April 25 - So why are the Big 3 afraid to file a Gulf Carrier complaint with DOT? 

To hear Delta Air Lines, American Airlines and United Airlines (Big 3) tell it, their evidence the Gulf Carriers purportedly receiving subsidies is “irrefutable,” “uncontestable” and as certain as their record setting quarterly profits.  Given this confident rhetoric, why are they afraid to file a complaint with the U.S. Department of Transportation (DOT)? 

In 1974, Congress enacted the International Air Transportation Fair Competitive Practices Act (IATFCPA). According to DOT’s website, IATFCPA authorizes the agency “to take action in response to anti-competitive, discriminatory, predatory or unjustifiable activities by a foreign government or foreign airline against a U.S. airline.” On its face, it sounds like the Big 3’s allegations and IATFCPA’s intent fit hand in glove.

An IATFCPA complaint should appeal to the Big 3. First, it squarely remedies their frustration with delayed action, which they repeatedly whine about. IATFCPA has a 180-day statutory deadline. The clock starts the day a complaint is filed. To put that into perspective, had the Big 3 filed a complaint in January 2015 rather than slinking around Washington with their super-secret White Paper, an armful of plain brown envelopes and limitless innuendo, DOT would have been required to act by July 2015, 21 months ago. Second, from the standpoint of shareholders, it would have saved them tens of millions of dollars that instead have needlessly been freely spent on an unprecedented lobbying campaign. 

For more than four decades U.S. airlines, including the Big 3 themselves, consistently have taken the IATFCPA pathway Congress created for them. They have benefited from DOT’s expertise and well-established process to fairly and thoroughly evaluate grievances, and to act expeditiously when warranted to safeguard their competitive interests. The Big 3’s departure from historic practice speaks volumes. They know that their case has no legal merit and that their “facts” are nothing more than political talking points that would not withstand scrutiny under DOT’s exacting fact-based standard. Accordingly, the Big 3 know it is inevitable DOT would reject an IATFCPA complaint. That is why they instead resorted to a bank-busting political campaign in hopes they can distract from the law, play fast and loose with “facts” that fit their narrative and strong-arm the Administration into siding with them thereby circumventing DOT’s IATFCPA process.

Here is why I am so confident the Big 3’s failure to file an IATFCPA complaint tells you all you need to know about the merits of their case. It has none.

First, Glen Hauenstein, the President of Delta, publicly admitted an IATFCPA complaint would fail.  In July 2015, when he was EVP and Chief Revenue Officer, Hauenstein was refreshingly honest admitting Delta has not suffered commercial harm due to Gulf Carrier competition. Game, set and match. 

The context of Hauenstein’s candid admission is important. It was a July 15, 2015 Q2 earnings call in which corporate officers have a legal duty to be truthful. A Deutsche Bank analyst asked “are you seeing some displacement of that traffic to competitors such as Emirates or Etihad or Qatar as they continue to add more and more seats into the marketplace? And I’m looking more like U.S. into India, Middle East, Africa because there is a decent amount of flow traffic between you and your partners.” Hauenstein’s  response – “we are not.”  The Big 3 have shown they are world class spinners but even they cannot spin Hauenstein’s honest and unequivocal admission of no commercial harm.

Second, IATFCPA protections apply to harm to U.S. airlines, not European code-share partners and European alliances hubs.  There are virtually no head-to-head competitive overlaps between the Big 3 and the Gulf Carriers. In fact, other than Emirates’ New York JFK-Milan Malpensa flight and its Newark-Athens flight, which beginning this year will compete with United only during the Summer season, there are no other direct overlaps. So how do you suffer commercial harm in the almost complete absence of competitive overlaps? As Delta’s President admitted, you don’t.

The Big 3’s anti-Open Skies campaign is about protecting the lucrative transatlantic market, which the Delta/American/United oligopoly dominates. They are seeking to deny passengers the competitive option to fly non-stop from the U.S. to geographically advantageous connecting hubs in Dubai, Abu Dhabi and Doha. Instead, they are demanding the Trump Administration force passengers to inconveniently connect onto flights offered by their European code-share partners. There is no U.S. national interest in protecting the Star, SkyTeam and oneworld alliances’ passenger flows over European hub airports. IATFCPA is a law intended to safeguard the competitive rights of U.S. carriers, not their foreign carrier partners. It also was not intended to thwart competition and competitive choice. Its mission is the exact opposite.

If the Big 3 are as confident in the merits of their case as they claim, the Trump Administration should put that to the test – require them to muster-up the courage to follow the four decade-old traditional approach U.S. airlines have consistently followed of filing an IATFCPA complaint at DOT. For the good of consumers and competitive choice, it is time to tell the Big 3 to put-up by filing such a DOT complaint or shut-up. 

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