Breaking news. The sun rose in the east today. If you’re wondering why I often dismiss the outcry of U.S. airlines over subsidies, look no further than two news items this week.
News Item #1: A protest over Emirates’ new service into Newark
I wrote about it here and expressed dismay that Emirates was being attacked for being the only carrier willing to offer year-around service between Athens and New York.
The Association of Flight Attendants (AFA), a labor body representing FAs for several U.S. airlines, offered this dire press release—
AFA Members, ALPA and other Unions, along with United Airlines management, rallied at Newark Airport to protest the launch of Emirates Airlines flight from Athens to Newark. This route is permissible under the U.S.-Gulf States Open Skies agreements. However, Emirates is only able to enter this obscure market due to enormous subsidies received from the United Arab Emirates (UAE) government, in violation of this same agreement.
You can read AFA United President Ken Diaz’s entire (nauseating) speech here.
News Item #2: A protest over cuts to the Essential Air Services (EAS) Program (i.e. subsidies)
Yesterday I highlighted that President Donald Trump’s proposed budget would cut the EAS. View from the Wing rightly notes this will never happen, but let’s still play it out.
The AFA also weighed in on this–
We are extremely concerned that the [proposed Trump] budget guts the Essential Air Service (EAS) Program. These cuts would harm rural and underserved communities that lack access to a fully-mature transportation system, and rely on subsidized air transportation services or face further economic isolation.
Do you see that? The press release even MENTIONS subsidies. Oh, but those are good ones.
CONCLUSION
When United CEO Oscar Munoz rambles incoherently about the ME3 while failing to acknowledge that government “subsidies” saved United after 9/11 and helped the carrier emerge from bankruptcy by taking over United’s pension obligations, I shake my head in disgust. I don’t dismiss that Gulf governments help to prop up their home carriers, both directly and indirectly. I do dismiss calls of “us good, them bad” emanating from the USA when they are just as guilty.
Here is the difference. The EAS is not increasing airline profits in any meaningful way. It is just making otherwise unprofitable routes marginally profitable. Without the subsidies these routes would surely be dropped. These EAS subsidies are minuscule compared with the tax, funding, regulatory, labor and route cherry picking advantage that the ME carriers enjoy. The two issues are orders of magnitude different in scale and scope, so this false equivalency is a joke. However, I am all for getting rid of, or cutting drastically, the EAS, limiting it maybe just to select Alaska routes.
no difference. you are from usa right?
While I disagree with these domestic subsidies, they are there to ensure (as with the postal service and standard rated universal mail access) that all Americans have access to air transportation, even when the market dictates such service may not be viable. That in most cases these subsidies go to communities in red states (whose voters and legislators decry public subsidies…until they’re the ones receiving them) and the money comes from taxpayers in blue states, says something about the hypocrisy in America today…and why I disagree with them. That said, these subsidies relate solely to the domestic market whereas those support mechanisms used by the governments of the M3 countries of their airlines are used solely to cream skim the markets into which they fly, impairing the profitability of the home country airlines. If US airlines lose customers on their international routes where they can make money, how do we expect them to provide service to small US communities without some form of public support?
wrong. government bailed the airline out. took their debts. saved united. period.
As soon as united pays Uncle Sam back for the billions in 9/11 bailouts and reassumes their pension obligations retroactively, we can talk about the ME3. BTW I’m flying from LGA to Bristol VA next week for $1,100. They could use some of that loot to start the repayment plan.
Matthew —
You’re smarter than this. As WR says, this is a ridiculous false equivalence. I don’t think the major airlines give one fig about the EAS. It’s like somebody saying that giving you a free coke is the same as a $10 million bribe in your secret Swiss bank account!
What’s important about that Athens-Newark route is that it shows how these multi-billion Middle East airline subsidies so distort the industry. Everybody knows that route isn’t profitable year round. ALL of the US-Greece flying is seasonal, for very good reason: there’s no good reason to visit Greece outside of summer (you’ve been to the Greek Islands, right?). Even in shoulder season (like May), these routes are weak performers (I flew last May on a half-empty plane). Munoz says Emirates will lose $25 million on this flight. I don’t think he’s lying, but even if he’s wrong, it’s a very long way from $25 million to break even! The ME3 do this stuff all the time: they operate service that, for a for-profit enterprise, would be insane. They completely distort the international marketplace everywhere they fly.
The ME3 have no “right” to fly this route. It’s solely dependent on their very unusual Fifth Freedom rights that the US in entirely in its right to revoke. Why wouldn’t you revoke this right? Should the US government support this nonsense that greatly punishes the US airlines and their employees? Is it more important that Boeing sell as many planes as possible, or that Americans should be entitled to buy $300 roundtrip tickets to Greece next winter? I just don’t get it. This is basic stuff. Why some of you bloggers want to support these government owned carriers is incomprehensible to me, unless all the free first class tickets your getting has clouded your judgment.
Protectionism comes in many forms and fact is that the US3 lobby for US government support wherever they can and hypocritically point the finger are foreign airlines when they receive government support.
The US3 all benefited in their early days from huge government help, the US mail flights were huge subsidies. They also have a large, protected domestic market – remember all the non-sense arguments against Virgin America as “foreign owned”, delaying them for years? The bailouts after 9/11? The approval delays for Norwegian Air?
Flag carriers around the world have received government support – its an industry fact and claiming otherwise is disingenuous. The ME3 are getting subsidies and they will eventually go away or be reduced – even the UAE can’t afford it forever…
if any airlines should complain about it, it would be Europeans and SQ/CX who face them on many routes. The US3 have not been offering much service to Africa, Middle East or South Asia anyway… they should focus on product, service and cost to compete rather than pushing customer-unfriendly, anti-competition measures…