The views expressed by contributors are their own and not the view of The Hill

Don’t let the aviation industry follow the shipbuilding industry’s decline

For decades, Bath Iron Works in Maine was a legendary builder of trawlers, freight steamers, and container ships, helping to expand U.S. exports and the global economy. Today, commercial shipbuilding by Bath Iron Works and other once-proud shipyards across the U.S. have been gutted thanks to massive and unrelenting foreign subsidies. U.S. airlines are also facing a subsidy threat, but not if the Obama administration takes immediate action.                   

Foreign subsidies present a real danger to U.S. airlines. Over the last decade, Qatar and the United Arab Emirates have provided over $42 billion in subsidies and benefits to their state-owned airlines. Those subsidies not only distort the market, but violate the Open Skies agreements these countries signed with the United States.  

{mosads}Thankfully, Congress isn’t standing on the sidelines. Over 260 House members and 22 senators have sent letters to the secretaries of the Departments of Transportation and State calling on the government to act.  

Companies cannot and should not be forced to compete against countries; that is not how a fair market operates. Any government providing unlimited resources to a company does so with the intention of harming fair competition.  

A compelling and prescient “cautionary tale” of commercial shipbuilding’s decline is summarized in a recent study from Aaron Klein, former deputy assistant secretary for the Department of Treasury and chief economist of the Senate Banking, Housing and Urban Affairs Committee. Klein describes the decline of U.S. commercial shipbuilding at the hands of subsidized competitors and highlights the clear parallels to the massive amounts of financial support the UAE and Qatar are lavishing on Qatar Airways, Etihad Airways and Emirates. 

The numbers are stark. In 1975, U.S. companies built 77 large commercial ships; in 1990 they built just three.  Although the global economy was changing, Klein notes that “one policy decision stands out” – the lack of a U.S. response to the huge subsidies that other countries – particularly Japan and South Korea – were providing their shipyards.  Today, those two nations have a 64 percent global market share in commercial shipbuilding, while the U.S. has plummeted to less than one-third of one percent.   

That decline resulted in a loss of hundreds of thousands of American jobs. Just ask someone from southeast Pennsylvania or at Bath Iron Works about the old days. Those communities once thrived thanks to a healthy commercial shipbuilding industry and today rely almost exclusively on U.S. military contracts.  

The U.S. airline industry is already starting down a similar path. Just this month, Delta announced plans to end its Atlanta-Dubai route, noting the challenges of competing with government-sponsored airlines. Over the years we’ve seen a steady decline in U.S. carriers’ service to places like India as Gulf carriers use subsidies to conquer the market. Delta and American have been forced to wholly abandon their service to India, because Gulf carriers have grabbed the U.S.-India market.  

Because airline networks are interconnected, the decline of international routes decreases service to small and medium-sized communities across the United States, resulting in the loss of American jobs.  In his report, Klein estimates that the disappearance of a single daily round-trip international flight would result in the loss of 1,700 to 2,200 jobs. 

The United States government should do whatever it takes to prevent further damage to U.S. carriers. In response to the concerns of American Airlines, Delta Air Lines, and United Airlines, the government created a public docket to solicit comments. Over a nearly four-month period, more than 4,000 comments were submitted. Nearly three-quarters of the comments urge the United States to level the playing field for American businesses and workers. Now that the docket has closed, it’s time for the administration to swiftly review the issue and request consultations with the UAE and Qatar to address the unfair subsidies and to protect the American jobs at risk.  

Nearly 40 years ago, Congress deregulated the domestic airline business, and U.S. carriers learned to compete.  But as Klein clearly explains, our airlines cannot compete with state-owned airlines with unlimited resources.  Now the U.S. government must act to protect the competitive international marketplace, remove undue government influence, and preserve a level playing field for American businesses.

Britton is an adjunct professor at the McDonough School of Business at Georgetown University.  He has worked in and near airlines since 1984, including 22 years at American Airlines.


More Economy & Budget News

See All

Most Popular

Load more


See all Video