November 6 - The Delta Way: Outsourcing US-India Flights, Crew Jobs To Foreign Partners


Business Travel Coalition

 

INDUSTRY ANALYSIS

 

The Delta Way: Outsourcing US-India Flights and American Crew Jobs To Foreign Partners

 

By Kevin Mitchell

Americans for Fair Skies, the anti-Open Skies lobbying arm of Delta Air Lines, argued yet again in recently tweeting that competition from Emirates Airline, Etihad Airways and Qatar Airways (Gulf Carriers) has driven Delta out of the non-stop US-India market. This repetitious political soundbite could not be further from the truth. 

Delta, in fact, has robust US-India service. It has decided, however, to serve India indirectly by outsourcing its passengers to offshore partners on connecting flights with non-US crew rather than directly serve that market with non-stop Delta flights with US crew. It is a profit-maximizing decision by Delta management at a substantial cost to US jobs. According to Fair Skies, each flight foregone due to competition or given to a foreign carrier results in 1,500 US jobs being lost. Based on this Delta-funded claim, Delta outsources thousands of jobs annually in the US-India market alone and that number is growing rapidly.

Facts are stubborn things. Those facts indisputably show that Delta’s absence from the non-stop US-India market is due to Delta management’s choice to outsource US-India flying to its foreign partners such as Air France/KLM, Virgin Atlantic and Jet Airways. Think about the proverbial smoke-filled back room where executives from Delta and their partner airlines, protected from competition oversight by antitrust immunity, go to divvy-up respective shares of the US-India connecting market.  Now you have the true picture.

On October 31, 2016 Delta issued a press release titled “Delta, Virgin Atlantic, Jet Airways expand cooperation with India-US connections via London-Heathrow.” It touts how “Delta and Virgin Atlantic customers flying between North America and India will be able to connect via a Delta codeshare onto Jet Airways’ flights to Mumbai and Delhi via London Heathrow and onward to 20 destinations within India.” 

The Delta release makes clear that this is an expansion of Delta’s existing outsourcing of US-India flying by emphasizing “[t]he new routes complement Delta and Jet Airways destinations available through existing codeshare agreements via Amsterdam Airport Schiphol and Paris Charles de Gaulle.” Is it a surprise that the new CEO of Jet Airways, Vinay Dube, was Delta Senior Vice President, Asia Pacific,  immediately prior to assuming his new position? 

There have been rumors in the media that Delta is looking to make an equity investment in Jet Airways to deepen that partnership and outsource even more US jobs. In mid-October 2017, Delta and Jet Airways announced 28 additional code-share/outsource routes as it expands its Jet Airways off-shoring relationship.

Up to March 2015, Delta operated a US-crewed Delta aircraft between Amsterdam and Mumbai. Delta likes to offer that flight as a primary example of it allegedly being unfairly forced out of the India market by Gulf Carrier competition. But, as often is the case with Delta, the facts tell an entirely different story. 

Pieter Elber, the CEO of Delta’s partner KLM, told the Business Standard on October 31, 2017 that, “traffic from India (to Amsterdam) is booming with the launch of new services and enhanced co-operation with Jet [Airways].” In 2014, there were 250,000 passengers travelling between Amsterdam and India. Mr. Elbers said now they are eyeing one million Amsterdam-India passengers in 2018, a four-fold increase. 

In 2016 India was Amsterdam’s 12th largest intercontinental market. Today, it has jumped to the seventh largest. So much for Delta’s politically expedient, but false, explanation of why it abandoned the Amsterdam-India market. That decision is yet another example of Delta’s core business strategy to offshore international flying, and outsource Delta crew jobs, to its foreign partners. 

Why is the rapid growth of Amsterdam-India flying relevant to the US Open Skies debate? For Delta’s US-India passengers, it means Mr. Bastian plans to increase transiting them through Amsterdam Schiphol onto partners KLM and Jet Airways. If you prefer more efficient US-India non-stop service, that’s tough. The Delta way is to inconveniently outsource customers to foreign partners via European connecting hubs like Schiphol. 

Delta generously spreads the outsourcing wealth around to its foreign partners. India-bound passengers are also divvied-up to Air France/KLM over Paris de Gaulle. Given the Delta-Air France/KLM joint venture agreement providing a 50/50 revenue split, Delta gets its share of the riches whether passengers are on US crewed aircraft or offshored to foreign crewed partners. 

It is therefore laughable when Ed Bastian, the CEO of Delta, politically grandstands claiming that if it and its oligopoly partners American Airlines and United Airlines prevail in getting the Trump Administration to abandon the US-UAE and US-Qatar Open Skies agreements “we’re (Delta) going to go back to India.” That service decision has nothing to do with Gulf Carriers and the Trump Administration. It is a business decision that the Delta/Air France-KLM/Virgin Atlantic/Jet Airways US-India cartel could make today. Instead, Mr. Bastian prefers to outsource those flying opportunities and crew jobs to its foreign cartel partners – and will likely to continue to do so regardless of the resolution of its war on Open Skies policy

It also is absurd when Mr. Bastian touts the US job-creating benefits of hypothetically renewed India and Middle East non-stop Delta flying. Tellingly, Mr. Bastian proclaims that this will enable Delta to “add jobs, lots of jobs. We are going to be able to add new long-haul airplanes to support that growth.” Mr. Bastian just declared Delta’s new Rolls Royce-powered Airbus A350-900 is its “flagship“ long-haul aircraft. So, how would Delta purchasing more Airbus aircraft and Rolls Royce engines benefit anyone other than European workers, just like all the Air France-KLM crew who benefit from Mr. Bastian’s decision to outsource flights to its European joint venture partner? 

But, you have to hand it to Mr. Bastian and his management team. They have convinced many Delta workers that the Gulf Carriers are the bogeymen taking away their US-India non-stop flying opportunities. In fact, the enemy of Delta’s crew and its aspiration for job security and growth is Mr. Bastian and his outsourcing and offshoring planning team, not the Gulf Carriers. 

The most compelling rebuttal of Delta’s “we were unfairly driven out of India” narrative is provided by its anti-Open Skies partner, United, and its partner, the second-tier competitor Air India. How is it that United is able to profitably offer non-stop flights from Newark to both Mumbai and New Delhi but the US-India non-stop market, according to Delta, it is not commercially viable? How is it that Air India, hardly a world-class competitor, is rapidly expanding its already significant non-stop US-India service offerings? Air India flies non-stop to New York JFK, Newark, Chicago, San Francisco, Los Angeles, Dallas-Fort Worth and Washington Dulles. 

According to the Times of India, Air India “is looking at several other US destinations.” Yet, Delta claims unfair competition by Gulf Carriers has driven competitors out of the US-India non-stop market. The accurate explanation: non-stop US-India flying is antithetical to the scheme by Delta and its cartel partners to divvy-up the US-India market on a connecting basis. Perhaps that exactly explains Jet Airways’ decision to withdraw from the India-New York non-stop market even as Air India is rapidly expanding non-stop India-US flying.

As usual, Delta is long on political soundbites and short on credible facts. Its US-India non-stop argument is a prime example of that. In fact, in a July 15, 2015 earnings call, Glen Hauenstein, now its President, referred to Delta’s failure to identify the rapidly growing US-India market as a “missed opportunity.” In other words, the Gulf Carriers had the vision to identify and aggressively develop that market overlooked by Delta. Now, to correct its self-inflicted commercial blunder, Delta is demanding that the Trump Administration “level the playing field” by penalizing the Gulf Carriers for having the foresight it lacked.

When you peel back the onion on Delta’s US-India political rhetoric, it is indisputably clear that it has no merit whatsoever. It’s just hollow and baseless political advocacy. Delta’s political rhetoric doesn’t fly, but jobs it could be giving to American aerospace workers sure do - overseas by the tens of thousands.

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