August 8Delta, United and American are Suffering Acute IATFCPA-phobia


INDUSTRY ANALYSIS

BY Kevin Mitchell

According to Bloomberg, leading allies of Open Skies, including the CEOs of FedEx, JetBlue, Atlas Air and US Travel, recently discussed with Secretary of State Rex Tillerson their strongly held view that a review under the International Air Transportation Fair Competitive Practices Act (IATFCPA) is the proper way for Delta Air Lines, American Airlines and United Airlines’ (Big Three) Gulf Carrier-related competitive concerns to be considered by the Trump Administration. IATFCPA is “inside baseball” even for people who follow aviation closely so let me explain why this was such a significant development.

The U.S. Department of Transportation (DOT) has an excellent summary overview of IATFCPA on its website located at http://btcnews.co/2fp5uFO. Over 40 years ago Congress enacted IATFCPA. It authorizes DOT to evaluate complaints by U.S. airlines when they believe they are suffering commercial harm due to unfair competitive practices by foreign carriers or their governments. It also permits DOT to begin an IATFCPA case on its own initiative. As the DOT link explains, it is a well-established process for a thorough, fact-based evaluation by DOT’s expert staff, and if corrective action is deemed to be warranted, it must be taken in 180 days.

For over four decades the Big Three and their merger partners have relied on IATFCPA. Cases have ranged from discriminatory charges at Italian airports for intra-EU versus  extra-EU flights to Argentine airports charging international flights three times more than the flag carrier’s domestic flights to a Northwest Airlines complaint against the Government of Australia concerning illegal traffic composition rules imposed on its Fifth Freedom flights operated between Osaka, Japan and Sydney. 

It has not been suggested IATFCPA is a flawed or ineffectual forum for considering and addressing foreign competition concerns, nor has the U.S. industry been critical of DOT’s willingness to take action under that statute. For an industry prone to complaining, that is a ringing endorsement. In fact, just four years ago DOT issued its most recent IATFCPA Show Cause order in the Italian airport matter.             

For good reason, this background likely makes many wonder why the Big Three have failed to file an IATFCPA complaint in the Gulf Carrier matter. Their howls and rants seem to fit hand-in-glove with the trusted, long-standing statutory process. It is all the more puzzling given the following.

First, the Big Three have consistently relied on the IATFCPA process in the past and are familiar with it. In fact, given their claim of a two-year forensic accounting investigation prior to delivering their White Paper of allegations to the U.S. Government in January 2015, they likely were involved in the Italian airport IATFCPA case at the same time they were developing their case against Gulf Carrier competition. 

Second, they claim their case against Gulf Carriers is legally bulletproof and their supporting facts are irrefutable. Accordingly, they should have great confidence to put their case in the hands of DOT’s expert staff.

Third, they express frustration that their campaign against Gulf Carrier competition has passed the 2-1/2 year mark with no resolution. One would think that IATFCPA’s six month statutory clock for action, if warranted, would be very appealing to them, not to mention the huge windfall in savings for the Big Three’s shareholders who continue funding this record-setting, multi-million dollar lobbying campaign against Open Skies. 

The only explanation for their failure to bring such a case is the Big Three suffer from acute IATFCPA-phobia. In order words, they are mortified to put their allegations to the test of a DOT fact-based evaluation by talented expert staff who will subject it to a rigorous but fair evaluation. They fear such a fact-based, exacting examination will quickly separate facts from political rhetoric, and swiftly conclude there is no proof of commercial harm as required by the statute and no proof of below cost price dumping which is the Big Three’s latest political sound bite. 

If there is any doubt it is a case of acute IATFCPA-phobia, Jill Zuckman, the spokesperson for the Big Three-funded Partnership for Open and Fair Skies, eliminated it when she recently was interviewed by Bloomberg. Zuckman’s reply when asked why the Big Three have chosen not to benefit from IATFCPA’s existing well-defined process and six month statutory clock, not to mention the expertise of DOT’s professional staff says it all. “The idea [begin an IATFCPA case] to the contrary is a fiction that the Gulf carriers and their allies have invented because it suits their objective of throwing a wrench in the process and avoiding the U.S. government taking action,” Zuckman said.

Really? It is a process created by Congress, and her clients, the Big Three, have consistently relied on it in the past. 

To emphasize just how acute the phobia is, Zuckman added nothing requires the Big Three to file an IATFCPA complaint. Translation: nothing requires the  Big Three to save years of time they have wasted turning a sprint into a marathon while complaining about the distance of the race, and nothing requires them to save the tens of millions of dollars of shareholder money they have cavalierly spent without benefit that could have been invested in improving customer service had they instead filed an IATFCPA complaint. 

Of course, the Big Three’s acute IATFCPA-phobia tells you everything you need to know about their allegations against the Gulf Carriers. The Big Three have not filed a DOT complaint because they know neither the law nor their creative “facts” would withstand review by DOT staff. Deservingly so, an IATFCPA complaint would be rejected. So, instead, they have mounted a political campaign disrespectfully hoping politicians will be less inclined to care about the truth and, due to political contributions and a sense of constituent beholdenness, might be willing to hold their noses and put the Big Three’s profit-motivated self-interest above that of consumers, communities and the nation’s economy by tearing-up U.S. Open Skies policy.   

Look at the DOT IATFCPA link above. DOT’s words, not mine. After a quick browse of it, I think you too will conclude the Big Three’s failure to file an IATFCPA complaint tells you all you need to know: they have no case and they know it.

 

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Mitchell is founder of Business Travel Coalition and OpenSkies.travel

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