United’s Jeff Smisek, Delta’s Richard Anderson, and American’s Doug Parker started crowing a little over a year ago about having to compete against Emirates, Etihad, and Qatar – that it was unfair these Gulf carriers got subsidies and they didn’t.
Jeff Smisek, Doug Parker, and Richard Anderson
Since then Jeff Smisek was fired when it turned out he was the cronyist, seeking government favors and even offering kickbacks to get them it seemed.
Delta’s Richard Anderson is being retired.
And American, which seemed the most reluctant in making the case, continued to solidify and grow its partnership with Etihad (which also controls oneworld member airberlin). It continued to build on its joint venture with British Airways and Iberia whose largest single owner is Qatar. And it apparently even seriously considered a flight to Abu Dhabi.
Etihad Airbus A380 First Apartment
While it became clear that the case made against the Gulf carriers was itself a fraud (which isn’t to say there haven’t been subsidies), that the US airlines have themselves been massively subsidized, and that it was a case of selective outrage (not complaining about other state-subsidized partners, including ones part-owned by US airlines), the cry over the Big 3 Gulf carriers somewhat subsided.
Except, oddly, from Doug Parker..
Back in November he penned a cynical and misleading op-ed in the Wall Street Journal suggesting that the Gulf carriers were a threat to US jobs.
Parker and his major airline CEOs of course aren’t in this ‘for American jobs’ when major US airlines outsource maintenance work and buy foreign-made aircraft. There’s nothing wrong with that, of course, maintenance work is supervised and inspected and meets the highest standards of safety.
US airline employment is at a seven year high even as the Gulf carriers expand their presence in US markets. Alaska and JetBlue are growing as a result of their partnerships with Emirates. And the growth of Gulf carriers has meant more jobs in travel and tourism, and in aircraft manufacturing, as well as trade.
Emirates Airbus A380 Shower Spa
“This is the biggest threat I’ve ever seen to commercial aviation in the United States,” Parker said during a speech at an aviation maintenance conference in Dallas on Wednesday. “I’m sure that sounds like hyperbole, but it’s not. What’s happening is those two countries are subsidizing those three airlines to a point where they don’t need to be profitable.”
It sounds like hyperbole because it is. He’s not worried about global warming, terrorism, or risk of war in the Middle East. And in any case clearly the future cost of jet fuel and negotiations with their own labor unions are greater threats to each airline than where Emirates, Etihad, and Qatar fly or what their operating margins are.
It’s also clearly false that Emirates, Etihad, and Qatar do as they wish without regard to profit — especially at a time of declining energy prices. Emirates is profitable, Etihad is arguably marginally profitable. And if financial performance wasn’t a driver of strategy you wouldn’t see Emirates:
- Introducing the densest configuration Airbus A380 in the world, the passenger jet squeezing in the most passengers.
- Introducing a new business class seat that’s competitive only with United’s decade-old legacy Boeing 777 seats.
- Downgauging poor-performing routes like Houston – Dubai from an A380 to a Boeing 777 (a function of declines in the energy business.
- And Emirates’ home base of Dubai is even introducing new airport fees which hit the home carrier hardest.
[S]ome of the routes being flown by the three Middle Eastern carriers cannot possibly be profitable, pointing specifically to Emirates’ flight from New York’s JFK International Airport to Milan.
Of course those Middle East airlines might point to some of Parker’s Pacific expansion, including a return to Tokyo Haneda and buildup of flying to China at a time where China’s economy is slumping. Parker’s own team complains of losses from their continued flying to South America.
American Airlines earned a $7.6 billion profit in 2016. That made American the most profitable airline in the world. And they’re asking the government for special protection from competition. (Delta’s CEO was explicit on this point that the goal was fewer flights and higher fares.)
Of course American’s profit was goosed in the fourth quarter by “a $3 billion special credit stemming from a change in its tax valuation allowance.” Though obligations are shed in bankruptcy, tax loss carry forwards are not.
A nickel’s worth of free advice for Mr. Parker: your limited time is far better spent, from a business standpoint, focusing on completing the merger between American and US Airways — getting a joint seniority list for pilots — and on providing customers with a consistent inflight product (most of the legacy US Airways fleet still doesn’t have an extra legroom seating product even as you’re looking to start selling international premium economy), than contemplating the 37 cities in India you aren’t really going to serve anyway if only you could keep US passengers all to yourself.