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Sparks Fly Between U.S. Air Giants and Oil Rich Sheiks

Today, all U.S. airlines are covered by bilateral Open Skies Agreements negotiated by the U.S. State Department with 120 countries, ensuring fair and free trade in airline services for both American and International operators. Under those agreements [1], the airlines are free to determine and expand their own routes to and from all other nations covered by those agreements.

The terms of the agreements [2], however, ban government subsidies to their own national airlines. Yet, U.S. airlines are currently in direct competition with three, high priced, Middle East luxury airlines the Americans say are in open violation of the government subsidy ban: Emirates, Etihad, and Qatar Airways. Together, they have received over $50 billion [3] in national government Middle East oil money.

In advertisements, Emirates brags about the showers on their planes available to passengers. That $50 billion in oil money can buy a lot of amenities. One ad [4] features Jennifer Aniston asking flight attendants on an American plane where the showers are located. She gets laughter in response.

Delta, American Airlines, and United Airlines have pressed [5] the Trump Administration to enforce the letter of the Open Skies Agreements. In retaliation, the head of Qatar Airways Sheik Akbar Al Baker complained—to guests at a Dublin gala celebrating the opening of a new route between Dublin and Doha—that the flight attendants on U.S. airlines are “grandmothers [6]” and that US airlines are “crap.”

His remarks drew a response [7] from the President of the Allied Pilots Association in the U.S. Dan Carey in which he said, “I have news for Mr. Al Baker: We love grandmothers, and we’re proud of our co-workers skill and experience. We rely on it every day on flights across the globe.”

But Carey’s remarks will likely not dissuade the sheik as he has openly bragged [8] that he would “do business with the devil if it was win-win.”

Emirates, Etihad, and Qatar Airways have offered no defense or even denial [2] for their billions in oil money subsidies, which are banned by the express language of the Open Skies Agreements their nations have signed. Banned for good reason since there cannot be free competition and true free trade when one side has both hands buried deep into their national treasuries. 

This is an opportunity for President Trump to keep America great and defend American jobs by promoting beneficial free trade by simply enforcing the letter of existing free trade agreements. He should do precisely that. Tens of thousands of American workers in American airlines are counting on him.

Peter Ferrara is a Senior Fellow at the Heartland Institute, a Senior Policy Adviser to the National Tax Limitation Committee, and Principal and General Counsel at the Raddington Group, an international economic consulting firm. He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under President George H.W. Bush.

22 Comments (Open | Close)

22 Comments To "Sparks Fly Between U.S. Air Giants and Oil Rich Sheiks"

#1 Comment By b On August 25, 2017 @ 2:09 am

I get the idea of protecting free trade and enforcing agreements. But have you ever flown on one of the ME carriers? If you have then you will agree that our carriers are crap. And it isn’t just the age of the plane, it is the service. American carriers act like they are doing you a favor. I suggest these carriers figure out a way to be more responsive to their customers before Amazon puts them out of business. Putting sanctions on the ME airlines won’t heal the wound, it will just cover it with a bandage. Besides, in our system competition drives innovation right? Time for our carriers to innovate or perish.

#2 Comment By Whine Merchant On August 25, 2017 @ 2:56 am

Flash: Emperor Trump has new clothes!

Thank you for highlighting this situation. Trumpsters will be in a quandary: the Tumpeters in the GOP will not complain, as it would highlight the welfare that Congress provides for favoured corporate interests, and the non-GOP Trumpeters applaud the anti-PC language mocking women who are not air-brushed bimbos. After all, the Allied Pilots Association is a quasi union, so they must be wrong.

#3 Comment By Nick On August 25, 2017 @ 7:32 am

Let’s be fair, even relative to most unsubsidized(ish) European airlines, U.S. airlines really are crap. Although the European airlines seem inclined to join U.S. airlines in a race to the bottom.

I was wondering the other day, having endured 3 hours in one of American’s new seats, and while trying to regain feeling in my legs, whether U.S. airlines have a department called the ministry of misery, where they hire sadists to come up with ways to nickel and dime passengers and make their lives miserable.

That said, picking on the flight attendants is unfair. It’s the culture at the large U.S. airlines that sucks. The employees just reflect that culture. The only U.S. airline that still makes any effort at customer service is Southwest.

#4 Comment By Fred Bowman On August 25, 2017 @ 8:58 am

Wouldn’t hold my breathe on Trump to say or do much of anything about this.

#5 Comment By Kevin Mitchell On August 25, 2017 @ 9:27 am

What a poorly informed piece. Even if he only did an hour of basic research he would have discovered the talking points he was given were advocacy, not facts.

#6 Comment By Gazza On August 25, 2017 @ 10:06 am

The Arabs are right. US airlines ARE rubbish, and their cabin staff are eitehr rude harpies or camp gay men… either way, very unappealing. Compared to Arab or Asian airlines, they are light years behind.

#7 Comment By Bob K. On August 25, 2017 @ 10:17 am

Let me guess. The USA helps the United Arab Emirates and Quatar to subsidize their Airlines by purchasing oil from them. Right?

It seems to me that us continuing this would be crony capitalism one step removed from home.

The solution is to stop buying their oil or at least threatening to do so in our foreign policy dealings with these countries if they don’t cease violating the “Open Skies Agreement.”

#8 Comment By KXB On August 25, 2017 @ 10:20 am

The writer leaves out a number of issues. First, the subsidies. Yes, Arab governments often subsidize their airlines. But the US subsidizes their airlines in an indirect fashion. Airlines receive gov’t guarantees when buying planes, without checking with voters if they want to be on the hook for a failed deal. Also, US airlines go in and out of bankruptcy. Thanks to such bankruptcy laws, airlines can pile up debt, then discharge them for less than they cost in bankruptcy court.

More importantly, many of the US-based passengers flying on Mideast airlines are going to cities not served by US airlines. By some counts, nearly 1/3 of Qatar Airways or Emirates passengers starting in the US are flying to cities in South Asia. How frequently do American, Delta, or United fly to Dhaka, Kolkata, or Columbo?

The labor issue is tricky. Yes, unions make labor more expensive on US airlines. But, Mideast airlines pay for much more training and housing than their US counterparts.

One advantage that US airlines have over Mideast airlines is they are far better equipped to handle schedule disruptions. Foreign airlines are way behind US airlines in how quickly they handle storm disruptions and booking you on another flight.

#9 Comment By Allen On August 25, 2017 @ 10:35 am

It’s the American carriers that are constantly trying to maximize profit and minimize comfort. Extra bag? You pay. More leg room? You pay. Want food? You pay. They won’t be satisfied until they herd passengers into pens and feed them from slop buckets. But it is the executives driving this, not the pilots or the attendants.

#10 Comment By William Gallh On August 25, 2017 @ 1:07 pm

U.S. Airlines ARE crap. They sacrifice passenger comfort for “the bottom line.” We Americans desperately need to reevaluate what “the bottom line” is.

#11 Comment By Cash On August 25, 2017 @ 1:36 pm

Let me guess: Peter Ferrara’s solution to this “problem” is for ME airlines to lower their service standards to American levels?

#12 Comment By William Dalton On August 25, 2017 @ 2:43 pm

The response from the Emirates Airline:

[9]

#13 Comment By Hubert Horan On August 25, 2017 @ 4:27 pm

The question isn’t why Peter Ferrara would be willing to publish deliberately misleading claims about airline competition under his name. That’s his job. That’s what his employer pays him to do. The question is why TAC would try to pass off such an obvious piece of PR hackery as “analysis”. Did TAC get paid for running this?
The Ferrara/Heartland Institute/TAC position is a fundamentally anti-competitive, pro-Cartel position. This view totally rejects all of the economic analysis that led to airline deregulation, e.g. consumers and investors should decide who wins in the marketplace, and governments (in addition to protecting the public interest in things like safety and accurate information for investors and consumers) should ensure the level-playing field conditions needed to maximize the benefits of competition for consumers and industry efficiency. The Ferrara/Heartland Institute/TAC objective is a system where entrenched incumbents can collude with Washington officials and create industry wide Cartel conditions that maximize gains for narrow sets of shareholders/executives at the expense of everyone else. The process by which these folks eliminated robust airline competition is laid out in detail in a law journal article (see [10])
None of the airline industry consolidation since 2004 is explained by “market forces” such as objectively measurable scale economies, or more efficient airlines displacing less efficient airlines in the market. It is entirely explained by governmental actions that (especially in the US) actually allowed less efficient companies to take over more efficient ones. Aviation is a global business. The first step was consolidation of the entire North Atlantic market into 3 collusive alliance, which forced a major round of domestic US mergers, which meant international carriers on the Pacific and elsewhere could not survive unless they accepted the terms of one of the 3 Cartel leaders.
The Middle Eastern carriers refused to play this game and insisted on competing independently. Even though the market overlap between these carriers and Delta, American and United is miniscule, the idea that anyone or anything could challenge the hegemony of the Cartel was seen as an existential threat, leading to millions being spent on lobbyists (and PR hacks) to push false claims that the ME3 carriers are causing major harm to American consumers and workers. The subsidy claims are staggeringly hypocritical. Does anyone think that none of DL/AA/UA’s alliance partners have ever received subsidies or explicit protections from their home governments? Does anyone think that carriers like Aeroflot, Korean, Alitalia, Swiss, SAS, Thai, Air New Zealand (etc etc) have fully funded all their operations out of profits that meet US GAAP accounting standards?
Ferrara is fighting to destroy competition from anyone who won’t play by strict Big 3 Cartel rules, and is willing to grossly misrepresent actual industry conditions in support of that objective. The question remains—are TAC’s editors too dense to see through an obvious piece of corporate advocacy—one that is not supported by objective evidence—or do TAC’s editors fully share these anti-consumer, anti-market efficiency objectives?

#14 Comment By Fred On August 25, 2017 @ 4:40 pm

The consumers are driving this, not airline executives. If people cared about better amenities, the seats that get those amenities would be sold out. That is not the case. Consumers only care about the lowest fare, nothing more. Only when they get on the plane do they then demand more than what they paid for.

#15 Comment By RMR On August 25, 2017 @ 7:28 pm

As a cabin crew member for one of those American carriers, it is true, we are CRAP! The service has dwindled to complete rubbish. Plus, how dare the American carriers complain while the continue to outsource jobs to foreign countries. The pot needs to stop whining that the kettle is black. Such hypocrites about protecting American jobs!

#16 Comment By vato_loco_frisco On August 25, 2017 @ 7:50 pm

Government subsidies do nothing to level the playing field, a core tenet of advocates for global trade agreements. Although US airlines might be at a disadvantage when middle eastern governments bankroll their own national carriers, American aircraft manufacturers, i.e., Boeing, are also subject to unfair competition when Airbus, a European consortium, subsidized development of the behemoth A380. Fortunately for Boeing, the A380 isn’t selling enough to justify production costs and the fleecing of European taxpayers.

And like others have said, subsidies or not, the service on US airlines is simply appalling. A few years back, my wife & I flew to Vietnam, the first leg of the journey being on a shabby United Airlines 747-400. During the 12-hour flight we saw the cabin crew maybe three times. After serving a substandard meal, they essentially disappeared until we landed in Seoul. The second leg of the trip was on a Korean carrier, a 4-hour flight but it was night & day compared to United. Excellent service, attentive flight attendants. We travel a lot but, I’m sorry to say, avoid US airlines whenever possible.

#17 Comment By Brad G. On August 25, 2017 @ 8:26 pm

I think plenty of East Asian cartiers get government money too. Singapore, Malaysian, Korean. I’m sure these get ‘help’ too.

#18 Comment By Fran Macadam On August 26, 2017 @ 1:25 am

What I’m hearing, is the American bottom was sacrificed, for the bottom line of American airlines.

#19 Comment By Bill Hough On August 26, 2017 @ 12:31 pm

This is a bad, one sided article. For a different view, see [11]

US airlines treat their customers like dirt, making the flight experience miserable while charging all sorts of nuisance fees for items that used to be included in the price.

Remember:
Emirates, Etihad, and Qatar are massive customers of Boeing, which unarguably helps the U.S. economy and generates lots of jobs
Emirates, Etihad, and Qatar are substantial employers in the U.S.
Emirates, Etihad, and Qatar bring a lot of people to the U.S., which boosts the U.S. economy
U.S. carriers argue that subsidies of all kinds are terrible, when in reality they’ve gotten these as well, ranging from profiting off of the Essential Air Service program, to unloading pensions when they went through bankruptcy
U.S. carriers argue that 1.2 million American aviation jobs are at risk, all while U.S. carriers are turning record profits in spite of these “evil” Gulf carriers
The real risk facing the U.S. carriers is the ultra low cost carriers like Norwegian, which in some cases have questionable business practices (when your company is based in Ireland, but you’re flying out of France and the UK with Thai crews)

#20 Comment By EliteCommInc. On August 26, 2017 @ 9:28 pm

There are two issues which are not by definition connected.

1. Foreign airliners, and I have flown in several are more comfortable and in my view the service sadly is better. It reminds of the days when flying was a like taking a cruise. One doesn’t need government subsidies to provide good, better and best service.

2. I am not sure the assessments here are fair. Most of the countries in question are not based on a capitalist system. Subsidies is part of their entire societal structure and practice. The EU is not an independent capital system – comparing the two is tough fare. Noe of the muslim states operate as capitalists, the relationship between faith, and ever aspect of government are intertwines.

I am pro US but, there are areas our industries could improve — that has nothing to do with money.

#21 Comment By Adako On August 27, 2017 @ 9:29 am

All US Airlines receive subsidies from federal and local governments. A little research will show readers how much the subsidies add up to in their area.

#22 Comment By Avgeek On August 30, 2017 @ 10:33 pm

Delta just bought a bunch of Bombardier jets that they will fly against Boeing products. Bombardier received funding from the Canadian government, and which allowed Delta to acquire the planes below the cost to manufacture them. Delta also receives a waiver of fuel taxes in Georgia. And so it goes… Delta is a pig at the trough, and should just stop whining about the ME carriers.