October 16 - The Big Three US Airlines Are Not Loyal to America, Or Her Workers


Business Travel Coalition

INDUSTRY ANALYSIS

 

The Big Three US Airlines Are Not Loyal to America, Or Her Workers


By Kevin Mitchell 

To hear the Delta Air Lines, American Airlines and United Airlines (Big Three) lobbying rhetoric targeted at the Trump Administration, they are the best friend American workers and US job creation could have. They claim to have a laser-like focus on protecting and promoting US jobs. At least that’s what they say when they are trying to convince the Trump Administration to ignore consumers by abandoning Open Skies and restricting competitive choice offered to them by Emirates Airline, Etihad Airways and Qatar Airways (Gulf Carriers).

However, contradictory actions by the Big Three paint a completely different and troubling anti-US worker picture. When you believe that you have booked your flight with any of the Big Three but instead end up on an aircraft of their foreign alliance or joint venture partners, think about the number of US crew jobs the Big Three have chosen to outsource to those foreign airlines. A recent high-profile example is Delta’s decision to stop flying from Seattle to London Heathrow choosing instead to give that route, and those US crew jobs, to its British joint venture partner Virgin Atlantic. Did that decision by Delta management cost 1,500 US jobs, as the Big Three allege to be the case when a Gulf Carrier flies a US route? 

The remarkable thing is that the US airline employee unions, who are whipped-up into a frenzy on the Gulf Carrier issue, are stone silent as the Big Three continue to off-shore international flying opportunities and potential new jobs to foreign partners. For example, Sara Nelson, President of the International Association of Flight Attendants (AFA), and a United Airlines flight attendant, is a passionate anti-Open Skies advocate. She claims United’s decision to end its Washington Dulles-Dubai non-stop flight caused AFA jobs to be lost. That’s a curious contention given that those United aircraft were redeployed in the US-Europe market and, unless they are operating today with no crew, no jobs, in fact, were lost as a result of United management’s profit-maximizing decision. Yet, Ms. Nelson turns a blind eye to all the potential United AFA jobs being outsourced daily to foreign Big Three alliance and joint venture partners such as Lufthansa.   

The Big Three claim that they have largely been forced to abandon the non-stop US-India market. The facts tell a different story. The Big Three have chosen to outsource that market on a less convenient one-stop or two-stop basis to foreign alliance and joint venture partners. If US airline employee unions wonder what happened to those US crew jobs, they need only ask their smiling foreign colleagues at Air France/KLM, Lufthansa, British Airways, Jet Airways and Air India who greatly appreciate the crew jobs the Big Three have outsourced to them. 

Remember, according to the Big Three and their lobbying mouthpieces the Partnership for Open and Fair Skies and Americans for Fair Skies, each potential US flying opportunity that instead is operated by a foreign carrier purportedly results in 1,500 US jobs being lost. Based on their own measure, the Big Three’s rampant and growing practice of outsourcing international flights to foreign alliance and joint venture partners is costing a massive number of US jobs.  

But, you have to hand it to the Big Three the way they have totally duped most US airline employee unions. Union leaders were told the Open Skies fight purportedly is about protecting US jobs and they seem to have been gullible enough to believe it. But, in fact, it is about the Big Three protecting their European alliance and joint venture partners and their non-US hubs. So, the US airline employee unions are indeed tirelessly fighting to protect the Big Three’s ability to outsource US crew jobs to foreign airline partners. How sadly ironic is that!? 

But, the most glaring example of the Big Three’s “we are the champions of US workers” hypocrisy is their lack of loyalty to Boeing and its American workers. To the extent anyone thinks that it is bad business to solely rely on Boeing and its world-leading made-in-the-USA aircraft, talk to Southwest and Alaska Airlines who are excellent airlines with all-Boeing fleets.

The ringleader of the Big Three, Delta, has been in the news a lot recently due to its partnership with Bombardier and its decision to be the US launch customer for Bombardier’s heavily subsidized C Series aircraft. Boeing filed a complaint with the US International Trade Commission (ITC) alleging Delta’s sweetheart deal violated US trade laws and put US aerospace workers at risk. The ITC agreed and the US Department of Commerce initially imposed a 220 percent countervailing duty that Ed Bastian, the CEO of Delta, decried as “absurd.”  Subsequently, the Commerce Department added an additional 80 percent duty on top of that. Mr. Bastian continued to criticize the Trump Administration’s decision dismissively branding it as “nonsensical” during Delta’s recent earnings call.

Does Delta loyally stand strong for US aerospace workers? Not so much. In fact, to add insult to the loss of potential Boeing jobs, Mr. Bastian recently anointed the Airbus A350-900 as the “flagship” of Delta’s fleet and defiantly said the Bombardier CS100 will “be our (Delta’s) best domestic aircraft.”  In that earnings call, Mr. Bastian referred to Bombardier as its “great partner” and criticized Boeing’s claim of damages.

Delta is not the only member of the oligopoly that is not loyal to Boeing and its American workers. Scott Kirby, the President of United, recently lamented that Airbus cannot give it a competitive price for new single-aisle aircraft. The culprit, according to Kirby who previously was President of American Airlines, is a “most-favorable customer” clause American has in its Airbus contract for a large order in 2011 that the New York Times called a “coup” for Airbus. According to comments Mr. Kirby made in an employee video, Airbus would have to write a check to American were it to offer any customer a more favorable price than American received.

So, let’s take stock of the Big Three. Delta is the beneficiary of the Bombardier C Series aircraft order that the ITC concluded constituted illegal dumping in the US market. American is the beneficiary of an Airbus “most-favorable customer” clause it received as part of a blockbuster deal. And, finally, United is envious of American’s Airbus preferential clause because it limits Airbus’s ability to give United a more favorable price.

The Big Three do not stand strong for US aerospace workers. For verification, look no further than Boeing’s new generation 777X program. Boeing has sold 305 777Xs. Delta, American and United have not purchased a single 777X, despite the fact they are awash in record-setting profits. In stark contrast, the Gulf Carriers have purchased 235 of them, including Emirates, which placed the largest order in commercial airline history when it purchased 150 GE-powered 777Xs enabling that über US job-creating program to launch. In total, based on the US Department of Commerce’s jobs multiplier, Gulf Carrier 777X purchases will create or sustain over 530,000 American jobs. In embarrassingly stark contrast, the Big Three are supporting zero 777X-related US jobs.

The Big Three certainly have the right to make fleet decisions most beneficial to their shareholders. However, they cannot have it both ways. They cannot trumpet that they are the champion of US jobs and then consistently turn their backs on Boeing and its US workers as well as numerous high paying Boeing supply-chain jobs.

Of course, the truth is that the Big Three’s campaign against Open Skies and Gulf Carrier competition has nothing whatsoever to do with US jobs. Their job argument is a political ruse. Their political campaign is aimed at stamping out competition while attempting to cloak their anti-consumer intent in stars and stripes rhetoric.

Knowing that they have no case, they have chosen to ignore four decades of standard aviation practice that they steadfastly adhered to by not filing an International Air Transportation Fair Competitive Practices Act complaint with the US Department of Transportation. Instead, the Big Three have disingenuously mounted a political campaign based on fictitious concerns about US workers in an attempt to cajole the Trump Administration. When the Trump Administration looks at their actions rather than listen to their pandering rhetoric, the inescapable conclusion is that the Open Skies/Gulf Carrier issue is motivated by the Big Three’s desire to boost their already record-setting profits by thwarting competition, and has nothing to do with safeguarding or creating American jobs.

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