November 14 - Big Three Cartel’s Anti-Open Skies Obsession - Fiddling While Rome Burns?


The Big Three Cartel’s Anti-Open Skies Obsession - Fiddling While Rome Burns?

 

By Kevin Mitchell   

Delta Air Lines, American Airlines and United Airlines (“Big Three”) have an unhealthy obsession that is proving to be increasingly detrimental to their shareholders. Fearful of competing in a marketplace where customers value the quality of service, they are consumed with demanding that the Trump Administration breach Open Skies agreements to limit competition from Emirates Airlines, Etihad Airways and Qatar Airways (“Gulf Carriers”). 

To date, this fixation has cost the Big Three’s shareholders tens of millions of dollars in lobbying and propaganda efforts. What do they have to show for their efforts? Nothing, but their lobbyists, lawyers and public relations firms do have bulging bank accounts from shareholder money that would have been better spent improving the Big Three’s product and advancing other value-adding priorities.

The Big Three have said air traffic control reform is among their highest Washington priorities. Delta opposed it last year but, to curry favor with the Trump Administration that strongly supports it, Delta flipped its position. The Big Three contend a modernized ATC system will significantly improve operations resulting in tens of millions of dollars of annual fuel savings and a better all-around travel experience for passengers.

However, the White House-backed ATC reform bill is stalled in the House of Representatives. It desperately needs a boost of help from stakeholder supporters like the Big Three. With tens of millions of dollars of annual operational benefits projected and an improved travel experience for customers on the line, where are the Big Three and their lobbyists? Instead of supporting President Trump’s ATC reform initiative, when it most needs it, they are running around Capitol Hill attempting to gather signatures on anti-Open Skies letters.

That is just one example of how the Big Three’s fixation on Gulf Carriers is proving to be a very costly distraction for shareholders.

Another is the Passenger Facility Charge (PFC) issue. For decades the airlines and airports have fought a pitched battle on whether PFCs should be increased. All that time, blocking such an increase has been one of the Big Three’s highest priorities. However, this year, the Big Three clearly took their eyes off the Congressional ball focusing instead on their anti-Open Skies campaign. The cost could be substantial. In the past, the Big Three have argued every one-dollar increase in the PFC cap would cost them tens of millions of dollars in lost annual revenue.

With the Big Three apparently asleep at the switch, earlier this year the powerful US Senate Appropriations Committee passed its FY18 US Department of Transportation funding bill which calls for the PFC on originating passengers to increase from $4.50 to $8.50. 

Where were the Big Three’s government affairs lobbyists? Were they running around Capitol Hill gathering signatures on low-hanging-fruit letters from constituent Senators and Members of Congress whining about the Gulf Carriers? What about their generously paid federally registered lobbyists? According to the Clerk of the House of Representatives, the Big Three reported that they spent a combined $9.82 million on federal lobbyists already in 2017 through September 30. Were they also running around Capitol Hill opposing Open Skies?

For the sake of shareholders, at some point, the Boards of Directors of the Big Three hopefully will realize just how their costly managements’ ineffective obsessions with Gulf Carriers have become. Maybe a substantial PFC increase and the failure to secure ATC reform will be the required wake-up call. However, I am not counting on it. Delta’s Board disappointingly sat idle when Richard Anderson tainted the Delta brand by playing the anti-Muslim card early on when he unabashedly injected 9/11 into the debate, and the silence from the CEOs of American and Delta, who should have disavowed such race baiting, was deafening. 

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