With an offensively misleading campaign against Gulf Carriers by suspect interest groups, it is time for a counterattack. Not because I love Gulf Carriers and certainly not because I hate U.S. carriers — but because the truth must be exposed. Today’s topic: 10 ways U.S. taxpayers subsidize U.S. airlines.
1. U.S. Military training pilots
The careers of many U.S. airline pilots start in the U.S. military, where they receive world-class training subsidized by the federal government. This saves airlines millions in training costs, shifting the burden to taxpayers.
Under this taxpayer-funded federal program, 163 rural communities receive air service that is not otherwise commercially viable. While the goal of linking small communities to larger hubs is admirable, this represents a pure subsidy to airlines who provide this service and is antithetical to “free market” principles.
Since 1974, federal agencies have been required to use U.S. carriers for both cargo and passenger transport when Uncle Sam is footing the bill for travel. While codeshare agreements have broadened the definition of what it means to fly on a U.S. carrier, this program has subsidized U.S. airlines for decades.
Don’t forget that after the 09/11/01 attacks, U.S. air carriers received massive taxpayer bailouts in order to survive.
5. Airport Construction
All those taxes that are embedded into your ticket prices are not the only dollars that go toward airport construction. Take LaGuardia Airport in New York City–the $4BN initial phase of renovation program is being funded half by private entities…and half by the Port Authority of New York. That’s hardly the “free market” at work.
6. Chapter 11 (Bankruptcy) protection
Consider the immense protection airlines have in seeking bankruptcy protection, allowing them to shed obligations like pension guarantees onto taxpayers. American, Delta, and United have all used U.S. bankruptcy laws to shield themselves from unwanted debt and labor costs. See this WSJ story.
7. Federal preemption
If someone rips you off, you can take them to court and sue them. Thanks to federal protections unique to airlines, you cannot seek redress through local and state courts against airlines. You must file a more expensive, time-consuming case in federal court.
The American Bar Association stated—
Practically all state consumer protection statutes and tort claims are rendered useless against air carriers.
We have shrunk from six major legacy carriers to just three. This has been done with the blessing of the U.S. Department of Justice. Essentially, the federal government has picked winners and losers in the airline industry, rubber stamping an era of mergers with only questionable due diligence on the ramifications to consumers it would have.
9. Airport slots/rules
Permiter rules and slot restrictions enshrine established legacy carriers and block meaningful competition. Legacy airlines don’t really want “free market” conditions in markets in which they dominate. The result? Higher prices, a backdoor subsidy to entrenched airlines.
10. Labor negotiations
Why is that Europe is often crippled with strikes while U.S. carriers have not had a major strike since 2005? One reason is the National Mediation Board, a federal board that is intended to promptly end railroad and airline strikes. Airlines don’t strike — it is workers who do, and the very purpose of the board is to limit this. That’s a government subsidy by a different name.
Let’s not forget that U.S. carriers came into existence thanks to subsidies over mail delivery. This post is not intended to attack any of the ten items above, merely to point to how disingenuous it is for U.S. carriers to argue they too do not benefit from subsidies and to show how difficult it is to even pinpoint what the word means. Thanks to Bill McGee of USA Today for his work on this topic, which helps me formulate this story.