May 11 - Like Spring Weather, Delta’s Positions Change Quickly And Dramatically


Delta Air Lines’ (Delta) public policy advocacy is tenacious and fueled by a seemingly limitless budget. Vital to the airline is the hope that Trump Administration officials and Members of Congress have extremely short memories because the positions Delta takes, and the “facts” it asserts to support the narrative de jure, often change quickly and dramatically.

If rumors are accurate, Delta is market-testing another potential pivot. Last year, given that its aged domestic fleet is not well-suited to fully realize the operational efficiencies of a modernized air traffic control system while the newer fleets of its competitors are, Delta lobbied vigorously against ATC reform. It was the lone voice in the U.S. airline community touting FAA’s NextGen accomplishments. It declared that FAA turned the corner on timely and cost-effective modernization, and publicly chided its competitors for blaming FAA for what Delta suggested were their own operational failings. 

Now, however, Delta is said to be in Let’s Make a Deal mode. The industry is abuzz with rumors that Delta is taking soundings to determine that if the airline were to drop its opposition to ATC reform – a “principled” policy position last year, a bargaining chip this year – in exchange could it get policymakers to help on its anti-Open Skies campaign against Gulf carrier competition?This should come as no surprise to people who watch Delta play the public affairs game. A “principled” position supported by “facts” today, an opposite position supported by alternate facts tomorrow. Delta has also mastered simultaneously arguing diametrically opposite positions.

A recent high-profile example of Delta’s advocacy agility was its position on export credit financing and reauthorization of the Export-Import Bank (EXIM). Delta opposed it before it supported it. In the beginning, Delta was a leading voice opposing reauthorization of the EXIM. It was a visible and vocal member of the chorus decrying export credit financing as inherently bad public policy and crony capitalism.

Delta claimed it was chased out of the U.S.-India market by EXIM lending to Air India to purchase Boeing 787 Dreamliners. Simultaneously, it spent millions of dollars repeatedly suing EXIM seeking to use the courts to block guarantees for Air India’s 787s. Then Delta pivoted. It claimed it never opposed export credit financing and, after waging a scorched earth lobbying campaign against EXIM, it in fact was prepared to support its reauthorization provided the legislation included an anticompetitive carve-out prohibiting widebody financing for state-owned carriers. 

Delta’s new position was noteworthy for several reasons. First, for those who didn’t suffer amnesia, effortlessly and with a straight face Delta claimed it in fact never changed its position. Second, to its credit, Delta’s new position passed the “judge us by what we do, not what we say” test. At the same time Delta opposed the concept of export credit financing, DeltaTechOps was benefiting from it. Specifically, EXIM guaranteed a $41 million bond issued to RG Linhas Aéreas S.A. (GOL Airlines), an airline in which Delta holds an equity stake, for engine maintenance service DeltaTechOps performed on GOL jets in Atlanta. 

The new position also was consistent with the fact that Delta has benefitted significantly from Canadian and Brazilian export credit financing guarantees to purchase Bombardier and Embraer aircraft. As an aside, it is interesting to note that Delta now claims Gulf carriers are responsible for chasing it out of the U.S.-India market. Air India and Gulf carriers have one thing in common – none are responsible for Delta’s failure to have the foresight to identify and serve the significant and growing U.S.-India market but all have been made scapegoats for its commercial oversight. 

Delta also has shown great dexterity in simultaneously arguing alternate facts in its battle to stamp-out the much-needed competitive choice Gulf carriers offer to consumers.

At the same time Delta argues that it currently is being harmed by Gulf carrier competition, in an earnings call its now President, Glen Hauenstein, admitted it is not. Delta is breathless in asserting that it currently is suffering commercial harm at the hands of Gulf carrier competitors. Yet, Mr. Hauenstein, at the time EVP and Chief Revenue Officer and now Delta’s President, admitted that political talking point is not true. Americans for Fair Skies, a lobbying arm of Delta, asserts that Mr. Hauenstein’s admission in a July 15, 2015 Q2 2015 earnings call was misrepresented. You be the judge who is telling the truth and who is spinning on Delta’s nickel. 

​Michael Linenberg - Deutsche Bank

“Yes I am just -- but I’m wondering Glen are you seeing some displacement of that traffic to competitors such as Emirates or Etihad or Qatar as they continue to add more and more seats into the marketplace? And I’m looking more like U.S. into India, Middle East, Africa because there is a decent amount of flow traffic between you and your partners.”

Glen Hauenstein - EVP and Chief Revenue Officer

“Correct. As we’ve stated in the past, we are not -- we have not been the largest player in the U.S. to India or the Indian Subcontinent but it is a significant long-term threat to us. As much a missed opportunity, we believe that under the right and clear circumstances that we should be able to fly non-stop from the U.S. into India.”

Mr. Hauenstein’s candor is refreshing and commendable. For Delta, the U.S.-India market is “a missed opportunity.” Its failure to capitalize on the commercial opportunity is not Air India, EXIM or Gulf carriers’ fault. It was an oversight by Delta. As to whether Delta currently is suffering commercial harm due to Gulf carrier competition, Mr. Hauenstein is equally emphatic – “we are not.” Americans for Fair Skies made a feeble attempt to explain away Mr. Hauenstein’s admission by attacking me. Its point – but Mr. Hauenstein said there was a long-term threat. In a Department of Transportation International Air Transportation Fair Competition Practices Act case there is a term of art used to describe a claim of speculative future harm when the complainant has admitted no current commercial harm -- denied. 

Delta is equally flexible in its advocacy about Fifth Freedom flights. In its political campaign against Open Skies and Gulf carriers, Delta is obsessed with Fifth Freedom flights that give consumers greater competitive choice in the U.S.-Europe oligopoly market. In addition to branding them as illegal, at its Investor Day in December 2013 former Chairman and CEO Richard Anderson went so far as to label Fifth Freedom flights as anachronistic – claiming they are a vestige of a time fuel stops were required due to the limited range of aircraft and never were intended for flights such as Emirates’ New York JFK-Milan-Dubai service. However, while attacking Fifth Freedom operations and Emirates’ limited use of them, Delta continues to operate a Fifth Freedom hub at Tokyo Narita for intra-Asian traffic. 

A centerpiece of its lobbying campaign to topple a consumer-friendly deal for first time day-time U.S.-Japan flights at Tokyo Haneda International Airport was the harm Delta claimed such flights would cause its Fifth Freedom Narita hub. For instance, a January 19, 2016 Detroit News article titled, “Treaty talks imperil Delta Detroit-Tokyo flights,” includes the Delta-sourced fact that “Of all the [Detroit] Delta passengers who landed in Narita in 2015, 64 percent of them connected to one of six Asian cities served by Delta connections, from Shanghai and Taipei to Manila and Osaka.” So much for Delta’s assertions in the Gulf carrier debate that Fifth Freedom operations are illegal and commercially outdated.

Yet another example of Delta’s policy nimbleness is its preoccupation with state-owned airlines. On April 20, 2017 CEO Ed Bastian is quoted as saying that Delta’s top priority in Washington is, “State-owned enterprises and the need for our government to protect U.S. jobs and promote fair trade, not free trade.” Of course that is code for Delta’s political campaign against Gulf carriers, and its selective indignation aimed at state-owned carriers provided they are located in the United Arab Emirates or Qatar. At the same time, Delta is nurturing its $450 million equity investment in China Eastern, China’s most heavily subsided state-owned carrier, and benefiting from its leadership role in the SkyTeam alliance where 75 percent of members are state-owned carriers. 

Let’s hope U.S. policymakers don’t take the bait accepting Delta’s offer to trade away its past opposition to ATC reform for help restricting the important and much-needed competitive choice Gulf carriers provide. That would be a terrible deal for consumers. As the past few weeks have dramatically and graphically shown, now more than ever, passengers need and deserve more not less competitive choice in air service. The Delta, American and United oligopoly is working vigorously to eliminate the little international competition that remains. I am confident the Trump Administration will stand-up for competition and consumer choice, not more market power for the Delta-American-United oligopoly.

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