US Airlines Are Whining About Foreign Carriers Stealing Their Customers, But It's Their Own Fault

Business Insider

View gallery

.
Emirates economy class plane food meal

Emirates

Economy class on Emirates may be nicer than on American carriers.

The American airline industry is seriously upset that Emirates —   the United Arab Emirates-based airline with a reputation for luxury service  — is now operating a route from Europe to New York, and has plans for another to Boston.

This expansion has sparked calls for "reasonable policies" that would support the American airline industry over foreign competitors.

But a close reading of the American airline industry's demands reveals that the industry is anti-competition, uninterested in raising its own standards, and no friend to the American consumer. 

Vocal Protest

Groups representing the American airline industry have not taken the news of the new Emirates routes quietly. Airlines for America (A4A), the trade organization whose members transport more than 90% of American air travelers, said on Twitter that the "New [New York to Milan] Emirates route poses threat to U.S. #aviation industry."

In a statement emailed to Business Insider, an A4A spokesperson said "growing competition from Middle Eastern carriers" makes U.S. support for American airlines "more important than ever."

A Delta spokesperson told us, "We do share ALPA's concerns on this issue." American had no comment, and United did not reply to a request for comment, but both are A4A members.

The shrillest rhetoric came from the Air Line Pilots Association (ALPA), the union that represents nearly 50,000 American and Canadian pilots. In a statement, it called the new service "the beginning of a dangerous trend by state-owned foreign carriers" that threatens American jobs.

It painted a clear difference between American carriers and their foreign, state-owned competitors:

Today, under the current structure, U.S. airlines face excessive taxes, a burdensome regulatory environment, inadequate and stalled infrastructure funding, and federal policy that permits an unlevel playing field in the global market.

Conversely, Emirates Airline does business tax-free in the United Arab Emirates. It flies new, fuel-efficient aircraft subsidized by U.S. taxpayers, benefits from pro-aviation national policy, and operates at state-of-the-art airports funded by tens of billions of dollars in infrastructure investment by its government.

It's tweeting calls for support, using the hash tag #SaveOurSkies.

In a June 2013 white paper titled "Leveling the Playing Field," ALPA said U.S. carriers are in "survival mode," as "foreign airlines are stealing market share from U.S. airlines and threatening domestic carriers in our own backyard."

View gallery

.
Emirates economy class

Emirates

Emirates economy class

American Carriers Do Deserve Some Sympathy

But not much.

It will surprise few that U.S. airlines are among the most disliked companies in the country. It's very hard to make money in an industry where profits are razor thin and taxes are very high, so naturally service suffers.

And despite Emirates' protests that it is "required to be self-sustainable and profitable," it gets plenty of financial help from its own government, as well as ours (more on that in a moment).

So it's easy to sympathize — at least a little — with American carriers, and support some of the recommendations ALPA included in its white paper. These line up with "policy priorities" pushed by A4A:

  • Maintain current restrictions on foreign ownership of airlines
  • New "Open Skies" agreements (governing flights between the U.S. and other countries) "should contain labor provisions that support the value of high labor standards and protect U.S. aviation jobs"
  • Expand the visa waiver program to bring more tourists to the U.S.
  • Negotiate to end export credit agency financing for wide-body aircraft

The most valid demand is the last one, which would cut the support foreign airlines get from the Export-Import Bank of the United States (Ex-Im).

According to a 2009 Pew Charitable Trusts analysis, Ex-Im issued nearly $10 billion in loan guarantees to companies to buy Boeing aircraft in financial years 2007 and 2008. Bloomberg reported in 2012 that Emirates "raised $14.6 billion under Ex-Im's bond program, the most of any airline since the program began."

According to The Street, Emirates, Etihad Airways, and Korean Air Lines, all of which receive backing from their respective governments, got help from Ex-Im. What plane is Emirates flying between Milan and New York? A Boeing 777-300ER, naturally.

These policies would support American businesses over foreign competitors —  a logical stance for the American government to take. They could help U.S. carriers offer better service for lower fares. Maybe an American airline could one day rejoin the world's best, or at least be counted in the top ten.

But They Also Have Petulant Demands

It make sense that American carriers want policies that benefit them, not their foreign competitors. But some of the changes ALPA calls for go beyond leveling the playing field, to tilting it in favor of existing, American carriers:

  • Repeal the 2012 Full-Fare Advertising rule, which requires that advertised airfares include taxes and fees
  • Put a moratorium on non-safety related consumer regulations, "until DOT conducts a review of existing protections, submits its findings for peer review by neutral academic experts, and collects information from airlines about the cost of compliance"
  • Restrict the creation of new airlines (because they tend to fail, but not before forcing established airlines to cut prices)

If these were all put into place, airlines could advertise seemingly low fares, without telling customers they will also have to pay hidden taxes and fees.

View gallery

.
Emirates economy class usb

Emirates

Emirates economy class

They would face many fewer policies designed to benefit passengers. No more rules like the the tarmac time limit, which fines airlines if they leave people in a plane on the runway for over three hours.

Most egregious is the demand for a restriction on the creation of new airlines. No more competition, even if it's American. No more upstart, local challengers (like JetBlue, Southwest, and Virgin) that push existing carriers to match their good service and low fares.

They're Anti-Competition

These suggestions are not pro-American or pro-competition. They're pro-existing carriers. And past statements from A4A and ALPA show the aviation industry is openly more concerned with protecting existing airlines than helping customers.

In the white paper, ALPA accused the American government of a "tendency to emphasize consumer interests over the financial viability of the industry."

In August, the Department of Justice sued to block the $11 billion merger of American Airlines and US Airways, arguing less competition would be bad for passengers. ALPA and A4A insisted the merger would make the new mega-airline stronger and create jobs.

So Forget That "Deserve Our Sympathy" Idea

Delta, United, and American don't offer service on par with that of Emirates. Emirates won the 2013 "Airline of the Year" award from leading airline reviewer  Skytrax .  American Airlines, Delta, and United Airlines, while all operating on the New York to Milan route, didn't even crack the top ten.  No American carrier did. 

But petulant demands that the government roll back pro-consumer policies and eliminate the possibility of new competitors indicate that they have no interest in raising their own standards and winning customers away from Emirates with a superior experience.

The American traveler has no friend in the American aviation industry. So don't feel bad if you go with Emirates for your next vacation.



More From Business Insider

Rates

View Comments (3)