After Qatar Airways placed an order for up to 100 Boeing planes on Friday, Delta CEO Ed Bastian returned to his soap box crusading against having to compete against smaller and less successful airlines that he claims are as subsidized as Delta is.
Etihad Airways and Emirates airline had received $50 billion in illegal subsidies, financing that allows the carriers to offer some 30 flights a day to the United States at fares substantially below what U.S. airlines can offer.
Of course some of those subsidies have come from the US government’s Export-Import Bank and the US-Qatar and US-UAE Open Skies agreements don’t actually have a clause in them disallowing subsidies (or else the US itself would be very much in violation). And the US airlines’ white paper asserting these subsidies fabricated quotes.
Here’s the US-UAE Open Skies Treaty (.pdf) The closest it comes is to require each government to permit ‘fair competition’ — but there’s no reference to subsidies, instead this means that a nation’s airlines are permitted to operate unencumbered.
What Delta, American, and United airlines asked for — and received — was ‘consultations’ under Article 13 of the treaty, but those consultations don’t allege violations of the treaty itself.
Indeed Delta received subsidies from Pennsylvania for its oil refinery and received fuel tax subsidies from Georgia for years. The federal government assumed billions in pension liabilities off Delta’s balance sheet. And though bankruptcy shed obligations, the airline still got to keep its net operating losses to avoid paying income tax on profits for years (in other words, the losses were wiped clean but they still got to use them for tax purposes, a la Donald Trump).
US airline employment is at an all-time high, Delta is off of its busiest summer ever, and US airline have been making greater profits than any airlines in the history of the world. Yet we’re supposed to feel sorry for them. And here’s what they’re asking for: limits of flights that US consumers can choose from, and higher airfares that US passengers have to pay.
Delta’s CEO has no problem with subsidies. They own a stake in China’s most subsidized airline, they share revenue through a transatlantic joint venture with Alitalia which is bankrolled by Etihad — one of the very airlines the US carriers complain about being subsidized. What Delta really mean is they only like subsidies that benefit them.
Though their previous CEO invoked 9/11 as a reason to go after Emirates, Etihad, and Qatar they continue to partner with government-sponsored Saudia… a government at certain levels which appears to have actually been complicit in 9/11.
They simply want to use the government towards their own ends. They see government as a competitive tool. Bastian gives away the store when he explains that the Gulf airlines are too successful:
The United Arab Emirates and Qatar together have a population the size of the U.S. state of Ohio, but “they have more widebodies on order than all the Chinese airlines and U.S. airlines combined,” Bastian said at an event in New York. “That doesn’t sound fair, that doesn’t sound free,” he said.
Bastian says these airlines are too big and too successful and he wants the US government to do something about it. He used to complain that the Gulf carriers’ product was simply too good, it had to be subsidized, but soon Delta will have the only business class suites with doors.
But is he just making up claims about his competitors here? Bastian seems to think that if he just repeats false claims enough times people will think it’s true and his side will win. Let’s look at total aircraft orders:
- Emirates has about 250 planes on firm order and about that same amount in service. Qatar has about 220 on order and a current fleet around 150 planes. The entire current fleet and order books of Emirates and Qatar total only the mainline fleet size of Delta (without any of Delta’s own aircraft orders) and without accounting for Emirates and Qatar aircraft retirements.
- Since Air China has 175 planes on order; China Eastern (which Delta partly owns) has about 230; China Southern has 80 on order; Hainan Airlines has 50 on order; and Xiamin has 65 Chinese airlines have demonstrably more aircraft on order than Emirates and Qatar and this doesn’t count any other Chinese carriers. And it doesn’t count the aircraft orders of US airlines, either.
- In fact Delta has more planes on order than either Qatar or Emirates. And Delta and American have more planes on order than Qatar and Emirates combined, without even adding in other US airlines like United.
But what are facts when you’re on a quest to use the government to rob the pocketbooks of your customers? Remember Delta has said the whole point of the exercise is to limit their customers’ flight options and raise prices.
To date Delta’s complaints have gone nowhere but their CEO is hopeful that Donald Trump’s anti-foreigner rhetoric on trade will help his cause once the election is over.
(HT: Point Me to the Plane)