Global Airlines, A fair playground?

An Open Skies Agreement between two countries, allows the respective country’s airline, either cargo or passenger operations, land at a foreign airport without excessive interference from the foreign country's government. Without the agreements, a single flight to a country can prove to be a time consuming, rigorous annoyance. With the agreement, there are no issues with, “commercial decisions of air carriers about routes, capacity, and pricing, freeing carriers to provide more affordable, convenient, and efficient air service for consumers.” (“Open Skies Agreements”, n.d.) The Open Skies Agreement between the United States, and the United Arab Emirates is currently experiencing issues. The three big US airlines, (Delta, American and United) have experiences a reduction in fares on routes they share with the Middle Eastern Gulf air carriers. This prompted an accusation by the US carriers, claiming the gulf carriers are accepting government subsidies, and that it is having anti-competitive effects. “The Americans alleged that Gulf governments had provided $42 billion in subsidies to their airlines, contrary to open skies aviation agreements.” (Kane, 2016). Emirates, Etihad Airways and Qatar Airways are the airlines in question, yet they deny the claims of government subsidization. Emirates seems to be unfazed by the accusations. They see the US claims simply as a way for them to regain the customers they have been losing to the gulf carriers. In a statement made by Emirates, they state:

“It is disturbing that Delta, United and American presume they and their partners are entitled to their existing share of traffic, as if they own their customers, when they don’t make a corresponding effort to improve their service and product proposition to win consumers’ hearts and wallets.” (Kane, 2016)

The Gulf region views the reaction of the big three US carriers as a narrow-minded view, thinking only of their company, and not of the economy as a whole.

The “Big Three” carriers have all their weight resting on the claim that the gulf carriers are violating the open skies agreement by accepting government subsidies, yet in Emirates’ rebuttal statement, they make a counter claim that, “The Legacy Carriers come to this debate with unclean hands.” (“Emirates’ Response to Claims”, n.d.) The statement of Emirates goes into detail by saying the following:

They have received billions of dollars of government support, including U.S. Government assumption of airline pension obligations, airline stabilization grants, loan guarantees, grandfathering of airport slots, bankruptcy relief from debt and other obligations, direct grants and tax exemptions to support airport development, grants of antitrust immunity to form market-dominant alliances, protection of the U.S. market from foreign competition, and the prohibition against majority foreign ownership. (“Emirates Response to Claims”, n.d.)

It is said that the US carriers have accepted over 100 billion dollars since 2002, proving that the United States is fighting against something that they, themselves are guilty of.

Another complaint, and issue faced by domestic airlines, is that foreign carriers are purchasing American aircraft, such as Boeing products, below market interest rates, causing them to be saving about 12 million more than the domestic carriers, who do not have the same interest rates available to them. This is made possible for the foreign carriers through the Export-Import Bank. The purpose of the Bank is to promote the sale, and facilitate the export of American goods, as to support American jobs, and improve the American economy. The Export-Import Bank, or EXIM describe what they do as:

EXIM fills in the gap for American businesses by equipping them with the financing tools necessary to compete for global sales. In doing so, the Bank levels the playing field for U.S. goods and services going up against foreign competition in overseas markets, so that American companies can create more good-paying American jobs. (“About Us”, n.d.)

The Export-Import Bank performs its duty by making it possible and providing incentive for foreign carriers to purchase American aircraft. The US airlines are angry that they pay more per aircraft, yet the whole system is in place, not to help an individual airline, but to put more money into the United States economy.

After reviewing the information gathered above, it is apparent that global “playing field” of the long-haul carriers is not fair. In business, almost nothing is fair, and both the US carriers, and the gulf carriers are global businesses. I do think the Open Skies Agreement should definitely make the playing field more fair, as that is the purpose of it, but it is clear that there are corners cut and misinterpretation of the agreement on the behalf of both parties. The Export-Import Bank issue, itself, does not seem unfair to me. As I stated, the purpose is to improve the US Economy, and it is doing just that. It may place foreign carriers at an advantage on a global scale, but no one is cheating the other in regards to the bank. Both the US Airlines and the Middle Eastern Airlines are very successful businesses, but to become more fair, I think they will have to find more respect for one another, yet the odds of that are slim.

References

About Us. (n.d.). Retrieved from http://www.exim.gov/about/

 Emirates’ response to claims raised about state-owned airlines in Qatar and the United Arab
            Emirates. (2015, June 29). Retrieved from http://content.emirates.com/downloads
            /ek/pdfs/openskies_rebuttal/EK_Response_Main.pdf

Kane, F. (2016, January 30). Open skies dispute between US and Gulf airlines escalates.
            Retrieved from http://www.thenational.ae/business/aviation/open-skies-dispute-between-
            us-and-gulf-airlines-escalates

Open Skies Agreements. (n.d.). Open skies agreements. Retrieved from http://www.state.gov/e/eb/tra/ata/