Tuesday, January 24, 2017

Editorial calls US airlines’ rhetoric re: new Gulf carrier service ‘disgraceful’

The following is an editorial by the founder of the Business Travel Coalition (BTC), and published here with its express permission.

By Kevin Mitchell
Founder, Business Travel Coalition

Emirates Airline [on Jan. 23] announced new daily service to begin in March between Dubai [(DXB)] and New York Newark [Liberty International airport (EWR)] with a stop to pick up passengers in Athens [International Airport in Greece (ATH)]. This service represents a commercial aviation right negotiated between the United States and the United Arab Emirates, and codified in an Open Skies agreement. A Fifth Freedom* [of the air, enumerated in the Manual on the Regulation of International Air Transport] allows a carrier to transport revenue traffic from its home country to a second country and onto a third country. It is a core element of the 120 U.S. Open Skies agreements. This traffic right permits an airline to initiate service in unserved or underserved markets benefiting consumers, communities and businesses. Emirates' flights will provide year-round service between Greece and the U.S. for the first time since 2012.

Emirates A380 at LAX
Some U.S. airlines responded immediately with tired and grossly misleading protectionist rhetoric that 1) Emirates is “flagrantly violating its Open Skies agreement with the United States,” 2) Emirates, Etihad Airways and Qatar Airways (the “Gulf carriers”) have received $50 billion in government subsidies and 3) “for every international flight that U.S. airlines are forced to close due to subsidy-fueled Gulf carrier expansion, economists estimate that over 1,500 American jobs are lost.”

First, that an airline can be in violation of an Open Skies agreement in the exercise of its negotiated right is patently false and grossly hypocritical. Indeed, the Japan-U.S. bilateral air transport agreement provides unlimited fifth freedom traffic rights for U.S. air carriers serving destinations in Far East Asia beyond Japan. For decades, U.S. airlines such as Northwest, United (NYSE:UAL) and Delta (NYSE:DAL) have offered Fifth Freedom flights when it made commercial sense to do so. In fact, Delta still has a significant Fifth Freedom operation at Tokyo’s Narita [International Airport (NRT)].

Last year during its campaign opposing greater competitive choice for consumers traveling to Tokyo Haneda [Airport (HND)], Delta claimed such flights would put its Narita Fifth Freedom hub at risk because in 2015, 64 percent of all Delta passengers landing at Narita connected onto Delta Fifth Freedom flights to six Asian cities served by Delta connections from Shanghai and Taipei to Manila and Osaka.

Some U.S. airlines take selective and inconsistent positions, taking advantage of Fifth Freedom rights when it benefits them and opposing them – and seeking to deprive consumers, businesses and shippers of the competitive choice they provide – when they do not.

Second, the Gulf carriers have all provided extensive refutation of the claim of $50 billion in government subsidies during the early years of their development and today. That’s not to say that it is not in most governments’ strategic interests to support their fledgling commercial airline industries. Indeed, the U.S. Congressional Research Service reported on massive government subsidies and financial aid to the U.S. airline industry totaling, conservatively, some $155 billion dollars through 1998 in support of that sector’s formation and development. A second recent academic analysis adds additional evidence to bring U.S. airlines’ subsidies and unique advantages to $226 billion dollars through the past couple of years.

Third, the unsupportable and widely discredited claim that 1,500 jobs are lost for every international flight U.S. airlines cancels due to Gulf carrier competition is a silly canard as there is a de minimis number of markets where U.S. carriers have been or are currently competitive rivals with Gulf carriers. Moreover, earlier in their anti-Open Skies campaign these same carriers claimed that the number of job losses per flight was 800 calling into question the credibility of any numbers they assert. Over the years U.S. carriers have largely chosen to ignore markets Gulf carriers serve, or have ceded them to their antitrust-immunized alliance partners. What’s more, U.S. airlines cannot point to a single commercial aviation job lost. In fact, it is just the opposite.

Supported by Gulf carrier-generated U.S. aviation jobs, the U.S. government reported [recently] that, “U.S. scheduled passenger airlines employed 3.7 percent more workers in November 2016 than in November 2015, the U.S. Department of Transportation’s Bureau of Transportation Statistics reported... November was the highest monthly FTE total (416,046) since January 2005 (417,789) and was the 37th consecutive month that U.S. scheduled passenger airline full-time equivalent employment exceeded the same month of the previous year.”

Finally, U.S. Open Skies policy represents the Gold Standard for President Trump-envisioned international bilateral trade agreements that, is this instance, provide consumers new and better competitive choices; generate middle-class aerospace and travel and tourism job growth in communities across the country; support local economic stability and growth; drive a better balance-of-trade through foreign tourists’ dollars; and provide the marketplace discipline necessary to encourage efficient, innovative commercial and cargo air transportation services.

ABOUT BTC
Founded in 1994, the mission of Business Travel Coalition is to interpret industry and government policies and practices and provide a platform so that the managed travel community can influence issues of strategic importance to their organizations.

Editor’s note: There are a total of nine “Freedoms of the air” enumerated in the Manual on the Regulation of International Air Transport published by the International Civil Aviation Organization.

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



Photo by Carl Dombek
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