June 5 - Desperation in the Air: The Anti-Open Skies Crowd’s Silly CRAF Argument


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INDUSTRY ANALYSIS


Desperation in the Air: The Anti-Open Skies Crowd’s Silly CRAF Argument

By Kevin Mitchell      

Memorial Day officially ushered in summer in Washington, DC. The sweet smell of springtime cherry blossoms has been replaced by the acrid odor of a desperate political argument intended to resuscitate the failing protectionist lobbying campaign against US Open Skies policy and competitive choice for air travelers. 

Nearly 2-1/2 years ago Delta Air Lines, American Airlines, United Airlines (the Big Three) and their unions launched a political campaign aimed at denying consumers the option to choose to fly Emirates Airline, Etihad Airways and Qatar Airways (the Gulf Carriers). 

The Big Three demanded that the US government breach its Open Skies agreements with the United Arab Emirates and Qatar by freezing the rights of their carriers to fly to the US, and to terminate those agreements if they were not modified to the Big Three’s anti-competitive satisfaction. Heavy on allegations but devoid of facts, to date the Big Three’s campaign has been historically expensive but an utter failure.   

Recently at a Capitol Hill rally a labor leader claimed that their pleas to the Obama Administration fell on “deaf ears.” That is not true and frankly disrespects the many US government officials at the Departments of Transportation, State and Commerce who spent thousands of hours meticulously combing through thousands of public submissions and analyzing data presented by both sides. 

Simply put, the Obama Administration’s eyes and ears were fully open and functioning too well for the Big Three’s liking. The problem is the same one that continues to dog the anti-Open Skies coalition in lobbying the Trump Administration – they don’t have a meritorious legal case; they have failed to provide facts that support their claim of competitive harm; and it would be a huge mistake to abandon longstanding bipartisan Open Skies policy as they demand. 

At some point one would think that the boards of the Big Three would say enough is enough – management has wasted tens of millions of dollars on a lobbying campaign that has been a unmitigated failure and that has inadvertently brought sharp attention to other issues such as whether grants of antitrust immunity for airline joint ventures, which are predicated upon robust new domestic and foreign carrier entry, are still in the public interest given the Big Three’s protectionist aspirations.

More prudently, the Big Three should alternatively spend that shareholder money on customer service and enhancing competitiveness by offering a better product. However, we obviously haven’t reached the point of sensibility by corporate fiduciaries yet. 

Indeed, Americans for Fair Skies, a lobbying arm of Delta Air Lines, has launched the most desperate and silly anti-Open Skies argument yet. It claims Gulf Carrier competition puts US national security at risk by endangering the Civil Reserve Air Fleet (CRAF) program. They argue that because Gulf Carriers compete head-to-head with the Big Three in a grand total of two markets – New York-Milan and Newark-Athens, lost international market share is such a threat that the Big Three will be unable to maintain their widebody fleet in support national military need for supplemental airlift. You cannot make this stuff up!

Think about it. The United Arab Emirates (UAE) and Qatar are two of the United States’ most important and loyal allies in the volatile Gulf region. In his recent historic speech to the Arab Islamic American Summit in Riyadh, President Trump praised the UAE for its leadership “in the battle for hearts and souls” in combating radicalism in the region and he called Qatar, which hosts the US Central Command, “a crucial strategic partner.” 

Setting aside the assertion that there will be insufficient widebody aircraft available to CRAF, consider exactly what Delta Air Lines’ lobbying subsidiary is saying. It is claiming that US national security interests would be best served by breaching existing Open Skies agreements with the UAE and Qatar. Put differently, the Big Three’s aversion to competition that might challenge their record-setting profits should be considered more important to the US than its vital relationship with two of our country’s most important strategic partners in the Gulf region. 

How could anyone come-up with such an absurd argument, let alone spend a considerable sum of money on a slick YouTube video promoting it, which has an impressive 58 views?! The Big Three and their labor allies live in an echo chamber. They have convinced each other that fiction is fact. They have convinced each other that if they only spend enough shareholder money and union member dues, to generate enough political heat and noise, thoughtful US policymakers’ recommendations will be ignored. And, they have convinced each other that a silly and disingenuous political argument like Open Skies puts the CRAF program at risk is actually very clever. 

One can only imagine the “thought process” that went into developing the CRAF argument. Perhaps it went something like this: we need to find an Administration ally other than the Departments of Transportation, State or Commerce. At DOT our goose is cooked. They know the only reason we have not filed an International Air Transportation Fair Competitive Practices Act (IATFCPA) complaint is that we know we cannot make a case under DOT’s exacting fact-based standard. 

The State Department – well, that’s a lost cause too because they care about diplomatic relations with the UAE and Qatar, two of our most important allies in the Middle East. There is no reason for hope at the Department of Commerce either. The UAE is the US’s largest and most important trading partner in the Middle East, and the US currently enjoys a significant balance of trade surplus with them. 

On top of that, Commerce is focused on American manufacturing jobs and the Gulf Carriers are responsible for 235 of the 306 total orders for the new generation Boeing 777X. Based on Commerce’s jobs multiplier for US aerospace exports, the Gulf Carriers’ commitment to the Boeing 777X program and American aerospace workers will create or sustain 531,598 American jobs. 

How about the Department of Defense (DOD), maybe we can convince them to side with us – they don’t really need a US Central Command in Qatar – any ideas for a compelling DOD-related argument? 

You can tell a lot about the confidence organizations and people have in the merits of their case by the arguments they make to support it. The CRAF argument reeks of desperation and no confidence, and understandably so. 

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Mitchell is founder of Business Travel Coalition and OpenSkies.travel.  

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