Release #: Vol. 84, No. 10
December 01, 2015
Guest Commentary: Building Influence
By Ambassador Charlene Barshefsky
There are many tactics that help elevate a message and push policy objectives. One notable and proven strategy is tackling a policy issue with a broad coalition of parties that aren’t ordinarily aligned. For instance, when labor and management—parties that are normally on opposite sides of the negotiating table—join forces, not just in name, but in discussions about strategy and execution, they tend to get noticed.
The Partnership for Open & Fair Skies is such a coalition. And since its creation at the start of this year, the partnership has been an effective voice for U.S. airlines and their workers. The partnership has focused on three state-owned Middle East carriers—Emirates, Qatar, and Etihad—that are using unprecedented amounts of subsidies to exploit the open and unfettered access they receive under Open Skies agreements with the United States, which are premised on the elimination of government-induced market distortions, including subsidies. Labor and management both view this abuse of the agreements as a threat to the U.S. airline industry, airline jobs, and the U.S. economy.
In the last 10 years, the United Arab Emirates and Qatar have provided more than $42 billion in subsidies that distort the international aviation marketplace. These numbers are facts—they appear in Emirates’, Qatar’s, and Etihad’s own financial statements. What else would you learn if you read these financial statements? At least two of the three airlines wouldn’t be commercially viable if not for government subsidies. The third would be smaller.
And what does more than $42 billion in government subsidies buy them? World-class airports, new aircraft, and the ability to siphon international traffic from other airlines that don’t have the luxury of billions of dollars from government treasuries. The airport that’s currently under construction in Dubai, for example, will cost at least $32 billion and be five times the size of Chicago O’Hare International Airport. It’s being designed to handle 100 A380s at the same time. That’s the kind of unconstrained, untethered growth that the subsidies make possible.
These subsidies are directed in such a way as to allow the airlines to take traffic from U.S., European, and other carriers and to shift it to Middle East hubs. Research has demonstrated that these Middle East carriers are not meaningfully stimulating new traffic. Their growth is pure share displacement. Shifting passengers to the Middle East carriers and their hubs is what it’s all about.
Case in point: In November, Delta announced the termination of its service between Atlanta, Ga., and Dubai effective Feb. 11, 2016. The company said that cancellation of the service “comes amid overcapacity on U.S. routes to the Middle East operated by government-owned and subsidized airlines.” Delta had been losing money on the route for two years, unable to compete on cost with the subsidized Middle East carriers. With each route lost or forgone by a U.S. airline, more than 800 good jobs are lost.
The harm caused by the subsidies these carriers receive is widespread. The Indian subcontinent and the Middle East are largely off limits to U.S. carriers, and transatlantic and transpacific routes are under threat. The U.S. carriers and the men and women who work in the airline industry are at risk. If nothing is done, U.S. carriers will be forced out of more routes, diminishing service, degrading their networks, and harming a vital national industry.
And that is just the effect on existing routes. What about future growth? The Middle East carriers currently have almost 600 widebody aircraft on firm order. The three major Chinese carriers—serving a country with 1.3 billion people—have fewer than 100 on order. Turkish Airlines—serving a country of 75 million—has 15. This vast disparity underscores the Middle East carriers’ outlier status and the threat they pose to U.S. carriers and U.S. jobs.
Despite much evidence demonstrating clear violations of the U.S. Open Skies agreements, nothing comes easy in Washington, D.C., even when the solution seems obvious, and rarely are decisions or remedies swift. But as advocates for U.S. airlines and their employees, we cannot give up our goal of building influence and making our collective voice heard on this critically important issue that threatens not just jobs, but an entire industry.
Ambassador Barshefsky was the U.S. Trade Representative (USTR) from 1997–2001 and the deputy USTR from 1993–1996.
This article is from the December issue of Air Line Pilot magazine, the Official Journal of the Air Line Pilots Association, International—a monthly publication for all ALPA members.-###-