ANALYSIS: US Open Skies debate divides industry

An ongoing call by US mainline carriers for the country's government to re-look at its Open Skies deals with certain Gulf nations has stirred up strong reactions in the industry, even as some parties choose to stay out of the controversial issue altogether.

An ongoing call by US mainline carriers for the country's government to re-look at its Open Skies deals with certain Gulf nations has stirred up strong reactions in the industry, even as some parties choose to stay out of the controversial issue altogether.

Chief executives from American Airlines, Delta Air Lines and United Airlines met with senior White House officials in late January to persuade them to consider limiting the access of Gulf carriers to the USA.

Our original Routes Americas story from February 1, 2015 confirming this meeting between the US majors and the senior Obama administration officials has ignited an interesting debate.  Read the full story: US Airlines Make Call to Restrict Gulf Carrier Growth in US Market

A Delta spokesman says that the three airlines have launched a discussion with the US government on “the impact of more than $40 billion of government subsidies and unfair benefits to state-owned Gulf airlines, specifically Emirates, Etihad and Qatar [Airways]”.

The three US airlines decline to comment further on the meetings, which were understood to be with US secretary of transportation Anthony Foxx and secretary of commerce Penny Pritzker. The US Department of Transportation declines to comment on the meeting.

Some US airports that are not hub airports for the US mainline carriers have greeted the news with dismay, as they point out that they rely on foreign carriers for international growth.

Phil Brown, executive director of the Greater Orlando Aviation Authority, tells Flightglobal, publisher of the Airline Business Daily publication at Routes Americas: “We see this as not being very competitive and not in our interests.”

“The question is whether reversing what we’ve been doing in Open Skies for the last 25 years for the benefit of a few large corporations [is a good thing].”

Denver International airport’s chief executive Kim Day says the airport hopes that the US does not limit new service. “We are for growth of tourism and growth of service." United has a strong presence at Denver, which is served by a handful of foreign carriers.

Other airport operators, including those of Seattle Tacoma International and Detroit Metropolitan Wayne County, also expressed their support of Open Skies.

Detroit airport’s director of air service development Joe Cambron says: “We support open skies as we always have and are working hard to improve service to the Middle East to support our communities’ strong ties to the region.”

Detroit is served currently by mostly US carriers, but has service by Royal Jordanian, Lufthansa, Air France and Air Canada.

Aside from airports, a number of US airlines have emerged as supportive of retaining US open skies policies. In a 26 January letter addressed to US secretary of state John Kerry, secretary Foxx and secretary Pritzker, JetBlue president Robin Hayes expressed his “unwavering support” for what he calls the “indisputably successful aviation policy of open skies”.

JetBlue has codeshare partnerships with Emirates, Etihad and Qatar. Hayes, who becomes JetBlue chief executive later this month, urges the White House officials to “continue to advance our nation’s proven open skies policy”.

He cites an example of how the policy has benefitted JetBlue - Emirates’ new service between Dubai and Boston in March 2014 allowed JetBlue to launch connecting service to Detroit from Boston. “This had formerly been a monopoly market served only by Delta with high average fares,” says Hayes. Fares on the route have fallen 33% since JetBlue’s entry, he adds.

Southwest Airlines, which is among the biggest four US carriers alongside American, Delta and United, declines to comment for this story.

Cargo carrier FedEx, which has backed open skies in the past, reiterates its stand. “The US should not abandon its progressive and open market stance for the benefit of a few airlines. FedEx has always believed that limiting government regulation of economic competition is critical,” says a FedEx spokesperson.

The effort by the three US mainline carriers to meet with White House officials was first reported by Flightglobal in October 2014. An initial meeting scheduled for that month was postponed.

Even as the three carriers rekindle their efforts, US airline trade association Airlines For America (A4A) has sought to distance itself from the move by its members Delta, America and United.

An A4A spokesperson refers questions on the issue to the three carriers, indicating that the association has no part to play in the effort.

The three US airlines could find some support in the Air Line Pilots Association (ALPA), which has echoed calls by the carriers for the US government to re-look its open skies policies.

An ALPA spokesperson, when asked to comment on the airlines’ meeting with the White House officials, says the union is for Open Skies agreements “provided that partner nations’ airlines compete on commercial merit and do not benefit from unfair economic advantages in the marketplace”.

“The United States has or is pursuing an Open Skies agreement with several countries that position their airlines to do business with economic advantages that create a significant competitive imbalance in the market,” adds the spokesperson.

The effort by the three US mainline carriers to lobby the US government to re-look at Open Skies with certain Middle Eastern countries received an airing in a speech by former deputy assistant secretary of state John Byerly at the Routes Americas strategy summit in Denver. Byerly, a consultant who has Emirates and Norwegian among his clients, blasted the move by the US airlines as “anti-competitive”.

Byerly points out that an unlevel playing field is an inherent trait in the global aviation market. US carriers themselves have been advantaged by certain elements in the US aviation industry, such as the Chapter 11 bankruptcy protection process that all three US mainline carriers have gone through, which has allowed the airlines to restructure their costs.

“If you aim at comprehensive regulations to impose perfect ‘fairness’, you will destroy competition and innovation. Everyone will lose except for pampered airlines and their artificial profits at the expense of consumers,” says Byerly.

Critics have taken aim at Byerly’s affiliation with Emirates and Norwegian, alleging that he is not an impartial observer. Norwegian, which is seeking to transfer its US long-haul service to its Irish subsidiary, has faced significant opposition from US carriers and labour unions in the past year.

In response, Byerly says: “People can take whatever I say with a grain, tablespoon or two gallons of salt. What we need is an open debate about the substantive issues instead of private sessions in Washington between vested airline interests and the government. Transparency and public debate - that's how we should progress."

NOTE: This article was originally published in issue 2 of the Airline Business Routes Americas Daily in Denver.  You can view the full publication with content and insight from the event, here.

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