Did you remember what was Boeing reaction after being overtaken by Airbus in the late 1990? They argue that European governments have violated free-trade rules by subsidizing Airbus for decades… I was just shocked, even disgusted considering the aviation pioneer from the US, following live Richard Quest on CNN and listening Delta Airlines CEO Richard Anderson unacceptable comment related to the 9/11. For me, clearly you’re losing the debate when you try to link your opponent to 9/11!
Regardless of that comment, the problem of the US Legacy carriers is much older than 9/11 (in 2001). Much of what has gone wrong can be traced in 1978 when the Airline Deregulation Act was adopted. Airline deregulation, a useful step in principle, was never about building a strong industry; it was about lowering ticket prices by creating competition. A decade or so later, three of them (Trans World Airlines (TWA), Continental Airlines and Amercia West – were in Chapter 11 bankruptcy proceedings. The Nord American U.S. Big Three (American Airlines (& US Airways) 197 mio PAX / 954 A/C, Delta Airlines 171 mio PAX / 719 A/C and United Airlines / 138 mio / 70) were themselves under serious financial pressures and complaining bitterly about the protection from creditors afforded carriers in Chapter 11 and the far wars to which they were addicted.
I am not convinced that the real problem is because the Middle Eastern airlines are government owned as such… My lecture is that they are scared that their goal aren’t to maximize profit for the airline but for the country, which is something US airlines can’t compete with as they have to maximize shareholder value. MEB3 will reinvest any profit in their fleet and offering to have more passengers using their respective hub. This is their main reason d’etre… not to make any investor / shareholder happy.
For sure, I would not under estimate the resolve of the US Government/system. They are capable of using a wide range resources and winning is more important than time. Look again at their dispute between Boeing and Airbus – how many years and the real question is ‘who is cheating better than the other’… It will take age… and the mean time the Middle Eastern Big Three (MEB3) growth will be more or less stabilized… as you can’t grow forever, unfortunately…
What it basically boils down to is this:
- The Middle Eastern Big Three carriers are government owned, so the US airlines claim they’re no longer competing with other airlines (not private businesses), but rather directly with (foreign) governments
- Clearly this wouldn’t be an issue if the Middle Eastern carriers weren’t gaining so much market share; this scares the US airlines, because the growth of the Middle Eastern carriers seems endless
- Is this even really a fair complaint, when US airlines have also benefited from governments over the years?
- As I’ve said before, I think the truth is in the middle. If the US airlines want to go after the Middle Eastern Big Three carriers, they really have to go after all airlines that are government owned. And if they do, that’s a slippery slope. Where does it stop — if they’re 100%, 50%, or 5% government owned?
- So while I’m all for fair competition, I think I side with the Middle Eastern carriers here. Part of competing in the global airline industry means accepting that life sometimes isn’t fair and that not all airlines are on a level playing ground, from staffing costs to capital to profit goals.
- But if the argument is that it’s not ‘fair’ to compete with government owned airlines, it hardly seems fair to single just three airlines out.
Sure, each side uses information or one bit of fact or the other to support their case, but at the end of the day, I have to feel the playing field is not level. If Delta was making similar claims against most of their European rivals (who are publicly traded for the most part) then it’s a different story. Stop complaining and continue to improve your offering to be able to compete at the same playing field of services as the company here… In Europe, Lufthansa is clearly following that way…
The US Carriers have to think about their pioneers who start the aviation 112 years ago, what I would call the ‘Wright brothers spirit’… They have also to consider the full picture… about these subsidies and their effect… about the overall impact of that matter on the US economy and not only on their airlines… Also, they have to realize that the Middle East is the hub of global aviation for a basic geographic fact: The Gulf is situated just 8 hours flying time from two-thirds of the world’s population, well placed to tap into many new and emerging markets in Asia, Africa and Latin America….
‘Les chiens aboient, la caravane passe’ as we say in French (‘sticks and stones may break my bones’)… More seriously, today we still have only two key aircraft manufacturers and I can see real damage in the Boeing Gulf carrier’s relations. They are looking for the best available product, and if they will stop considering Boeing it will have a big impact on their fleet as Airbus will not be able to double its supply chain. For sure, as part of that commercial war, the US department of trade will have to analyze very carefully the whole situation, in particular the U.S. aerospace industry benefiting greatly from their size and expansion. It represents a lot of money for the aerospace industry that means real, high skill and high paying U.S. jobs…
Again, I think it’s a slippery slope. There are dozens upon dozens of government owned airlines, yet they’re only going after the ‘Middle Eastern Big Three Air Carriers’ and I am pretty convinced that without Delta Airlines CEO Richard Anderson ‘comment’, those US Carriers and certain European BIG players would continue fighting a rearguard action… and we would’ny talk about that matter so openly… only behind doors… as per definition competition is not fair!
(Dubai TV March 2015)