Watching Out for American Jobs

Uh oh, American jobs are at stake. Again.

Or so the major domestic airlines—and the elected officials closest to them—would have you believe.

The latest endeavor to save American jobs from evil international interlopers is a neatly worded provision hidden deep within the 515-page Senate Tax Bill, which proposes slapping a corporate tax on select international carriers serving the United States.

Specifically, the provision calls for international airlines to pay U.S. corporate taxes if a) there is no reciprocal tax agreement between the U.S. and the carrier’s home country and b) U.S. airlines do not have at least two routes operating to that nation.

The language was introduced by Georgia Senator Johnny Isakson, who said the provision would “protect Georgia airline employees by ending a tax exemption for airlines based in countries that deny fair market access for U.S.-based airlines.”

It is worth mentioning that Isakson’s state happens to be home to the world’s busiest airport, Hartsfield-Jackson Atlanta International Airport where Delta Air Lines operates about 75 percent of all traffic.

Why does that matter?

MORE Airlines & Airports

Frontier Airlines Reveals Progressive Mileage Jackpot...

JetBlue Adds Summer Flights To Grenada Ahead of Spicemas...

Amsterdam Airport Cutting Flights Due to Global Warming

Delta, in concert with American, United, and a lobbying group known as “Partnership for Open & Fair Skies” has been very vocal on the issue that some airlines—particularly Emirates, Etihad and Qatar—are propped up by unfair subsidies, which violate the Open Skies agreement.

While the provision in the tax code does not specifically mention the three Gulf airlines, the Los Angeles Times reports that “Isakson’s staff said the change is intended to target those carriers.”

If you haven’t been following the debate, Open Skies is an agreement that allows “airlines unrestricted access to fly between countries, eliminating government control over routing, frequency and pricing,” according to a U.S. Travel Association fact sheet.

In 2015, however, American, Delta and United submitted a 55-page report alleging that the Middle Eastern carriers are receiving unfair government subsidies to the tune of $50 billion, and asking the federal government to take action.

This basically boils down to two key tentpole issues: First, say the airlines, they can only compete on a global level if they have access to a “level playing field.” And secondly, these unfair subsidies are “attacking” American jobs.

Specifically, the Partnership says, “Overall, 1.2 million U.S. jobs are supported by American, Delta and United and these jobs are under attack by subsidized service by the Gulf carriers.” It also asserts that “every daily international roundtrip flight lost by U.S. carriers because of this subsidized competition equals a net loss of more than 1,500 U.S. jobs.”

It is worth noting that the idea that Gulf carriers are threatening American jobs is not a sentiment shared by all domestic airlines.

An opposing coalition, U.S. Airlines for Open Skies (USAOS), comprised of Atlas Air Worldwide, FedEx, Hawaiian Airlines and JetBlue Airways, says Open Skies actually promotes U.S. jobs and propels the economy, and that “the legacy carriers do not speak for all, or even most, U.S. airlines.”

Incidentally, the Partnership has voiced its concerns about Open Skies directly to President Donald Trump and President Barack Obama, but neither seemed in a hurry to dive into the issue.

So now it appears the legacy carriers are attempting an end-around federal officials by asking their elected representatives to jimmy in this new tax code.

Needless to say, USAOS is not in favor of the proposed corporate tax.

"This is another poorly veiled attempt by Delta to shield itself from competition and circumvent the established Department of Transportation process to review legitimate subsidy claims,” said Andrea Christianson, spokesperson for U.S. Airlines for Open Skies.

“This special interest ploy was designed to hurt the Gulf carriers but would actually impact airlines from as many as 14 countries and territories, such as Jordan, Ethiopia, and Malaysia. In addition, the provision opens the door to retaliatory taxes that would harm U.S. airlines, particularly U.S. cargo carriers. Delta appears unconcerned about the collateral damage of its multi-million dollar lobbying campaign, but Congress should be. We encourage Congress to reject this harmful provision."

While the debate rages on between the legacy airlines and the Gulf carriers—in an expensive propaganda war that both sides can easily afford—the real victims of the new would be the other airlines serving under-represented routes.

According to the Wall Street Journal, the proposal would impact carriers from 14 countries and territories, including the British Virgin Islands, Cape Verde, Ethiopia, Fiji, French Polynesia, Jordan, Kuwait, Malaysia, Qatar, Samoa, Saudi Arabia, Serbia, Suriname and the United Arab Emirates.

If the new corporate tax on international airlines becomes law, it is the Ethiopian Airlines, the Fiji Airways, the Malaysia Airlines and the other international carriers that will pay the price. These airlines serve the routes the major U.S carriers have abandoned as “unprofitable.”

It’s good to remember that these international carriers all support American jobs, both in through U.S.-based operations, and by bringing to the United States the inbound tourists and business professionals who have limited options for getting here.

U.S. Travel’s Executive Vice President for Public Affairs Jonathan Grella said in June, “Make no mistake: more growth and connectivity from under-served markets to the U.S has meant more American jobs, not less."

While Grella was generally responding to the issue of the“Big Three versus the Gulf Carriers, certainly the logic applies to all the airlines that will be affected by this proposed change to the tax code.

The new corporate tax also could potentially set off ripple effect globally, which would eventually hurt even U.S. legacy carriers.

READ MORE: Delta Targets Jennifer Aniston in Latest Open Skies Salvo

“Foreign governments—even those not directly affected by the proposed language—could be tempted to follow the U.S. example and impose reciprocal taxes,” said Perry Flint, a spokesperson for the International Air Transport Association, in a statement to CNBC. He also said the tax provision would “upend decades of precedent” on foreign aviation taxation.

With American carriers facing record profitability and record employment levels, it is hard to believe that the potential for job loss is really as dire as the Partnership predicts, especially when plenty of research from U.S. Travel and the USAOS suggest otherwise.

What’s more, the legacy carriers’ stance on state-subsidized airlines seems to be a moving target. In China, for example, the “Big Three” are aggressively partnering with, and even buying a stake in, that nation’s state-sponsored airlines, which seemingly blows their argument against subsidies out of the water.

READ MORE: Delta Expands Trans-Pacific Service to China

No matter where you stand on the issue, however, the reality is that there’s a process in place, through the Departments of Commerce, State and Transportation to review allegations of unfair trade practices.

Allowing the airlines to use their elected representatives to wedge in a punitive tax code—when the official process isn’t moving quickly enough or isn’t leaning in their favor—sets a troubling precedent.

What’s to stop the airlines from using lawmakers to circumvent the courts on issues like seat sizes? Or involuntarily bumping passengers?

If a level playing field is the stated goal, let’s just be sure it’s level for everyone.

Follow @MonicaPoling