November 8 -  Delta has cost the US economy 100,000 jobs!


INDUSTRY ANALYSIS


Delta, American and United Are Champions of Off-Shoring Aviation Jobs

Trying to pander to the Trump Administration, Delta Air Lines, American Airlines and United Airlines (Big Three) claimed that their failed $50 million lobbying campaign against competitive choice offered by Emirates Airline, Etihad Airways and Qatar Airways (Gulf Carriers) was all about protecting US aviation jobs. However, that was a cynical and false political narrative. In fact, it was all about protecting the Big Three’s record-setting US-Europe profits, and it had nothing to do with US aviation jobs.

Indeed, when it comes to off-shoring US aviation jobs, there is no one who outsources more US jobs than the Big Three.

The Big Three anchor the three global airlines alliances -- Star, oneworld and SkyTeam. One can debate the consumer benefits of alliances. However, it isn’t debatable that alliances are a boon to off-shoring international flying that the Big Three otherwise would offer on US-crewed aircraft. Instead, passengers are outsourced to foreign-crewed partner airlines.

How many US jobs are lost as result? According to the Big Three themselves, for every flight operated by a foreign carrier rather than a US airline, 1,500 US jobs are lost. Keep in mind that is the Big Three’s job loss multiplier. So, for instance, Delta’s decision to stop flying passengers from Amsterdam to Mumbai on its own US-crewed aircraft and, instead, outsource that flying to code-share partners Air France-KLM and Jet Airways cost the US economy 1,500 jobs. An additional 1,500 US jobs were lost as a result of Delta’s decision to give its longstanding Seattle-London Heathrow route to partner Virgin Atlantic.

That is the tip of the iceberg. Think about how many international journeys on the Big Three now involve at least one leg on a foreign-crewed alliance or joint venture partner.

So, just how loud is the sucking sound of US-aviation jobs being off-shored by the Big Three? In its Q2 2018 earnings call, Glen Hauenstein, Delta’s President, boasted “we continue to rely more heavily on our partner's EU hubs and now deployed 60% of our transatlantic capacity into their hubs.” In other words, instead of conveniently flying passengers non-stop on US-crewed Delta aircraft to points in Europe and beyond, Delta is routing 60 percent of all transatlantic passengers to European partner connecting hubs so that those with onward journeys can be divvied up among its foreign-crewed international partners.

This outsourcing doesn’t just happen on foreign soil. Next time you are at large US international airports like Atlanta Hartsfield, Dallas-Fort Worth, New York JFK or Chicago O’Hare think about the substantial number of international partner aircraft you see there. Then ask yourself how many of these flights to Paris, Amsterdam, Seoul, London Heathrow, Frankfurt, Munich and other international destinations could be operated by the Big Three themselves with US crew rather than the Big Three subsidizing the passenger loads of foreign partners by offloading code-share passenger onto their foreign-crewed flights.

Patriotism aside, you may say to yourself giving away so much international flying revenue makes no commercial sense for the Big Three. Therein lies the dark underbelly of virtual mergers facilitated by rampant and ill-advised grants of antitrust immunity. The Big Three and their foreign airline joint venture partners pool and share revenues regardless of who does the flying. For instance, Delta’s decision to cost the US economy 1,500 jobs by outsourcing its Amsterdam-Mumbai flight to Air France-KLM resulted in zero revenue loss for Delta. So, perversely, revenue pooling and sharing, made possible by antitrust immunity, create an incentive to outsource international crew jobs to foreign airline partners. Why not save the cost of operating a US crewed aircraft and instead redeploy that aircraft elsewhere when you can bank the same amount of passenger revenue by having Air France-KLM fly Delta passengers on its foreign-crewed aircraft instead?

The hypocrisy of the Big Three wrapping themselves in the stars and stripes and claiming to be great champions of US aviation jobs extends far beyond outsourcing international flying and crew jobs.

There is the shining example of Delta turning its back on US aerospace workers by loyally purchasing European and Canadian built Airbus and Bombardier/Airbus aircraft.

In 2014 Delta was faced with a choice of supporting American or European jobs when it purchased aircraft to replace its older generation Boeing 747s and 767 aircraft. Delta chose European workers. It purchased 25 Rolls-Royce powered Airbus A350-900s – its new “flagship” aircraft according to Delta CEO Ed Bastian and COO Gil West – and 25 Rolls-Royce powered Airbus A330-900neos. With a reported market value of $14.3 billion, according to the US Department of Commerce’s aerospace jobs multiplier, this Delta transaction alone outsourced more than 70,000 American jobs.

In December 2017, Delta announced its decision for its narrowbody fleet renewal. Was it Boeing and its outstanding US workers, as well as Boeing’s nationwide supply chain including many medium and small-sized US businesses? No, Delta just talks about supporting US jobs. It announced an order for 100 Airbus A321neo aircraft with an option for 100 more. Mr. Bastian declared “[t]his is the right transaction at the right time for our customers, our employees and our shareholders.” What about US workers and President Trump’s commitment to bolster US manufacturing jobs? Those considerations didn’t make it into Mr. Bastian’s equation. Based on Commerce’s jobs multiplier, this $12.7 billion choice by Delta cost more than 60,000 additional US jobs.

One should not forget Delta fighting to open the US market for Canada’s subsidized Bombardier C Series aircraft. Since Airbus took a majority stake in its C Series partnership with Bombardier, the aircraft has been rebranded as the Airbus A220. In late October Mr. Bastian was in Montreal to take delivery of Delta’s first Airbus A220-100. Mr. Bastian gushed “the innovation, creativity and remarkable engineering skills that went into the design and production of this aircraft is simply breathtaking.”

Delta got a sweetheart deal when it purchased 75 C Series 100 aircraft with an option for 50 more. Those are convertible to the larger CS300s, which Boeing believes will compete head-to-head with its US-manufactured aircraft. The Trump Administration concluded that deal was too good to be legal; it constituted illegal trade dumping that threatened US jobs and it announced two substantial tariffs would be imposed. Mr. Bastian blasted the Trump Administration’s decision calling it “absurd” and defended Bombardier whom Mr. Bastian called its “great partner.” Defiantly, Mr. Bastian warned, "[w]e don't believe that will be the end of the story." He further poked Boeing’s workers in the eye by declaring that the Canadian-built CS100 will “be our (Delta’s) best domestic aircraft.”

Next time you hear the Big Three’s claim they are champions of US aviation workers, and that their protectionist agenda is benevolently motivated solely by safeguarding and protecting US jobs, judge that assertion by the Big Three’s actions, not their disingenuous words and lobbying rhetoric. When it comes to turning their backs on US workers by outsourcing and off-shoring US aviation-related jobs, Delta, American and United are true champions without rivals.

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