U.S. Airline CEOs go Head to Head Over Open Skies

GettyImages-88387627-compressorSparks flew at the annual Chamber of Commerce Aviation Summit in Washington last week over whether the Trump administration should restrict Middle Eastern carriers’ access to American skies.

The tussle between airline CEOs fits into a broader debate over free trade and protectionism that also has pitted the leaders of the country’s manufacturing and retail sectors against one another.

On one side of the skirmish are the country’s three biggest commercial carriers—American, Delta and United Continental. They argue that Emirates, Etihad and Qatar Airways are unfairly subsidized by their governments and therefore shouldn’t be allowed to compete in U.S. airspace.

On the other side are many other American carriers—including Jet Blue, FedEx, Alaskan and Hawaiian. They argue that open competition allows smaller players to expand their networks through alliance partnerships and keeps transport costs down for the public.

“OUR HUB-AND-SPOKE SYSTEM WILL FALL APART. IT IS THAT SERIOUS.”

The issue came to a head in January, when Emirates announced it had launched a Dubai-to-Athens-to-New York service—its second transatlantic route, in addition to Dubai-to-Milan-to-New York.

American Airlines CEO Doug Parker described the move as a “shot across the bow”, especially given the company counts airports in New York among its 10 flying hubs. “Our hub-and-spoke system will fall apart. It is that serious,” he told the conference.

The Indian market had already been taken away from U.S. carriers, Parker said, while warning that Dallas-to-Paris could be next.

The extent of subsidies to carriers in the United Arab Emirates and Qatar “goes beyond anything I have ever seen before,” United Continental CEO Oscar Munoz said. In a recent submission to Secretary of State Rex Tillerson, the three airlines claimed their Middle Eastern rivals benefited from more than $50 billion in subsidies since 2014.

The Middle Eastern airlines deny this, claiming their governments are simply investing in their industries with an expectation of a financial return. Smaller American airlines, meanwhile, have formed alliances with foreign carriers, including from the Middle East, to expand their customer offerings.

“This is a network business,” Alaska CEO Brad Tilden told the conference. “What if your cellphone was better than anyone’s cellphone, but you could only use it in Seattle or Takoma? That’s the position the smaller airlines find themselves in,” he said.

The three big airlines claim that a weakening of their position would threaten thousand of jobs. JetBlue CEO Robin Hayes countered by claiming the opposing airlines employed a combined 900,000 people, or three times more the number employed by American, Delta and United Continental.

After the conference, the smaller airlines lodged a joint press statement, arguing their larger competitors were trying to weaken the competition.

“The legacy carriers claim to support Open Skies and competition, but the reality is their demands don’t match their rhetoric, it said. “Instead of going through traditional channels to address alleged subsidies, the legacy carriers have made political demands that would jeopardize the benefits Open Skies agreements bring to American workers, families and communities.”

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