Delta Air Lines recently announced that profits more than tripled during what the company CEO hailed as the strongest March quarter in Delta history. So if airlines are flying high on record profits, why are they working to block new competition, limit traveler choice and reduce capacity in key markets?
Over the last few months, the U.S. legacy airlines (American, Delta and United) have launched a furious lobbying campaign to persuade the U.S. government to keep competitors from expanding in the U.S. They are demanding that the government take the unprecedented step of freezing new routes for three Gulf carriers—Emirates, Etihad and Qatar Airways—effectively revoking our “Open Skies” agreements with the United Arab Emirates (UAE) and Qatar.
The more than 100 Open Skies agreements the U.S. has negotiated with countries around the world represent the cornerstone of airline competition. Open Skies agreements permit free-market access in international aviation, eliminating government control over routing, frequency and pricing. Competition drives down prices—which is why airfares are 32 percent lower on Open Skies routes compared to regulated routes, delivering billions in savings to American passengers.
Open Skies has also opened more U.S. cities to the international travel market. Cities like Dallas, Detroit, Las Vegas, Memphis, Minneapolis, Portland and Salt Lake City now enjoy new or enhanced direct connections to international destinations—a huge boost to local economies.
Under Open Skies, a record 75 million international travelers visited the U.S. in 2014 and spent $180 billion on travel goods and services, directly supporting over one million U.S. jobs. We are well on pace to reach 100 million international visitors a year by 2021, the goal set by the Obama administration. But without Open Skies, that milestone is in peril.
The Gulf competitors that the legacy carriers seek to block are responsible for bringing over 140,000 visitors to the U.S. last year, giving us crucial access to the booming travel markets of India, Asia and the Middle East. These visitors spent about $1 billion, which generated over $2 billion in total economic output and supported 15,000 American jobs.
No wonder Open Skies has enjoyed more than 20 years of uninterrupted bipartisan support.
The legacy carriers themselves were 100 percent behind Open Skies when these agreements allowed them to break into the European Union and Central and South America, enabling them to evolve into global powerhouses. They even supported Open Skies agreements with the U.A.E and Qatar and voiced no concerns about the Gulf carriers—until they started to compete.
Yet, Delta, United and American show little interest in competing in many markets the Gulf carriers serve. On the very day Delta announced record profits, the airline pledged to cut capacity by 15 to 20 percent in India, the Middle East, Japan and Africa.
The U.S. legacy carriers claim overturning Open Skies is necessary because the Gulf airlines receive government support. The Gulf carriers disagree, but the subsidy issue is a red herring. Once you scratch the surface, it’s quickly evident that nearly every airline affected by Open Skies receives some form of government support, starting with Delta, United and American.
A partial list of the U.S. legacy carriers’ subsidies over the past two decades includes: billions in direct payments and loan guarantees after 9/11; lenient bankruptcy laws that let U.S. carriers wipe billions in debt off their balance sheets and transfer billions in pension liability onto U.S. taxpayers; unique antitrust immunity that allows airlines to coordinate prices and capacity with their European airline partners; pension bailouts; plus many other subsidies.
If the U.S. carriers wish to protest the subsidies they charge the Gulf carriers with receiving, there is a mechanism for filing a formal complaint and triggering an investigation by the U.S. Department of Transportation. Unfortunately, they have chosen to spin and lobby than to prove these allegations.
Make no mistake: we need a globally competitive U.S. airline industry. Rather than pursue protectionist policies, we encourage U.S. airlines to pursue policies that are pro-competition, pro-growth and pro-traveler. Undermining Open Skies may reduce competitive pressure on U.S. carriers, but the cost to travel consumers and the U.S. economy is much too high.
Dow is president and CEO of the U.S. Travel Association.