April 4 - Dear President Trump


President Donald J. Trump

The White House

1600 Pennsylvania Ave, NW

Washington, DC 20500

 

Dear Mr. President,

I write to you in support of tens of millions of U.S. airline customers and millions of U.S. workers in the travel, tourism and aerospace industries. These American citizens stand together in their opposition to the demands of Delta Air Lines, American Airlines and United Airlines for U.S. Government protection to insulate their cozy oligopoly from foreign competition. Their attacks on foreign airlines - especially the Gulf carriers Emirates Airline, Etihad Airways and Qatar Airways - threaten to erode U.S. commitment to Open Skies policy and U.S. credibility as a partner to 120 governments with which we have Open Skies agreements.

One misleading claim that the three U.S. carriers make is that it is unfair that the Gulf carriers’ international capacity exceeds the demand for travel to and from their home countries. Such an assertion contravenes a central principle of Open Skies agreements, which guarantees airlines a “balance-of-opportunities” to compete in a deregulated marketplace but not a “balance-of-benefits” guaranteeing a fixed share of passengers. 

In 1992 Northwest Airlines, now part of Delta Air Lines, leveraged the “balance-of-opportunities” principle in America’s first Open Skies Agreement with the Netherlands to its immense benefit when it secured invaluable antitrust immunity to link its U.S. hubs with the Amsterdam hub of its alliance partner KLM Royal Dutch Airlines. Open Skies allowed these two smaller airlines, one of them with a tiny home market, to have unfettered access to the massive transatlantic market. Northwest and KLM were not guaranteed any fixed share of that market. Rather, Open Skies provided them unrestricted opportunity to demonstrate their value to consumers in a deregulated, highly competitive international market.

The U.S. has long supported airline competition and opposed market division schemes. With World War II still raging in 1944, the Convention on International Civil Aviation was convened in Chicago to establish a post-war framework for global aviation. The U.S. sought a single, worldwide-liberalized agreement that would allow largely unregulated market access for all signatory countries’ airlines on a multilateral basis. The UK and other governments, however, viewed aviation much like a public utility that requires extensive government regulation. These governments also feared the competitive prowess of U.S. airlines such as Pan Am vis-à-vis their flag carriers.

In Chicago, and in the bilateral air services negotiations that followed, the U.S. was forced to accept the principle of a “balance-of-benefits,” roughly a government-mandated 50/50 split of airline frequencies, seats or passengers.  In the wake of domestic airline deregulation, however, U.S. policymakers pressed for considerably greater reliance on vigorous airline competition in international markets and called for trading competitive opportunities, rather than restrictions. The concept of balance-of-opportunities, as opposed to balance-of-benefits, took hold and led in 1990 to the U.S. DOT “Cities Program” driven by U.S. airports that wanted non-stop international air service and had identified foreign airlines ready and willing to provide it. The Cities Program was implemented through grants of “extra-bilateral” authority within existing agreements and further cracked the edifice of the airline-centric balance-of-benefits approach.  

Soon after, in 1992, the balance-of-opportunities construct became central to new bilateral air service agreements with America’s adoption of an Open Skies policy. There is no effort to weigh a foreign population or divvy up benefits between U.S. and foreign airlines. Instead, Open Skies is focused on fostering vigorous airline competition to the benefit of consumers and our national economy. For example, the fact that under the U.S.-Ethiopia Open Skies agreement only Ethiopian Airlines has to date taken advantage of the right to fly between the two countries is not seen as failure. Likewise, the fact that U.S. airlines operate far more frequencies than foreign carriers in dozens of markets - from Brazil to Japan to France - is the result of competition fostered by Open Skies. Moreover, it is indisputable that the U.S. would never accept an agreement with China or India that would award their airlines four times as many frequencies as U.S. carriers based on their much larger populations.   

So, whether it is the Netherlands, the United Arab Emirates, China, India or any other country, the size of home markets is irrelevant under Open Skies. The balance-of-opportunities principle has proven highly beneficial to the U.S. and has been broadly endorsed by aviation and travel and tourism stakeholders. Indeed, new foreign carrier entry enabled by the balance-of-opportunities approach is far more important today than in 1992 due to antitrust immunized alliances and the massive airline industry consolidation and concomitant reduction in domestic and foreign competition. Just four airlines control 80 percent of the domestic market and three immunized alliances control 80 percent of the transatlantic market.

I hope that this background information sheds a bright light for your advisors on another false claim by those U.S. carriers pursuing a strategy to lock out competition with the aid of federal government regulation.

Thank you for all you do in support of great American jobs, robust competition and the consumer.

Sincerely,

Kevin Mitchell

Founder

Business Travel Coalition; OpenSkies.travel

 

COPIES

Members of the U.S. Congress

Secretary of Commerce Wilbur Ross

Secretary of Transportation Elaine Chao

Secretary of State Rex Tillerson

White House Chief Strategist Stephen Bannon

Senior Advisor to the President Jared Kushner

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