September 9 - The United Airlines Prism


INDUSTRY ANALYSIS

The New York Times, The Washington Post and various other news outlets have reported that United Airlines ousted its CEO Jeffery Smisek amid a federal government corruption probe and the airline’s own investigation into whether the airline had exchanged favors with the chairman of the Port Authority of New York and New Jersey. According to these reports, the alleged improprieties concern the reinstatement of unprofitable flights from Newark Liberty International Airport to Columbia, South Carolina - the weekend home airport of the Authority’s chairman - in return for improvements and benefits the airline wanted at the airport.

As CNBC reports today, “Shortly after the agency approved a new United hangar at Newark, as well as financial incentives for its construction, the airline moved forward with plans to resume service from Newark to Columbia, according to media reports.”

As part of the Authority’s $8 billion capital improvement plan, announced in 2014, United also reportedly sought rail service to Lower Manhattan, and other benefits, including airport rent reduction. It would appear from press reports that while United was accusing the Gulf carriers of receiving government subsidies, the airline itself was agreeing - perhaps in violation of U.S. laws - to special subsidies and other competitive advantages and benefits.

“United Airlines’, Delta Air Lines’ and American Airlines’ (the “Big 3”) recent anti-competitive and anti-consumer behavior in seeking to deprive consumers of new competitive choices and alternatives by blocking Norwegian Air International’s application before the U.S. Department of Transportation and alleging that the Gulf carriers (Emirates Airlines, Qatar Airways and Etihad Airways) have received $42 billion in government subsidies is contemptible and must be challenged,” stated BTC founder Kevin Mitchell.

“Now that the Big 3 have secured their antitrust immunized global alliances and radical domestic U.S. consolidation, they want to cry foul and accuse some competitors of accepting subsidies while being silent on their own massive subsidies and structural advantages. They want to raise the drawbridge and foreclose on foreign airline new entry in the U.S. by labeling stiff competition as unfair,” added Mitchell. (http://btcnews.co/1idq2h6)

A Congressional Research Services report completed in 1999, but only recently published by WikiLeaks, detailed how the U.S. federal government spent $155 billion through 1998 in support of aviation activities to help establish the industry. And the Risk Advisory Group this year released a report that details some $71 billion in financial support and benefits for U.S. airlines since 1999 in, among other areas, bankruptcy debt relief, pension termination and fuel subsidies. This brings the total for U.S. airlines conservatively to $226 billion in financial support, special benefits and structural advantages. However, there is not one airline on earth complaining about this U.S. support, or unleveled playing field vis-à-vis U.S. airlines; they simply compete.

In an article this month entitled ‘How much do [U.S.] taxpayers support airlines?’ USAToday reported, “However, in various ways and to various degrees, every airline on Earth is funded by its home government, and that certainly is true here. “There’s not a playing field in the world that is level,” says Kevin Mitchell, chairman of the Business Travel Coalition and an opponent of restricting access to Gulf airlines. Other parties — including U.S. carriers FedEx, JetBlue and Hawaiian — agree with Mitchell and have challenged the Big Three’s claims they’re protecting American jobs rather than protecting their turf.” (http://btcnews.co/1Vz7kON)

“Whether it's United's alleged actions with the Port Authority or the Big 3’s concerted campaign against the Gulf carriers and Norwegian Air International, the bright red thread running through this lobbying is the willingness to induce government officials to act improperly to the Big 3's competitive advantage,” concluded Mitchell.

...

ABOUT OpenSkies.travel

Mitchell is the founder of OpenSkies.travel the mission of which is to bring significant organization to the task of maintaining aviation liberalization agreements in accordance with the intent of the signatories to such accords. See Founding Members at http://btcnews.co/1BiYrkx.

ABOUT BTC
Founded in 1994, the mission of Business Travel Coalition is to interpret industry and government policies and practices and provide a platform so that the managed travel community can influence issues of strategic importance to their organizations.

©2001 to 2017 Business Travel Coalition, Inc..