in the decade between 2000 and 2009 — more money than the white paper claims Emirates, Etihad, and Qatar were subsidized.

U.S. airlines have competed against state-owned airlines for decades, but these massive subsidies are unprecedented.

When US airlines were in their own infancy the single largest customer was the US Postal Service (which awarded contracts through a corrupt process that became known as the Air Mail Scandal). American’s first major aircraft order was subsidized by the federal government’s Reconstruction Finance Corporation. Pan Am became known as The Chosen Instrument of US foreign policy and was so intertwined with the government that it was also accused of manipulating — not mere domestic policy but — US policy around the globe.

The coalition’s analysis shows that every route closure leads to a net loss of 1,500 U.S. jobs.

The math on this is ridiculous. It ignores the jobs created by routes flown by the Gulf carriers, jobs at Alaska, jetBlue, and Fedex, and that airline employment is at a peak not a trough.

This is a direct violation of our Open Skies agreements, which require parties to ensure “fair and equal” opportunities to compete.

Either Gingich is lying or he hasn’t read the treaties. There is a section called ‘fair competition’ but it doesn’t say what Delta wants it to say. The section is clear that fair competition means each airline determining the frequency and capacity of the flights it chooses to offer. The section on fair competition does not mention subsidies at all. Instead fair competition in the treaty means,
Consistent with this right, neither Party shall unilaterally limit the volume of traffic, frequency or regularity of service, or the aircraft type or types operated by the designated airlines ofthe other Party, except as may be required for customs, technical, operational, or environmental reasons under uniform conditions consistent with Article 15 of the Convention.

Note that the imposition of a unilateral limit on flights is exactly what Delta, American, and United are asking the US government to impose – a direct abrogation of the Open Skies treaty.

One might be tempted to dismiss the findings of this study because it was funded by the United States’ three major legacy carriers…

Or because it’s been thoroughly debunked.

…but other developed nations such as Canada, Japan, and China – as well as the EU – have come to the same conclusion and have already taken steps to equalize the economic playing field with the Gulf carriers.

Everyone else is being protectionist in order to subsidize their home carriers, so why don’t we, while telling ourselves in 1984 fashion we’re doing it for open competition.

Airline consumers can take solace, I suppose, that when you’re left enlisting Newt Gingrich for your cause — who didn’t even receive an appointment in the Trump administration after defenestrating himself daily during the campaign — all is probably already lost. Hiring on Gingrich should be indication alone that American, Delta, and United are not your friends. We need more competition in air travel not less even if competition is not good for Delta, American and United.

Who’s next for the Partnership for Fair & Open Skies, Chris Christie whose own Port Authority chair took bribes for state action from United Airlines? United really shouldn’t be a part of any coalition arguing that other airlines are receiving improper government favors…

(HT: @jasonclampet)

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. “hoping you won’t realize this is blatant protectionism”

    You sure are referring to trump deplorables and other ignorant, imbecile hillbillies.

    Of course they will believe in whatever comes from the mouths of unethical republicans and their new god trump.

  2. Word of the day: Kakistocracy

    A kakistocracy is a system of government which is run by the worst, least qualified, or most unscrupulous citizens.

    Spot-on description of the current administration.

  3. So my using American Airlines dollars goes to paying Newt Gingrich who is one of the nation’s biggest homophobes and White Supremacists. I guess they feel that in order to lobby the White House and the Republicans only a certified right wing bigot can get the job done

  4. Thank you Gary. Both for shining a light on one of the most unethical people to ever serve in Congress, and the airlines dishonesty. Good watchdog stuff.

  5. Wow! How revealing but not surprising, sadly. I also wonder what these legacy carrier CEO’s get paid compared to their “unfair” foreign competitors, what they pay out to stockholders and what they are paying people like Newt Gingrich to lobby for them. My guess is it would be euqal to a subsidy all on its own.

  6. You sure care a lot about your luxury free flights to — almost daily — sell your soul to these emirs.

    You may not like the major US airlines, but constantly defending the multi-billion dollar subsidies to these Middle East airlines — with garbage sanctimonious claims that everyone else has the same subsidy — is pathetic,

  7. Wow! This is an extremely complex issue, but Gary and every responder to this point addresses not the true complexity, but let’s political colors shine. Trump is not my choice for President, but that doesn’t mean he’s incompetent. Drop the politics, I’m defending no one. State the issue and then propose a better solution. Because Gingrich or Trump don’t share your views doesn’t mean they are wrong or you are right. If someone is a homophobe it doesn’t mean every though they ever had is wrong.
    Put a hand on each ear and pull it out of he sand…or wherever else it is.
    Solutions people. If you have one, tell us what it is and what we, as consumers, need to do to help make the change.

  8. There are three reasons Delta, American and United are attacking Emirates, Etihad and Qatar under the Open Skies agreement: mo’ money, mo’ money, mo’ money. These companies have Wall Street analysts, large shareholders, and consultants telling them that eliminating competition from those mid-east carriers will result in new routes with more customers and the ability to charge all customers on those routes higher prices. Led by the unscrupulous folks at Delta, these companies will say anything if they think it can get them what they want. We are in an era where facts, truth and the rule of law matter little.

  9. Great timing, this. IGingrich not only got caught out in an active affair while he was persecuting Clinton for having one, he also blew the whole GOP game admitting that the whole point of cutting taxes to the bone for the rich is to make cuts inevitable to Social Security and Medicare. Yet his idiot redneck voters who rely on both programs to survive and retire don’t even know that their party has done everything it can for 50+ years to kill both programs.

    Only the Democrats try to manage the government sensibly to protect those whose survival depends on the GOP not getting their way. But rednecks will vote against their own children’s health care to get off their hideous prejudices and spite liberals. That’s why we are written off as a modern society by all other nations which have vastly better quality of life ratings by their populations. There isn’t a mass shooting every week in happy countries where they take care of each other. Only where the lowest scum on earth ,rednecks support greedpigs.

  10. A stunning commentary by a person that follows liberal media dribble. Liberals “manage” government? Talk about mind control.
    What I’ve discovered tonight on Gary’s blog is I need to drop out. While I love to discuss politics this blog is about nothing other than people so afraid of other opinions that they have nothing to with any substance to share.
    Throwing little insults or verbal assaults does nothing to move society forward. You may guess that I’m conservative in my opinions. So of My VERY best friends, some of which I’ve traveled the world with, have different views. We’ve sat in bars all over the world and discussed our opinions, and had fun doing it.
    Here, there is no discussion, only unintelligent dribble.
    Sorry Gary, I choose to drop your blog. You accuse others of accepting money (Gingrich), but you do the same every day with your sponsors.
    Anyone that can ostracize another because they disagree on a viewpoint is an intellectual midget.

  11. Seriously, Delta?

    Pond scum like Newt Gingrich?

    Shame on you.

    Can’t wait to see how everyone in the LGBTQ community will feel about having you sponsor our Pride Marches & our other community events with this NOTORIOUS HOMOPHOBE on your payroll.

    Same applies to you, Oscar M at United…

    By week’s end, both of these airlines’ LGBTQ employee groups & the leadership at as many Pride March groups as possible around the country that these airlines seek to curry favor with will be made aware that you have this sleazy, despicable enemy of our communties doing your bidding.

    Bad enough you want to pick everyone’s pockets AND run our airlines into the ground by stepping all over the 85% of fare paying passengers…

    …but if you think the LGBTQ communities will let you hire one of our biggest enemies who is bent on running us, and our hard fought & won rights, into the ground…

    …well, then you guys done lost it and are every bit as stupid and insane as the Dotard and his Roy Moore supporting imbeciles (including Newt Gingrich) better known as the DEPLORABLES…

    **COUNT ON IT**

  12. @IAHPHX
    and I thought we were lucky and you would spare us your garbage on this one…
    Why do you read the blog if you disagree with everything?
    The big US 3 are the most deplorable entities in the country, and your bosses are corrupt incompetent pigs
    As opposed to what you try to present, you know nothing about aviation and you certainly don’t know about the economics of it
    Now go have a drink with your drunk boss DUI Parker

  13. Gary, give us travel tips and please keep your ultra liberal politics to yourself. I don’t read your blog to be lectured on the evils of conservatives and the virtues of liberals like you.

  14. @Richard – how on earth is arguing against protectionism liberal politics? Because I’ve criticized Newt Gingrich for selling out his conservative politics as a lobbyist?

    I love it when readers can’t tell where I’m coming from ideologically, this is a GREAT example 🙂

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