Close the Door: U.S. carriers, together with their unions, are playing the protectionist card

Jan 20 2014Keep the doors closed, Air Canada’s chief Calin Rovinescu implied during a recent speech in Vancouver.

“Let me be clear,” he said. “The Gulf carriers are seeking to scoop or divert connection traffic—transit passengers that are already traveling to or from Canada. They are seeking to build their hubs at the expense of our hubs… basically, converting our hubs into stubs.”

Lufthansa or Air France/KLM might have uttered similar words. Some airlines in Africa or Asia too. But U.S. carriers?

Until recently they were rather quiet on the issue of Gulf carrier expansion. But now America’s airlines—led by Delta and United—are loudly voicing resistance. Clearly, this reveals fear—fear that the Gulf carriers will do to them what Emirates and the like have already done to carriers elsewhere in the world. United and Delta know all too well what their joint venture partners Lufthansa and Air France/KLM, respectively, have experienced competing against Gulf carriers—the lost traffic, the yield erosion, the arms race on product investment and so forth.

Manifestations of this newfound resistance among U.S. carriers are everywhere. Airlines for America (A4A), the U.S. airline trade association, is lobbying loudly against a U.S. customs pre-clearance facility in Abu Dhabi, which would theoretically make connecting there more attractive (although in reality perhaps not—minimum connect times will likely increase, making itineraries to the U.S. via Abu Dhabi more time consuming and thus less well positioned against other options on distribution screens). On Dec. 12, A4A’s CEO Nicholas Calio warned a congressional subcommittee that “international carriers” (read: Gulf carriers) “have caused U.S. airlines to pull down capacity in some international markets, which is the most profitable part of the business and a part of the business that subsidizes—to a great degree—our domestic routes.” He added later in the hearing: “Open skies are great, but you have to look at what happens down the line after the open skies comes.”

A4A has also warned about the impact of Gulf carrier plane buying: “The massive orders from the Middle Eastern carriers at the Dubai Airshow should serve as a wake-up call to our government about the need to implement a National Airline Policy that would help level the playing field, enable U.S. carriers to compete globally and benefit passengers and shippers.”

Delta itself sued the U.S. export-import bank to try to stop it from granting loan guarantees that Delta says give unfair competitive advantages to foreign carriers. Foremost among those foreign carriers, because they buy so many Boeings, are Gulf carriers. Delta and its joint venture partner Alitalia also sued Emirates for alleged violations of the U.S.-Italy aviation treaty, after Emirates launched nonstop flights between Milan and New York JFK. And Delta recently mocked Gulf carriers for their use of expatriates: “If they don’t smile at the customers, they get deported.” United’s CEO makes no secret of his unhappiness with the U.S.-U.A.E. bilateral treaty, which he feels grants far more benefits to Gulf carriers than to U.S. carriers.

So why are U.S. carriers suddenly so worried about Gulf carriers? The obvious reason: Gulf carriers are expanding to the U.S. like never before…

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