James Shillinglaw | April 20, 2015 12:49 PM ET
A Disconnect in the Center Ring
Sometimes I’m motivated to write this column when I see one of our own opinion pieces in this space. In this case, I read my colleague Rich Thomaselli’s column titled “BTC, U.S. Travel Association Ruining Their Own Arguments,” which focused on sides being taken on the hot-button Open Skies debate.
Rich, who is our airlines editor, took the Business Travel Coalition (BTC) and the U.S. Travel Association (USTA) to task for using evidence that major U.S. airlines received $155 billion in government subsidies between 1918 and 1998.
BTC and USTA publicized this information to refute arguments made by American, Delta and United that the three major Middle Eastern carriers—Emirates, Etihad and Qatar—received $42 billion in subsidies over a 10-year period in their petition to have the U.S. alter existing Open Skies agreements with the United Arab Emirates and Qatar.
The major U.S. airlines say those subsidies represent unfair competition by Middle Eastern carriers, so those airline should be denied new gateways and flights into the U.S. And the U.S. government has indeed opened an investigation into the situation. Major European airlines have also convinced the EU to open a similar investigation.
While Rich said he is on record as supporting the idea of open competition, fair market and free trade, he called the argument advanced by BTC and USTA “petty” and “childish” for dredging up evidence that initially seems to be quite old. He also criticized USTA President and CEO Roger Dow for his seemingly open support of Emirates when it announced its new route from Dubai to Orlando.
Indeed, it is unusual for USTA to get so publicly involved in a fight that pits the group against the major U.S. airlines, which they supposedly represent along with the rest of the industry. But that goes to the heart of the issue: Never before has it been there such a disconnect between major U.S. airlines and the U.S. travel industry.
That has largely happened because U.S. airlines and the U.S. travel industry have very different interests. USTA, for example, wants to encourage more visitors to the U.S., which can only happen if there are more airlines and more flights to get them here. USTA also wants to greater competition in the skies, which could lead to lower airfares, more flight options and more visitors to the U.S., all of which could greatly benefit the U.S. economy.
U.S. major airlines, on the other hand, want to hold on to their lock on the market. They have finally achieved profitability after years of losses. They also have consolidated their power into three main full-service airlines (meaning ones that offer major domestic and international networks).
U.S. major airlines also have developed three large international alliances—oneWorld, SkyTeam and Star Alliance—that have created vast networks of worldwide carriers (ironically Qatar is a member of oneWorld, so I’d love to be in on meetings of that alliance).
Finally, major U.S. airlines have won approval of a number anti-trust immunity deals from the Department of Justice that allow them to directly link with major foreign carriers on marketing, routes, frequent-flyer programs and other services.
The challenge here is there doesn’t appear to be anything, beyond the influx of the three major Middle Eastern airlines, to put pressure on U.S. airlines to add more international routes and lower fares in the market. Anytime a low-cost, low-fare carrier emerges to pressure U.S. major airlines, the majors try to nip it in the bud. Just look at the efforts by major U.S. airlines and their unions to squash Norwegian Air System, the first major low-fare, trans-Atlantic carrier to emerge in years.
It all seems part of a pattern led by major U.S. airlines to stifle competition and reduce the options available for consumers to they can keep fares high and limit the number of seats on international routes. The net effect, however, is to potentially reduce the number of international visitors coming to the U.S., as well as the number of U.S. travelers going abroad. That may be good for U.S. airlines, but it is hardly good for the travel industry.
Now I’m not necessarily coming down on the side of the three Middle Eastern airlines. The U.A.E. and Qatar may very well have subsidized those three carriers for quite some time, and that may represent unfair competition in the market. At the same time, if those three airlines can produce more options in the market, I’m all for it, because there just doesn’t seem to be any competitive pressure on major U.S. airlines today.
American, Delta and United effectively represent an oligopoly in both the international and domestic markets. There may be some competitive pressure domestically from such airlines as Southwest, JetBlue, Alaska, Frontier, Virgin America and Spirit, but those carriers simply do not have the international reach that the three majors have with their routes and international alliances.
I’m very happy to see that U.S. airlines are more profitable, but if that comes at the expense of real competition, lower airfares and more routes in the market, it’s not a good thing for the travel industry.
So in summary, I would hardly call the move by BTC and USTA to release older statistics about government subsidies for U.S. airlines “childish” or “petty.” They are merely responding to U.S. airlines that produced evidence of government subsidies for Middle Eastern airlines, which has been used to push the U.S. government to review existing Open Skies agreements.
Rich is correct in noting that BTC and USTA could have used more recent evidence that the U.S. airlines were massively subsidized by the government after 9/11. Indeed, I asked USTA and they provided me with that information as well.
The larger story here, however, is the fundamental disconnect between the U.S. travel industry and major U.S. airlines. Once upon a time, we all were one industry, but the U.S. carriers at some point over the last decade or two decided their interests were not necessarily aligned with those of the U.S. travel industry as a whole.
And now USTA’s Roger Dow has effectively pointed out the same situation in his support for more competition on international air routes.
Get Travel Deals and Travel News
Latest Travel News
Features & Advice
Hotel & Resort
Airlines & Airports
Airlines & Airports
Airlines & Airports