War On Competition Has Caused Industry Uncertainty

Published on : Friday, June 5, 2015

Delta_Air_Lines_roll_out_painthallDelta Air Lines, American Airlines, United Airlines – have secured antitrust immunity for their global alliances and joint ventures, and have engineered domestic consolidation, they have been aggressively attacking consumer protections, price transparency and domestic and foreign carrier new entrant competition .

With respect to competition, the first battle in a take-no-prisoners war was to block Norwegian Air International’s (NAI) application to serve the U.S. through relentless political pressure. The propaganda in support of that conflict was/is the big lie that the US-EU Open Skies agreement would be violated were NAI allowed to begin services. In truth, under that agreement, NAI’s application to serve the U.S. should have been a 5-week pro forma review and approval. Sadly, instead, airlines’ political pressure has held up approval for 16 months.

The second and ongoing battle was entered into against three Gulf Carriers – Etihad Airways, Emirates and Qatar Airways – with the supporting charges that alleged government subsidies violate U.S. Open Skies agreements with Qatar and the United Arab Emirates (UAE), and that those countries’ labor practices were not up to U.S. standards, among other claims. As sure as the sun rises in the east, if the Gulf airlines are restricted by the Administration, there will be additional Big Three-led battles, with conjured up violations of Open Skies agreements the call to arms, and reneging on the agreements or altering them to the Big Three’s advantage, the sought after settlement.

Soon, if it has not done so already, the Obama Administration will hopefully see the protestations for what they are: A strategy to restrict domestic and international marketplace competition through government-imposed commercial protectionism. The Administration expectantly will not take direction from one small and self-serving subset of stakeholders among the dozen or more interested parties who have spoken out about the Big Three’s self-interested strategy to block competition.

The most important stakeholder in this debate is the consumer who is benefiting greatly from Gulf Carrier entry and who is simultaneously being financially harmed by denied access to NAI’s low-cost transatlantic service offerings that would offer sorely needed competition. However, that harm can begin to be repaired once the NAI application is approved. What soon may be irreparable, however, is damage to our country’s reputation as an unfailing partner as well as our image, crafted over 50 years, as a bastion of free-market enterprise and as advocates for global economic liberalization.

II. STRATEGIC RISK
One strategic risk to Open Skies policy associated with the war on competition is that airlines and aviation authorities worldwide are paying close attention to what the Administration does. If the Administration were to cave to the Big Three’s demands, then foreign airlines and their governments would observe this protectionism, and abdication of American leadership, and seek their own advantages in renegotiated Open Skies agreements with the U.S. and other countries. The danger is that the painstakingly created international system for aviation liberalization would be infected with the cancer of uncertainty, which would metastasize and place the system at risk. What’s more, because aviation is so highly visible to world governments and leaders in other industries, such uncertainty would also spark concerns over U.S. trade direction in other economic sectors.

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