February 2 - Dear Secretaries Tillerson and Chao


The Honorable Rex Tillerson

Secretary

U.S. Department of State

2201 C Street NW

Washington, DC 20520

 

The Honorable Elaine L. Chao

Secretary

U.S. Department of Transportation

1200 New Jersey Ave, SE

Washington, DC 20590

 

Dear Secretaries Tillerson and Chao,

On behalf of the Business Travel Coalition and OpenSkies.travel, I want to congratulate you on your Senate confirmations. Secretary Chao, I know that you are familiar with the United States’ longstanding Open Skies international air service policy because you were on the Department of Transportation (DOT) leadership team that deserves great credit for inaugurating this wise policy that for 25 years has served the U.S. economy, American consumers and workers, our airlines and communities nationwide so well.

Our country’s pro-competition, pro-consumer, pro-growth Open Skies policy is a Made-in-America success story, representing the Gold Standard for bilateral trade agreements. Nevertheless, Open Skies has been under vicious attack by a small number of legacy airlines, specifically Delta Air Lines, American Airlines and United Airlines. These “Big 3” airlines, having benefited from massive consolidation in the U.S. airline industry and also having secured antitrust immunity allowing them to set prices and capacity jointly with foreign airlines that were once independent competitors, now seek to preserve their dominant market positions by enlisting the federal government to protect them from competition at the expense of consumers, U.S. communities, the American travel and tourism industry and our country’s aerospace manufacturers. This is ironic given that the record profits of the Big 3 have positioned them to competitively respond in the marketplace but instead they have chosen to seek government protection.

This anti-competitive campaign began two years ago. The allegations of the Big 3 were carefully considered through an inter-agency process that evaluated their arguments along with the opposing views and supporting documentation of other U.S. stakeholders as well as the detailed rebuttal documents submitted by Emirates Airline, Etihad Airways and Qatar Airways (the “Gulf Carriers”). After this exhaustive examination, the demand by the Big 3 for a freeze on Gulf carrier rights under the Open Skies agreements was rejected.  

Disingenuously, the Big 3 now see President Trump’s focus on American jobs as an opportunity to relitigate their failed case. The fact, however, is that the restrictions they seek on Open Skies would cost far more American jobs than they claim it would save. That is why groups like the U.S. Travel Association and the U.S. Airlines for Open Skies coalition (comprised of FedEx Express, JetBlue Airways, Hawaiian Airlines and Atlas Air Worldwide) stand shoulder-to-shoulder with the Business Travel Coalition in opposing this attempt to selectively rewrite Open Skies for the self-interest of the Big 3. In fact, the U.S. Airlines for Open Skies coalition alone represents more than 900,000 employees.

The Gulf Carriers are huge drivers of American aerospace jobs. For instance, Emirates is the largest operator of Boeing 777 aircraft. One out of every five Boeing 777s flying in the world today is operated by Emirates and virtually all are powered by GE engines. According to the Department of Commerce, every $1 billion in U.S. aerospace exports creates or supports nearly 6,000 U.S. jobs, many throughout Boeing’s nationwide supply chain of small and medium-sized companies. Additionally, by bringing in hundreds of thousands of tourists annually, the Gulf Carriers support U.S. job growth and stability for the travel and tourism industry among airlines, hotel companies, rental car companies, travel agencies and scores of other industries dependent on tourism.

Of deep concern is that a small number of airlines is endeavoring to dictate to all these other stakeholders who depend on Open Skies policy for success and growth. Indeed, the Big 3 are pursuing a policy of “capacity discipline” in both international and domestic markets, with the aim of limiting supply and increasing ticket prices for consumers. Furthermore, in the wake of U.S. airline mergers, the Big 3 have closed hubs in mid-sized American cities - cities like Pittsburgh, Memphis, Cincinnati and St. Louis - depriving these heartland communities of the connectivity that is vital to jobs and prosperity.

The claim of the Big 3 that their employees’ jobs are at risk is absurd. In its most recent published data on airline employment, DOT reported that November 2016 was the 37th consecutive month that U.S. scheduled passenger airline full-time equivalent employment exceeded the same month of the previous year with employment of 416,046. In other words, despite the substantial growth in Gulf Carrier service to the United States, employment at U.S. airlines, including the Big 3, is growing.

Inescapably, what the Big 3 are anti-competitively seeking is an end to the Open Skies agreements with the UAE and Qatar. If they truly believe that the Open Skies agreements have been violated, they are authorized by statute to file a complaint with DOT under the International Air Transportation Fair Competitive Practices Act (IATFCPA). Or, if the alleged violations pertain to the pricing articles in the Open Skies agreements, they could provide the evidence and pursue the specific procedure set out in the those articles to resolve pricing disputes. The truth is that the Big 3 are not pursuing these established avenues for redress of alleged grievances because they know that they can demonstrate neither a legal violation nor meaningful harm. Lacking a legal basis for an IATFCPA complaint, and facts that support it, the Big 3 have launched a loud political campaign with soaring but hollow rhetoric. 

For 25 years America’s Open Skies policy has proven itself to be the Gold Standard for international bilateral trade agreements. It provides consumers new and better competitive choices; generates middle-class aerospace and travel and tourism job growth in communities across the country; supports local economic stability and growth; drives a better balance-of-trade through foreign tourists’ dollars; and provides the marketplace discipline necessary to encourage efficient, innovative commercial air transportation services. Simply put, Open Skies is a proven policy that serves the best interest of our country, and a policy that should not be jettisoned because three self-pleading legacy airlines prefer to seek protection from the U.S. government rather than improve their product and compete in the marketplace.

The Business Travel Coalition and OpenSkies.travel look forward to working closely with your Departments and request a meeting with you to discuss our concerns.

Sincerely,

Kevin Mitchell

Chairman

Business Travel Coalition

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