Global Airlines: Is it a Fair playing Field

1.      The US-UAE Open Skies Agreement is not unique in its creation. The United States has many Open Skies Agreements with a multitude of countries. According to the U.S. Department of State (Open Skies, 2017), these agreements:

provide rights for airlines to offer international passenger and cargo services. They are pro-consumer, pro-competition, and pro-growth. They include reciprocal obligations to eliminate government interference in commercial airline decisions about routes, capacity, and pricing, so airlines can provide more affordable, convenient, and efficient air service to consumers, promoting increased travel and trade, and facilitating broad economic growth. Open Skies agreements improve flexibility for airline operations, expand cooperative marketing opportunities between airlines, enable global express delivery cargo networks, liberalize charter regulations, and commit both governments to high standards of safety and security.

Generally speaking, the agreements are made to promote aviation, making it fairer among the airlines, and to benefit the consumers and economies of the countries within the agreement. This particular agreement’s goals, per the agreement itself (Air Transport Agreement, 2002), are the following:

·       to promote an international aviation system based on competition among airlines in the marketplace with minimum government interference and regulation

·       to facilitate the expansion of international air transport opportunities

·       to make it possible for airlines to offer the traveling and shipping public a variety of service options at the lowest prices that are not discriminatory and do not represent abuse of a dominant position, and wishing to encourage individual airlines to develop and implement innovative and competitive prices

·       to ensure the highest degree of safety and security in international air transport and reaffirming their grave concern about acts or threats against the security of aircraft, which jeopardize the safety of persons or property, adversely affect the operation of air transportation, and undermine public confidence in the safety of civil aviation

Unfortunately, it appears as if the UAE is not holding its end of the agreement. According to Correll of the Washington Examiner (2018), Emirates and Etihad Airways have been receiving vast amounts of subsidies from the UAE, totaling over $50 billion; a direct violation of the agreement.

2.      No current U.S. long-haul airline participating in these agreements is receiving subsidies, at least subsidies that are public knowledge, unless the Essential Air Service program is included. This program allows for passengers to fly into smaller communities, which air carriers wouldn’t normally fly to due to the anticipated cost being too great for the consumer to pay. As a result, the U.S. government will pay for excess costs compared to what is charged to the consumer. However, in the past, U.S. carriers have received subsidies. The Air Transportation Safety and Stabilization Act passed shortly after September 11, 2001 did provide a massive $15 billion subsidy / bailout to the airlines due to the resulting crash of the airline industry after the airliners that were hijacked destroyed the twin towers. This is not what I’d consider a violation of any Open Skies Agreement however, due to the extenuating circumstances. According to a WikiLeaks document from 2009, published by Schaal of skift.com (2015), for “U.S. aviation, including commercial airlines, the FAA, and airports, received $155 billion in federal direct spending from 1918 to 1998.” This spending is clearly due to the vast improvements and changes made to the aviation sector in the United States in the 20^th century.

3.      The Export-Import bank “provides taxpayer-backed loans and loan guarantees to foreign countries and companies for the purchase of U.S. exports” (Quinn, 2015). In addition, the Export-Import bank has allowed the “foreign airlines [to benefit] from billions in loans and loan guarantees from the Export-Import Bank over the years” (Quinn, 2015). The Export-Import bank benefits companies, such as Boeing in this example, so that foreign carriers can afford to purchase Boeing aircraft at reduced interest rates. However, if a U.S. carrier wanted to do the same, they would not be able to receive these same rates, thus creating an unfair advantage for the foreign carriers, at the expense of domestic carriers, and at the benefit of foreign carriers and domestic companies like Boeing.

4.      As I stated above, Emirates has been provided governmental subsidies in violation of our Open Skies Agreement. Qatar Airways has also benefitted from governmental subsidies. Norwegian International Airlines has been heavily subsidized to provide dirt cheap airfare to and within the U.S., creating an unfair playing field. The Open Skies Agreement "[allows] Norwegian Airline International (NAI) to reap the benefits of [the] agreement, while simultaneously breaking the outlined code of conduct regarding labor" (Zandamela, 2017). These are the current issues and complaints domestic carriers and lawmakers are talking about, which of course, the international countries involved and foreign air carriers that benefit, deny.

5.      Regarding the fairness of the global playing field of long-haul carriers, I don’t think it will ever be fair. There are so many different carriers with many routes, many governments and regulations involved, and a complex environment that prevents every stipulation of every agreement from being followed. Countries always want to have the edge over the other and will utilize every means possible to get the better side of the agreement, whatever it takes…at least until they are caught. And at that point, they will find another way to cheat. Agreements are great, but there are always people with ulterior motives who want to undermine the other party of the agreement they have promised to uphold. I say we continue to make and fine-tune these agreements and try to catch those found to be in violation of the agreements, and to blacklist them from the agreements via the international community of countries involved. That would get the particularly bad-behaving country or carrier to be put in its place and straighten up.

References

AIR TRANSPORT AGREEMENT BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE UNITED ARAB EMIRATES[PDF]. (2002, March 11). U.S. Department of State.

Correll, D. S. (2017, December 02). US airlines at odds over aviation agreements with Qatar and UAE. Retrieved March 19, 2018, from https://www.washingtonexaminer.com/us-airlines-at-odds-over-aviation-agreements-with-qatar-and-uae

Open Skies Partnerships: Expanding the Benefits of Freer Commercial Aviation. (2017, July 05). Retrieved March 19, 2018, from https://www.state.gov/e/eb/rls/fs/2017/267131.htm

Quinn, M. (2015, April 17). Gulf Airlines Win Big With Subsidies, Taxpayer-Backed Loans. Retrieved March 19, 2018, from https://www.dailysignal.com/2015/04/13/bank-rolled-how-foreign-airlines-win-big-with-government-subsidies-and-u-s-taxpayer-backed-loans/

Schaal, D. (2015, April 08). WikiLeaks Disclosure Shows U.S. Airlines Received Billions in Subsidies. Retrieved March 19, 2018, from https://skift.com/2015/04/09/wikileaks-disclosure-shows-u-s-airlines-received-billions-in-subsidies

Zandamela, T. (2017, April). Norwegian Airlines International's Violation of the US/EU Open Skies Agreement. Retrieved March 19, 2018, from https://scholarsarchive.byu.edu/byuplr/vol31/iss1/16/