Global Airlines
1) Describe the
US-UAE Open Skies Agreement. List and describe two long-haul carriers that are
a part of this agreement that also receive government subsidies.
It is an agreement between the US
and 124 other nations to allow fair and equal competition on a global scale.
The ultimate purpose of this agreement is to limit the amount of government
interaction with international transportation of cargo and passengers. That is,
to allow free flight over international boarders without government
interdiction, to let the airlines regulate pricing, weight limits, and routes
based off of the free market.
Two long haul carriers that also
received government subsidies are Qatar Airways and Emirates Airlines. These
two international carriers were receiving an unfair advantage from their
government via “no interest, no obligation loans”. The Open Skies Agreement is
designed to stop governments from intervening in the open international
aviation market. For example, Emirates Airlines contracted government owned
constructions companies and lower than market cost prices; which produced an
unfair advantage for this company. (Frequently
Asked Questions, n.d.)
2) Do any long-haul US carriers receive subsidies or have received subsidies in the past? If so, which airlines? Why?
2) Do any long-haul US carriers receive subsidies or have received subsidies in the past? If so, which airlines? Why?
Yes. One way I thought was
interesting right of the bat was via military pilots. If you think about it,
there are more military trained pilots flying in the airlines than pilots who
pursue training personally or are trained by the airlines. So, in a way, one of
the largest ways the United States government support the airline industry is
by training pilots for its personal use (Mathew, 2017). This saves the airlines
billions of dollars in the long run.
3) Another complaint is that long-haul foreign carriers have made aircraft purchases at "below market interest rates" that are unavailable to US carriers. How is this possible? Please discuss the Export-Import Bank.
Foreign Airlines can purchase
planes at a lower interest rate than their American competitors because the
government is loaning them the money at these below market interest rates. In some
cases, the government isn’t even including a reimbursement instructions and
just lending them the money to get ahead of their competitors. (Frequently Asked Questions, n.d.)
4) Are there any
current issues with Norwegian International Airlines and the Open Skies
Agreement? What about with carriers such as Emirates or Qatar?
Norwegian International Airlines
has recently secured a deal with U.S travel Association and the TSA to allow them
to have connecting flights to and from the United States. This decision was
lobbied against and publicly condemned by large American based air carriers. This
could potentially undermine the current airlines because Norway has different
laws and requirements than it’s competing countries. They could potentially
hire Asian workers at a much lower than average wage and have a lower standard
for safety laws. A similar thing has already happened in the shipping business.
Large shipping companies have set up their headquarters in the least onerous countries
available to avoid unnecessary costs and taxes that come with operating out of
other countries.
Emirates Airlines and Qatar were
under an investigation for allegedly disobeying the rules laid down in the Open
Skies Agreement. Specifically, their government has been giving them an unfair
advantage over other airlines that have not been taking government subsidies.
5) Finally, critically analyzing the above information, do you feel that the global "playing field" of long-haul carriers is fair?
I feel like, that with many things, it is fair for the most
part. There will always be some way of getting a head or maintaining a lead
with a free market, whether it’s global or not. I do feel that with these
evolving situations there are more and more ways that this market could
potentially be taken advantage of though. These individual carriers that are
taking the subsidies and locations benefits for granted should be singled out
and forced to pay their dues where they should. If that means they need to
restrict their business or literally pay a fee to operate in a certain country,
so be it.
Citations
Frequently
Asked Questions. (n.d.). Retrieved March 13, 2018, from http://www.openandfairskies.com/frequently-asked-questions/
Mathew, 2017. 10 ways taxpayers
subsidize U.S. airlines. Live and Let’s Fly. Retrieved March 13th,
2018, from http://liveandletsfly.boardingarea.com/2017/07/21/10-ways-taxpayers-subsidize-u-s-airlines/
I completely agree with your answer for question 5. As of now, everything seems pretty fair for these carriers and it will always be difficult to regulate these things. It will be interesting to see how this all ends up in the future. I believe they should have to pay a fee, restricting business could cause a huge deficit for these carriers.
ReplyDeleteCody, good post. Your mentioning of government-trained pilots as means to subsidize airlines is an interesting aspect that stood out to me. There are many former-military pilots in the airlines today, albeit a lot of them are reaching retirement age and causing that whole stir. While I think that there are more military-trained pilots now, I don't see this trend continuing, as the size of standing military forces has decreased from the previous decades. Interesting analysis of the situation, I'm not opposed to trying to restructure the Open Skies Agreement. In my research, I found that we did a similar restructure with Britain after Brexit.
ReplyDeleteI think the Open Skies needs to be enforced, that's the key word. The Open Skies Agreement is being over looked right now because Emirates can fly MXP-JFK, a low yielding route on an A380 and make a billion dollar profit, whereas any other carrier flying JFK-MXP is yielding fares around $1200 or so and making much less of a profit that is more reasonably calculated.
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