September 15 - U.S. Major Airlines’ War on Foreign Carrier New Entry Having Consequences

 

U.S. Credibility, Global Open Skies Policy at Increasing Risk

Recent news reports, that should sound alarm bells, suggest that progress on a more liberal bilateral aviation agreement between China and the U.S. has been undermined by the toxic negotiating environment created by Delta Air Lines, American Airlines and United Airlines (US3) through their war on new entry in U.S. markets by Emirates Airline, Etihad Airways and Qatar Airways (ME3).

For example, Airways News reported today (http://btcnews.co/1NAMUnq), “Speaking at the International Aviation Forecast Summit Dr. Zhihang Chi, Air China’s VP & General Manager for North America…suggested that the current US3vME3 fight may be contributing to a political climate which makes expansion of international markets hard for US politicians to support, a policy which will continue to stunt growth should it hold.” This is a worrisome observation from a seasoned and widely respected airline executive of a leading state-owned Chinese carrier. If for competitive reasons the US3 seek to limit market access by state-owned ME3 carriers today, who is next? 

Now that the US3 have secured antitrust immunity for their global alliances and dominate internal U.S. aviation following domestic consolidation, they have been aggressively attacking new entry and expanded service by foreign carrier competitors. The first battle was to block Norwegian Air International’s (NAI) application to serve the U.S. - now stalled for 19 months - with relentless political pressure followed by an all-out assault on any new service by the ME3.

One hopes the Obama Administration sees the US3 strategy for what it is: A gambit to restrict international marketplace competition through government-imposed commercial protectionism. The US3 are pursuing a self-serving bid to limit consumer choice and stifle passenger-friendly innovation. As the NAI application and US3/ME3 controversy remain unresolved, the U.S. Administration must act now so as not to damage our country’s reputation as a trusted Open Skies partner as well as our image, crafted over 50 years, as a bastion of free-market enterprise and advocate for global economic liberalization.  

Airlines and aviation authorities worldwide are paying close attention to what the Administration does and are increasingly apprehensive. If, for example, the Administration were to cave to the US3’s demands, many of these international participants would seek their own protectionist advantages by undoing Open Skies agreements with the U.S. and other countries. “If America can walk away from open markets, why can’t we?” The fact of the matter is that the painstakingly created international system for aviation liberalization is now under a cloud of uncertainty and could quickly unravel if competitive self-interest is allowed to prevail over national and consumer interests. 

The Obama Administration should act promptly to reject the protectionist demands of the US3 and grant, at long last, a foreign air carrier permit to Norwegian Air International. Doing so would lift the current uncertainty, reassert American leadership in international aviation, and assure U.S. consumers and other airline and travel industry participants that the United States will not put the profits of the US3 ahead of the common good. Importantly, Open Skies partners who took us at our word when we convinced them to enter into these air service liberalization agreements need reassurances with respect to our commitments.

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