Thursday, June 25, 2015

OPINION: US airline execs barking up the wrong tree

The heads of the major U.S. airlines have been making a fair bit of noise lately about an “unfair advantage” enjoyed by Persian Gulf airlines and are urging the Obama administration to freeze new flights by those carriers into the United States. The problem is, they are missing -- or perhaps not admitting -- an important point.

Delta 777 on take-off
Photo provided by Delta Air Lines
A white paper issued jointly by the three major U.S. airlines in January charged that the airlines in question – Emirates, Etihad Airways and Qatar Airways – are subsidized to one degree or another by their governments. That document said, “their government owners have fueled their operations and their rapid growth with over $40 billion in subsidies and other unfair government-conferred advantages in the last decade alone,” a charge Emirates strongly denies.

That white paper also says the three Gulf airlines are growing at a rate that substantially exceeds global economic growth, which drives growth in demand for air transport services. That means those airlines must take passengers from other countries’ carriers, the U.S. airlines asserted.

Increased capacity and competition puts downward pressure on all fares; it is basic economics. And while lower fares will affect the profitability of U.S. airlines on the routes affected, principles of competition will keep overall fares more or less on par from one carrier to the next. To the point at hand, a check of the websites of Delta Air Lines (NYSE:DAL) and Emirates shows that non-stop fares from New York’s John F. Kennedy International Airport (JFK) to Milan, Italy’s Malpensa Airport (MXP), a route on which the two carriers compete, are in the same general range.

Using a sample trip departing JFK on Sept. 6 and returning Sept. 12, main cabin fares on Delta were either US$1,045 or $1,678, depending on which of the two daily flights was chosen, with Emirates’ main cabin fare of $1,378 for its single daily flight.

Emirates A380 in flight
Photo provided by Emirates
Business class passage on Emirates was quoted at $4,786 for the round trip, compared to either $5,604 or $6,166 for Delta.

According to SeatGuru.com, Delta’s Standard Economy seats are an inch wider than Emirates, but Emirates offers more legroom. Delta offers Business Class passengers more space for the higher fare. Finally, Emirates offer the option of traveling First Class while Delta does not.

With no clear winner when comparing price, space or schedules, why are the American airline executives fearful of the foreign-flagged carriers? Better service.

While I have not yet had the opportunity to fly any of the three Gulf carriers, everyone I have spoken to who has flown any of them raves about their service. The results of the 2015 SKYTRAX World Airline Awards, which are based on the opinions of travelers from over 160 countries, bear that out.

In the “World’s Best Airline” category, the first U.S. airline to show up is Virgin America, at No. 26. While Delta was first among the “big three U.S. carriers,” it was ranked No. 45 among the world’s top 100 airlines.

The three airlines that are drawing the ire of U.S. airline executives occupied the No. 1, No. 5 and No. 6 spots (Qatar, Emirates and Etihad, respectively). No. 45 is a long way behind those rankings. Even farther behind are United Airlines (NYSE:UAL), which ranked No. 60 and American Airlines (NYSE:AAL) at No. 79.

Qatar Airways was ranked No. 6 in the World’s Best Cabin Staff category, and Emirates, Qatar and Etihad were ranked Nos. 1, 2 and 5 respectively in the category of Best In-Flight Entertainment.

Customer service is clearly where U.S. airlines are missing the mark.

If U.S. airlines want to ensure a level playing field with the Gulf airlines – or most non-U.S. carriers, for that matter – they need to put on their big boy pants, stop asking Uncle Sam to intercede on their behalf, and step up their game in terms of the service they offer. With all other things being more or less equal, only by offering excellent service can they increase the number of seasoned travelers who will choose to fly an American carrier when they have the option of a plane flying a foreign flag.

Visit my main page at TheTravelPro.us for more news, reviews, and personal observations on the world of upmarket travel.

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