Now that the airlines’ previously ‘secret documents’ condemning Gulf carrier subsidies have been made public (.pdf), Cranky Flier argues the US carriers have a good case, at least in part.
- He suggests the case against Emirates is weak, but quite strong against the subsidies received by Qatar and Etihad.
- He agrees with my position that the US and Gulf airlines really don’t compete directly today.
- But he believes the potential for future competition, largely on transatlantic routes between the US and Europe, make ‘unfair competition’ worthy of scrutiny
It’s worth noting that the complaints about Emirates center around government support for the aviation industry — building the Dubai airport (US airports are almost exclusively government built), giving the airport’s largest tenant a privileged position (just as Delta as the largest tenant in Atlanta has a privileged position and how domestic airlines other than American are shunted off in the E concourse in Dallas), and innuendo about opaque transactions without any proof of subsidy or transfer (that may well exist, but the paper doesn’t prove it).
The concern Cranky seemed persuaded by is that Gulf carriers could start transatlantic flights between Europe and US which would compete against US carriers. And that really isn’t happening now. This would be an issue at the point where those flights begin in a material amount. Until then the issue just isn’t ripe, and shouldn’t be a US government priority – precisely because Open Skies promotes both consumer interests and security cooperation, which are at least if not more important the protecting US private airline interests.
It’s Emirates flying Milan – New York, a flight that was controversial on the Italy side of the equation. And Cranky acknowledges Emirates isn’t really so relevant to this discussion. At this point US airlines are simply positing some theoretical future harm. You don’t go blowing up international agreements over that.
At the point where there’s meaningful competition, we really do have to look seriously at issues like consumer benefit, which don’t get as much attention because consumers don’t really have lobbyists in the manner that airlines do (concentrated benefits, dispersed costs).
And if we start to care enough to sort through whether there’s actual unfairness, I think we have to ask about the fuel tax subsidies Delta receives from Georgia, and the subsidies Delta received for its oil refinery in Pennsylvania. (These subsidies make the airlines’ white paper criticizing the Gulf carriers not paying fuel tax especially bizarre.)
When we criticize state subsidies for aircraft, we should ask about where American Airlines got the funding for its very first large aircraft order (the sleeper version of the DC-3)… the Reconstruction Finance Corporation. Indeed, commercial aviation’s launch in the US was wholly directed by the Postal Service.
The Gulf carriers might respond that US airlines received direct payment from the federal government after 9/11, and the US government as well created the Air Transportation Stabilization Board authorized to provide up to $10 billion in subsidized loans. (America West, subsequently merged with US Airways and now with American, was on such recipient.) And the US bankruptcy process, while designed to ensure creditors receive the maximum amount of funds owed, generates lower costs by rejecting commitments and debts. Indeed, one might ask the federal government about United’s pensions and US Airways pensions.
The subsidies received in the early days of the US industry (remember we’re talking about the relatively early days of the Gulf aviation industry here) seem relevant and missing from the analysis. US airlines aren’t looking for free markets, they’re looking for protection from competition.
Any international case may take place within the context of WTO rules and definitions, but the case proceeds in a political and not merely definitional context.
There are plenty of state-owned, subsidized airlines flying to the US. Many are partners of US carriers, and even have fifth freedom rights. The US has an Open Skies agreement with Saudi Arabia, a Delta partner, and especially ironic considering remarks by Delta’s CEO trying to connect Qatar, Emirates, and Etihad to the 9/11 terrorist attacks (since there’s a reasonable case to be made that at least some portion of the Saudi government tacitly supported the attacks).
Furthermore, the rhetoric used by those making the case against Gulf carriers is deplorable and xenophobic.
This is pure cynicism on the part of US airlines. If they want a real hearing on subsidies received by Middle Eastern carriers, they need to start by renouncing their own subsidies. They need to start by renouncing the protectionism that keeps foreign ownership out of the US domestic airline market. They need to start by rejecting the protectionism that limits competition at places like Dallas Love Field (where Southwest is happy to see legal limits on the number of gates, since they control 90% of them, and American is happy as well since it limits growth of competition with their hub at Dallas Fort Worth).
If they cared about free markets in aviation, they would care about free markets in aviation. Instead they want to use complaints about others’ subsidies as a fig leaf to push for greater government intervention to limit competition and harm consumers. And they should be ashamed of themselves.