Competition And The “Open Skies Agreement”

Neil Siefring Vice President, Hilltop Advocacy
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Over the last few weeks, the news has been full of stories of domestic airlines treating their passengers poorly. Increasingly, antiquated airlines are treating their passengers like obstacles instead of paying customers who deserve respect. It is no surprise that legacy airlines are joining forces to restrict the options available to flyers by going after Open Skies agreements that give flyers flexibility.

United, Delta, and American Airlines, are working to overturn Open Skies agreements, which have saved passengers billions of dollars in fares, into a way to weaken their competitors. Open Skies agreements have helped improve aviation across the globe for passengers and cargo flights, these agreements between countries have helped make aviation more predictable, and price responsive, benefiting the consumer. They may be in danger because aged airlines are feeling the impact of competition from other airlines.

The push to revisit some of these agreements is being led by older, legacy carriers United, Delta, and American Airlines. Their more consumer friendly and innovative  competitors, including JetBlue, don’t support them, and the airline industry’s top trade association isn’t backing them, either. The old three airlines are using Open Skies to harm competing airlines. This move could easily harm all U.S. airlines if other countries responded in kind.
This dinosaur triumvirate is pulling out all the stops to demonize smaller airlines who oppose them, and the travel industry, that represents a much broader set of interests than just airlines. Despite record profits in the past several years, the airline industry’s dinosaurs are asking the federal government to intervene against several airlines based in the United Arab Emirates and Qatar, purportedly because they are subsidized.

The airlines — Emirates, Qatar Airways, and Etihad Airways — deny they are subsidized. It is curious that these three U.S. airlines are complaining about subsidies. The U.S. federal government has stepped in over the years to keep the U.S. legacy carriers from keeling over, through assuming billions of dollars in pension obligations to issuing stabilization grants. While U.S. carriers take money from the federal government, Middle Eastern airlines create thousands of American jobs by, among other things, buying Boeing airplanes.

The collection of older carriers are afraid of competition, while JetBlue, Hawaiian, FedEx and Alaska all oppose the bid. That these are the innovative and customer friendly airlines is hardly a surprise.

Airlines for America, the leading industry trade association, has declined to back the older airlines in their anti-competitive zeal. They are standing against American labor unions that want to prevent new airlines from being created. The unions have gone so far as to call for the repeal of a 2012 law that required airlines to disclose hidden fees in ticket prices. The airline cartel and their fellow travelers really don’t like competition and innovation.

Perhaps they are trying to avoid competition because their product is inferior. Skytrax, a leading authority on air travel service ranked Delta at 35 in the world’s top 100 airlines. That looks good compared to United, which came in at 68 (two spots better than Azerbaijan Airlines) and American Airlines at 77 (one spot behind Ethiopian Airlines). It is no surprize that two of the Middle Eastern airlines the three legacy carriers are trying to harm by altering Open Skies finished first and second respectively in the rankings: Emirates and Qatar. Etihad came in at a very respectable sixth place.

United, Delta, and American Airlines are being dragged kicking and screaming into the innovative economy. The next time you are stuck on hold with one of these legacy carriers, get bumped from a flight, or suffer through poor customer service, remember they are trying to fight Open Skies to limit your horizons.They should be working to improving service, not to stifle their competitors.

Neil Siefring is vice president of Hilltop Advocacy, LLC and a former Republican House staffer. Follow him on Twitter @NeilSiefring