Open Skies

1) Describe the US-UAE Open Skies Agreement. List and describe two long-haul carriers that are a part of this agreement that also receive government subsidies.

An Open Skies Agreement is between two countries that have foreign commercial carriers operating in their countries. The agreement is to allow foreign carriers to operate freely in and over the other country and vise versa (US Government, 2015). The United States is a member in 120 of these agreements. One that has currently been under the micro scope is the United Arab Emirates agreement. The United States focus in some of the agreements is very little to no governmental subsidies to a countries own airline. The UAE agreement has been under fire because the United States legacy carriers have been in uproar that the countries two largest airline (Emirates and Etihad) have been receiving government subsidies to keep the airline tickets cheaper than the United States carrier. This is very much true. Just look at the prices for yourself. Using Emirates, a flight from NYC to Dubai on March 30 till April 6, is $1,025.41 (Emirates, 2018). A flight on Delta for the same days is $1,733.41 (Delta, 2018). Just over $700 difference for the same ticket. Emirates which is based in Dubai and whose parent company is The Emirates Group is owned by the Government of Dubai. That is a huge conflict of interest. The City of Dubai became the land of the rich due to the massive oil reserves that they own. This makes the governments pockets very deep and very likely to use that money to grow their Airline. They can use this profit from oil to lower the operating cost of their jumbo jets to reduce the fair on tickets to allow more passengers.

Now I will say this, according to Ashley Nunes a guest writer for Forbes, Aviation Week, NPR and Weird; he states that the American Carriers do business with other airlines that receive massive amounts of government subsidies. Such as Delta who is partnered with China Eastern and China Southern who both received about $865 million in government subsidies (Nunes, 2016). Also, Delta (who has been the front runner) also receives help from our Government. The State of Georgia just got rid of a huge jet-fuel tax break for Delta. So, there is some blame on both sides of the aisle.

2) Do any long-haul US carriers receive subsidies or have received subsidies in the past? If so, which airlines? Why?

All three long-haul US carriers receive and have receive subsidies. Between 1957 and 1984 the US government allotted $928 million to Delta, United and American. After the 9/11 attacks in New York City, the whole airline system took a dive for the worst.  On September 22, 2001 (just 11 days after the attacks) Congress and President Bush implemented the Air Transportation Safety and Stabilization Act (Congress, 2001). Which granted up to $10 Billion in federal loans to the air carriers. Another example of a subsidies is Chapter 11 protection. An airline can file for Chapter 11 bankruptcy to dismiss debts and freeze wages that foreign airlines cannot.  All three legacy carriers and those they have merged with have all filed for chapter 11.

3) Another complaint is that long-haul foreign carriers have made aircraft purchases at "below market interest rates" that are unavailable to US carriers. How is this possible? Please discuss the Export-Import Bank.

The way foreign carriers can purchase aircraft “below market value,” is due to the Export-Import bank. This bank is Government run and is used by foreign companies to purchase American made products at a lower interest rate than the rest of the market. American companies are not allowed to use this service for Boeing products as the products must be imported for them to use the service. This is why Delta just purchased 100 Airbus A321neos with an option to purchase 100 more.

4) Are there any current issues with Norwegian International Airlines and the Open Skies Agreement? What about with carriers such as Emirates or Qatar?

Norwegian International Airlines is a subsidiary of the European low-cost carrier Norwegian Air Shuttle. The three legacy carriers are scared that with its low operating cost they will under cut their fares flying out of the United States. They believe that since they are headquartered in Ireland (with low taxes) they will be able to pay very little for their crews and hire Asian workers at ‘below market wages’ (Zhang, 2017).

I believe the issue the three legacy carriers have with Emirates and Qatar is that they are on the legacies turf. The Gulf carriers can cut ticket prices due to large amounts of government subsidies. The legacies can’t keep up with the cost of flying into the Gulf and are losing out on a big profit there and they don’t like it.

5) Finally, critically analyzing the above information, do you feel that the global "playing field" of long-haul carriers is fair?

I do not believe the long-haul carriers playing field is fair. Every airline worldwide accepts some form of subsidy from their government for their airline to prosper in the world-wide market. This is even true for the American carriers. My first paragraph sounds like I am totally agreeing with the legacies, but I am an American and want the airlines that represent the United States to continue to grow. I do believe the message that the legacies are marketing, that the Gulf carriers are taking US jobs is a fictitious statement. They just want to keep their turf theirs and don’t want to lose the war of the airlines.

References

Open Skies Partnerships: Expanding the Benefits of Freer Commercial Aviation. (2017, July 05). Retrieved March 18, 2018, from https://www.state.gov/e/eb/rls/fs/2017/267131.htm

D. (2001, September 22). H.R.2926 - 107th Congress (2001-2002): Air Transportation Safety and System Stabilization Act. Retrieved March 18, 2018, from https://www.congress.gov/bill/107th-congress/house-bill/2926

Nunes, A. (2016, November 17). Government Airline Subsidies... So What? Retrieved March 18, 2018, from https://www.forbes.com/sites/realspin/2016/11/17/government-airline-subsidies-so-what/#3054b9381f5f

Zhang, B. (2017, February 09). Europe's best low-cost airline could be an issue for the Trump administration. Retrieved March 18, 2018, from http://www.businessinsider.com/norwegian-air-international-america-trump-2017-2