Opinion: The Playing Field Has Always Been Uneven
U.S. industry drive against Gulf carriers shows need for an airline trade pact
Harsh Reality
If you wonder what the U.S. campaign against Gulf carriers will resemble, look back at the public relations initiatives taken by three major American airlines and labor against a foreign air carrier permit for Norwegian Air International (NAI). The new campaign will likely be on every channel, so to speak, and the only major difference between the NAI and Gulf cases will be that airlines will be in the forefront, rather than the Air Line Pilots Association.
Now that there is even a letterhead that the industry will see many times in the next months and years, it is clear that U.S. airlines are prepared to spend many millions in their efforts to find a regulatory way to stop Gulf carriers. That is what the “Partnership for Open and Fair Skies” is about. This column has recently discussed the situation and the many reactions to show its importance to the industry. Therefore a few further remarks:
The U.S. airlines—American, Delta and United—claim they are still in favor of “open skies.” But the carriers say the enormous amount in government subsidies received by their Gulf competitors justifies an exception to open skies to allow a rollback of traffic rights. That’s where things really start to get tricky from a systematic point of view: Assuming all the claims are accurate, this case is currently the most painful for U.S. and European airlines. But that in itself cannot be an argument for regulatory action. And is it the worst case ever?
Not really. The governments of India, China and South Africa, to name a few, have injected many billions into their own airlines and some continue to do so. The difference between them and Emirates—which, according to the partnership for open skies, has received $5 billion in support over the years—is that American, Delta and United airlines could not care less about another billion for Air India or South African. They just either fly below the radar or are strategically important alliance partners.
If some airlines, like Qatar or Etihad, have essentially unlimited access to equity and others don’t, it is understandable that competitors are crying foul. But it is enormously difficult to argue that a very rich investor should not put more money into an airline if he chooses. Systematically, it cannot matter whether that investor is a state or a private enterprise.
What is lacking in the airline industry is an effective international trade agreement that regulates such issues. Ideally, support for airlines should be regulated only by an international and multilateral pact.
In negotiations, more support mechanisms would be brought to the table such as the option to file for Chapter 11 bankruptcy protection in the U.S. Airlines in the rest of the world have been complaining about this process for years because they don’t have the option of ridding their balance sheets of billions in debt within a few months or a year. Even the allocation of traffic rights is an effective and popular way to support a local airline. But with no basic understanding of where and how an airline benefits and suffers, it is unlikely an agreement will be reached about what is fair.
The U.S. coalition wants to establish “a level playing field for all,” but that is wishful thinking. In the absence of a more or less global deal, the playing field will always be uneven because interests, countries, legislation and habits differ. Airlines worldwide have had to live with this situation for decades and it likely will continue for a long time.
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