It’s hard to feel bad for major U.S. airlines that cry foul over lost profits, especially as you insert your credit card into a kiosk to cover an annoying baggage fee or pay for an overpriced stale snack box on a flight.
But the stink American, Delta and United airlines have raised over a fair-play agreement being violated by Emirates Airline, Qatar Airways and Etihad Airways, and the governments that back them, is about more than the U.S. carriers’ bottom line. It’s also about ours.
On the line is the security of tens of thousands of jobs — many of them right here at O’Hare International Airport — and that’s a concern for Americans not only on Labor Day but every day. The dispute between the U.S. airlines and the Gulf carriers should be a priority for the Obama Administration; it must put pressure on the governments of Qatar and the United Arab Emirates to stop subsidizing their airlines so generously — $42 billion since 2004 — that American carriers simply cannot compete.
The American carriers say their passenger loads to the Middle East and Asia already are down at least 20 percent because of these enormous subsidies to the competition. And some European nations have already fought back, imposing restrictions on flights.
When other nations enter into an Open Skies Agreement with the U.S., they agree to “promote an international aviation system based on competition among airlines in the marketplace with minimum government interference and regulation,” according to the U.S. State Department website. But United Arab Emirates and Qatar, with their $42 billion in subsidies to favored airlines, have made a mockery of that vow to let the free market rule.
“That foreign government funding means they aren’t accountable to market forces,” Chicago Mayor Rahm Emanuel wrote in May in a letter to Secretary of State John Kerry and other officials, requesting that they open talks with Qatar and the UAE. “It has allowed these Gulf carriers to grow at an astounding rate, with an expanding global presence and a substantial cost advantage over U.S. carriers.
“They do not offer supply in the face of demand, and as a result, they are able to draw passengers and revenue away from U.S. carriers.”
Emanuel had pushed for Qatar Airways and Emirates Airline to open operations at O’Hare Airport. But in citing concerns about the subsidies, he said the three major U.S. airlines employ 25,000 in Chicago, “while the Gulf carriers employ less than 50.”
The Gulf carriers point to their growth as a positive for U.S. companies. In an opinion piece for USA Today in the spring, the CEO of Etihad Airways said contracts with American companies such as the Boeing Co., GE and Panasonic Corp. support jobs in the U.S. This country has a stake in the continued success of the Gulf carriers.
It’s true, too, that most airlines enjoy the benefits of government contracts and sympathetic tax codes. Part of the problem here is that there is no agreement internationally as to what constitutes a subsidy, as to opposed to an investment, in this service-based industry, says Brian Havel, director of DePaul’s International Aviation Law Institute.
But there is no international parity of government hand-outs here. The billions in subsidies that flow to the Gulf carriers give them an indisputably overwhelming — and entirely artificial — competitive advantage.
The goal is not protectionism, but a level playing field, to preserve American jobs.
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