July 16 - An ATC Reform/Open Skies Deal for Delta?


INDUSTRY ANALYSIS


An ATC Reform/Open Skies Deal for Delta?

By Kevin Mitchell

Last week Delta Air Lines’ CEO, Ed Bastian, made news during the company’s earnings call by announcing that Delta has flipped its position on air traffic control reform and is now “working constructively” on US House legislation President Trump supports, which closely resembles Air Traffic Control (ATC) reform principles the President signed at a White House ceremony last month. In response to a question from a Wall Street analyst Bastian declared, “we’re not philosophically opposed to privatization.”

Given Delta’s ferocious lobbying campaign against House Transportation Committee Chairman Shuster’s very similar ATC reform bill last year, this caught many by surprise. Ironically, as Bastian made this statement, opponents of ATC reform were invoking Delta’s name and using its anti-ATC reform study from last year as a lobbying weapon against the bill Delta now is constructively working on.

Many in Washington, however, were not surprised. For months, like bait at the end of a fishing line, Delta has been dangling in the front of the Administration a morsel they thought would be too tantalizing to resist: Delta would flip its position against ATC reform and support President Trump’s number one aviation priority IF the Administration agreed to help Delta on its number one priority, the Gulf Carrier/Open Skies issue. The open question is whether Delta’s flip-flop indicates it got an ATC reform/Open Skies deal. Time will tell.

How is it that Delta can take an adamant position against Chairman Shuster’s ATC reform legislation last year decrying that it would throw ATC modernization off-course and harm consumers and one year later embrace it and work constructively on it? If aviation advocacy were an Olympic sport, then Delta would easily win the all-around Gold Medal for gymnastics given its extraordinary dexterity. Rather than its words, Delta should be judged by its actions.

The examples of unashamed disregard for American workers are glaring.

In its scorched earth lobbying campaign against Open Skies, Delta claims it is a champion of American jobs. Politically appealing words but one needs only look at Delta’s recent aircraft purchases to see they are hollow. On July 13, with great fanfare, Delta took delivery of its first Airbus 350-900. It is the first carrier in North America to take delivery of this Airbus model. Delta is so concerned about American jobs, it turned its back on Boeing and US aerospace manufacturing workers by choosing Airbus and European workers instead. As Aviation Daily noted in its lead story, Delta – and American Airlines and United Airlines as well – has not ordered a single new generation Boeing 777X. The 777X program was able to launch, and will create hundreds of thousands of American manufacturing jobs, because of loyal support from Gulf Carriers Emirates, Etihad and Qatar that have purchased 235 of the 306 777Xs sold. 

But, it is not just Airbus and European workers who are benefitting from Delta’s recent aircraft purchases. It its earnings call, Bastian proudly announced the first of its 75 Bombardier C series CS100 aircraft will arrive next Spring and operate in the New York market. Again, Delta turned its back on Boeing and American manufacturing jobs. Canadian aerospace workers no doubt are thrilled. When asked about the unfair trade practices dispute between Boeing and Bombardier that arose due to the sweetheart deal Delta received, Bastian deflected by saying “let’s see how the dispute between those two parties comes together.” No doubt there are many American workers – both on the assembly line at Boeing and throughout Boeing’s nationwide supply chain – who believe they are parties too and wish Delta had put America, not Canada, first. 

Delta also says its campaign against Open Skies is to protect the jobs of Delta employees. To hear Delta tell it in its slick 15-minute Open Skies employee video, the Gulf Carriers are an existential threat to them and their families. However, Delta’s executive team continues to give away more Delta jobs to foreign joint venture (JV) partners than have ever been lost to Gulf Carrier competition. Since JV revenue is equally split, it doesn’t matter to Delta whether its aircraft crewed by its employees fly routes or they instead give the flying opportunities to foreign partner airlines and their foreign crews. 

Delta gets its revenue split either way. For instance, earlier this year Delta discontinued flying Seattle-London Heathrow. Instead, it gave the route to JV partner Virgin Atlantic. In its Gulf Carrier campaign Delta claims each US flight lost to a foreign carrier costs 1,500 American jobs. Did Delta’s decision to give this route to its foreign partner cost 1,500 US jobs? Next time you are in any Delta US hub, look around at the large number of Delta JV partner aircraft there and ask yourself how many of those flights could be operated by Delta, with Delta crew, if not for JV revenue splitting.

In that Delta video, Bastian makes the upbeat promise that Delta will start flying again to India if the Trump Administration decides to abandon Open Skies and clips the wings of the Gulf Carriers. Delta often cites its cancelled Amsterdam-Mumbai flight as a casualty of Gulf Carrier competition. Did those Delta US-India passengers simply vanish? Of course not. Delta has given them to foreign partners – Air France/KLM over Paris and JetAirways over Amsterdam. Based on its claim in the Gulf Carrier matter, another 1,500 American jobs lost due to a decision by Delta management. 

Let’s hope the Trump White House did not take Delta’s bait. In the Silver Anniversary year of Open Skies, we should be celebrating the enormous benefits it continues to deliver to consumers, communities and the nation’s economy. Instead, sadly, we are having a debate about whether this hugely successful bipartisan international air service policy, which has withstood the test of time, should be replaced by a managed competition scheme like Canada’s Blue Skies policy to further enrich three oligopoly airlines - Delta, American and United - with record setting profits.

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