April 23- Why The Silence Regarding State-Owned Turkish Airlines?

 

New State-Funded Mega-Hub Opens in Istanbul, US Big Three Say Nothing  

What does The Economist know that the generously paid executives at Delta Air Lines, American Airlines and United Airlines (Big Three) apparently do not?

Anyone who has followed the Big Three’s four-year-old protectionist lobbying campaign against Open Skies and the much-needed competitive choice Emirates Airline, Etihad Airways and Qatar Airways (Gulf Carriers) provide to consumers should read The Economist’s April 11, 2019 article “Turkish Airlines takes on Emirates, Etihad and Qatar Airways: A new mega-airport poses the biggest threat yet to the Gulf carriers.” (https://btcnews.co/2IBUJgT) 

In this article The Economist considers the competitive implications of the Government of Turkey’s audacious state-funded initiative to provide state-owned Turkish Airlines with a new super-connector hub - Istanbul International Airport - capable of permitting it to dominate global air passenger traffic flows. The scale of this state-funded airport project is almost unfathomable, especially here in the United States where the last new airport built was Denver International Airport that opened over 24 years ago.

According to The Economist, “[in] less than five years a forested valley the size of Manhattan has been transformed into a facility with enough room for 3,000 flights a day carrying 90m passengers a year... If all goes to plan, by 2028 the airport will have six runways and capacity for 200m flyers a year.”

The staggering price tag for the Government of Turkey -- $11 billion.  As The Economist noted, “gargantuan, especially when Turkey’s economy is shrinking and inflation tops 20%.” It also has cost at least 52 workers their lives.

So, let’s connect the dots. The Big Three breathlessly whine that Gulf Carriers present an existential competitive threat diverting global traffic flows. The Economist believes new state-funded Istanbul International Airport will enable Turkish Airlines to competitively threaten Gulf Carriers for those same traffic flows. So, logically, it follows that the Big Three should be outraged about the Government of Turkey’s lavishly funded Istanbul International Airport that opened on April 6 and the competitive advantage it gives state-owned Turkish Airlines, right? 

So why do the Big Three continue to be completely silent about state-owned Turkish Airlines? Why crickets when it comes to the $11 billion new mega-hub the Government of Turkey just bestowed on its state-owned flag carrier? Or, in the case of state-subsidized Chinese airlines that are using state aid-fueled capacity dumping and cut-throat pricing to drive US carriers out of US-China markets and to swell their disproportionate transpacific market share, the Big Three laughably attribute their silence to the lack of a US and China Open Skies agreement. With a smirk of self-satisfaction that they’ve made a clever and deceptive distinction, they claim they only moan about alleged state-owned carrier Open Skies violations. Well, the US-Turkey Open Skies agreement has been in place since 2000.

Could it be a carefully considered determination by the Big Three that Qatar Airways’ minority-owned Air Italy, and its fleet of just over a dozen aircraft, only five (5) of which are capable of operating long-haul service, poses a greater competitive threat than Turkish Airlines? Just joking. The Big Three’s irrational fixation on Air Italy is logic-defying but, even in their delusional state, it is impossible that they have made a reasoned and commercially-based decision to give Turkish Airlines a pass fearing little Air Italy more.

In contrast to fledgling Air Italy’s minute fleet, state-owned Turkish currently operates nearly 300 aircraft. It serves nine (9) US cities: New York JFK; Boston; Chicago; Houston; Los Angeles; Miami; San Francisco; Washington, DC; and Atlanta. Its current 75 weekly US frequencies have grown 23 percent between April 2015 and April 2019. Over that same period, the number of US seats Turkish offers has grown even more - 29 percent.  However, as impressive as that picture is, it understates the full extent of Turkish’s US market presence. Turkish also has additional extensive US code-share access via its Star Alliance partners, United Airlines and Air Canada.

How much will new Istanbul International Airport and the expanded connectivity there enable Turkish Airlines to grow its already substantial US presence? That’s unclear but apparently the Big Three either don’t care or they are fatally distracted by “existential threats” like Air Italy.

Of course, the most plausible explanation for ignoring the Turkish Airline threat is that airline is a member of the Star Alliance club, and as a professional courtesy to anchor Star carrier United, the Big Three are giving it a pass. The same explanation seems to apply for other heavily subsidized Star Alliance airlines such as Air India and South Africa Airways.   

Wait a minute, you did not believe the Big Three have a principled position on state aid to all foreign carriers rather than exercising selective indignation targeted just at the Gulf Carriers who they fear the most? Of course not -- the Big Three and a principled position; now there is an oxymoron. 

So, the next time you hear a Big Three executive moan about state-owned Gulf Carriers, ask him or her why they say nothing about state-owned Turkish Airlines and have not made a peep about the $11 billion mega-hub the Government of Turkey just built for it with the intent to siphon global passenger flows via Istanbul.

Also, the next time you hear a Trump Administration official make comments about Gulf Carriers, ask that official why the Administration does not seem to have an all-encompassing competition policy for all foreign-state owned carriers, and why it too has turned a blind eye to Turkish Airlines and the new state-funded Istanbul International Airport.

Kudos to the Economist for identifying a potential state-funded threat to global airline competition that both the Big Three and the Trump Administration seem to have ignored.

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