March 17, 2018
By - Kalan Foster
Global Airlines: Is It a Fair Playing Field?
Implementing the US-UAE open skies agreement was a way to reduce the amount of responsibility and the involvement of the US government. The international air transportation sector is a very lucrative part of our industry and to avoid and political corruption it's best if they stay out of this part of the industry. The agreement, signed by the U.S. Department of State, permits the other country’s airlines to establish offices in the territory of the other Party for the promotion and sale of air transportation (US Department of State. 2002, March 11).
These are the rules listed under the open skies agreement (US Department of State. 2002, March 11):
- The right to fly across its territory without landing.
- the right to make stops in its territory for non-traffic purposes.
- Each Party shall have the right to designate as many airlines as it wishes to conduct international air transportation in accordance with this Agreement and to withdraw or alter such designations.
- On receipt of such a designation, and of applications from the designated airline, in the form and manner prescribed for operating authorizations and technical permissions, the other Party shall grant appropriate authorizations and permissions with minimum procedural delay.
- While entering, within, or leaving the territory of one Party, its laws and regulations relating to the operation and navigation of aircraft shall be complied with by the other Party's airlines.
- Either Party may request consultations concerning the safety standards maintained by the other Party relating to aeronautical facilities, aircrews, aircraft, and operation of the designated airlines.
- The airlines of each Party shall have the right to establish offices in the territory of the other Party for the promotion and sale of air transportation.
- The airlines of each Party shall be permitted to pay for local expenses, including purchases of fuel, in the territory of the other Party in local currency.
The dispute between the US's three largest airlines and their overseas counterparts has been ongoing for years. The government has decided not to intervene and revoke the open skies agreement because of the dispute. There are no provisions anywhere in the open skies agreement regarding subsidies, the goal for US air carriers seems to be to create and issues to create reform for the open skies agreement. The case they have brought to the UAE Ambassador is that these air carriers should be considered unfair competition and removed from the agreement (Townsend, S. 2017, December 04). Fly Emirates and Qatar Airways do in fact receive subsidies from their government, but because there aren't any provisions in place to negate the increase in competition US air carrier have been lobbying the UAE Ambassador stating that these practices are unfair.
There are several US Air carriers that receive subsidies from our government. Delta, JetBlue, and American airlines all receive subsidies, but it's not as nearly as much as their middle eastern counterparts (Flows, C. 2016, November 17). Delta has decided to target these airlines specifically because they are funded by their government, but they also partner with Chinese competitor that provide unfair rates. Unfortunately, our government can't pay these airlines huge subsidies because we have plenty of other issues outside of the aviation sector.
The Export-Import bank allows air carriers to take out loans and finance projects and these rates are guaranteed to be below market values to foreign buyers. Foreign companies buy their aircraft from here and export them back overseas because its cheaper and they receive a lower export tax (Export-Import Bank of the United States. n.d). Buying these aircraft at a cheaper rate allows them to sell cheaper faires making it more difficult for US Carriers to compete. This option is unavailable to US air carriers become they pay US taxes anyways and its suppose to increase the profit of these manufacturers.
Norwegian Air Internation (NAI) has gone years without being approved by the US to participate in the open skies agreement. They want to provide direct flights from Cork and Shannon to Boston for more affordable rates, the average cost of a round-trip ticket is about $400, NAI has projected around trip flight would cost around $140 (Posaner, J. 2016, September 02). Emirates and Qatar are a huge threat to the industry and they have the potential to ruin international trade between the US and the middle east and that's another reason why Delta has been trying to create more pressure.
These issues are like walking on a tightrope, I want to say that they aren't playing fair but they aren't breaking any laws. I think its safe to say that these international air carriers don't have a business code of ethics and they aren't professional on that level of thinking but they are within their rights. I think the US Government should do what they can to ensure that our industry continues to thrive if these impacts are industry enough to cause job shortages or the loss of businesses I believe at that point they should intervene. Its very important to put America first in that regard but until it gets to that point I believe the answer to this question lies in the future.
These issues are like walking on a tightrope, I want to say that they aren't playing fair but they aren't breaking any laws. I think its safe to say that these international air carriers don't have a business code of ethics and they aren't professional on that level of thinking but they are within their rights. I think the US Government should do what they can to ensure that our industry continues to thrive if these impacts are industry enough to cause job shortages or the loss of businesses I believe at that point they should intervene. Its very important to put America first in that regard but until it gets to that point I believe the answer to this question lies in the future.
References
US Department of State. (2002, March 11). Air transport agreement: U.S. UAE air transport agreement of March 11, 2002. Retrieved March 17, 2018, from https://www.state.gov/e/eb/rls/othr/ata/u/
Townsend, S. (2017, December 04). US-UAE Business Council optimistic Open Skies Agreement will remain. Retrieved March 17, 2018, from https://www.thenational.ae/business/us-uae-business-council-optimistic-open-skies-agreement-will-remain-1.68099
Flows, C. (2016, November 17). Government Airline Subsidies... So What? Retrieved March 18, 2018, from https://www.forbes.com/sites/realspin/2016/11/17/government-airline-subsidies-so-what/#5dc514671f5f
Export-Import Bank of the United States. (n.d.). Export Finance Solutions to Increase Sales for U.S. Businesses [PDF file]. Retrieved march 17, 2018, from https://www.exim.gov/learning-resources/publications
Posaner, J. (2016, September 02). Norwegian airline clouds open skies. Retrieved March 17, 2018, from https://www.politico.eu/article/norwegian-airline-nai-ireland-us-open-skie
While they may not be breaking laws per se, what they are doing is technically not right. The Open Skies need to be enforced, think of it like throwing water balloons at the plants of your neighbors house, it's still a threat and it can potentially damage your house once the water balloon gets too close. They are that close.
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