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Unfair Business Practices Threaten Airlines

The U.S. airline industry’s considerable economic and employment impact on this state and many others is being put at risk by the unfair business practices of a pair of Persian Gulf governments and their national airlines. American Airlines, Delta Air Lines and United Airlines have presented a mountain of financial documents and other records proving that three state-owned Gulf airlines – Emirates, Etihad Airways and Qatar Airways – have received some $40 billion in subsidies from their respective governments – the United Arab Emirates (UAE) and Qatar – over the last decade. The Gulf carriers have used that money to finance a rapid expansion of their international routes. All three are now moving aggressively into the U.S. market, flooding it with subsidized passenger flights and wresting market share from the U.S. airlines.

Unlike their government-owned competitors from the Gulf, the U.S. airlines are not subsidized, so the massive Gulf carrier subsidies put U.S. carriers at a severe disadvantage. The unfair competition is threatening to bump U.S. airlines off of numerous international flights and routes. Make no mistake about it: The Gulf carriers’ expansion into the U.S. market is part of a coordinated effort by their government owners to dominate international aviation. If they succeed, the U.S. airlines will be forced to cut not only international service but domestic service as well, which will jeopardize jobs and economic activity in North Carolina, and negatively impact businesses throughout the state, regardless of whether they have direct ties to the airline industry or not. Tourism, for example, is one of North Carolina’s largest industries, with domestic travelers spending $20 billion a year statewide. Consider the business that will be lost by hotels, restaurants, stores, museums, and more, if air service to our state is reduced. And jobs and revenues lost by tourism-related businesses and at the airlines themselves will have a cascading effect across the state.

The outcome of the Open Skies debate will impact business interests far beyond those of the U.S. airlines and their government-subsidized competitors from the Persian Gulf. The dispute will affect businesses far and wide, across our state of North Carolina and across the country, including numerous businesses that have no direct ties to the airline industry.

Consider the impact that commercial aviation has on North Carolina: According to the Federal Aviation Administration, the industry generates nearly a quarter-million jobs in our state and contributes more than $14 billion to our annual gross domestic product. Consider too that our two major international airports – Charlotte/Douglas International and Raleigh-Durham International – are crucial lifelines for the state, not only allowing individuals to visit friends and families, but enabling many companies to locate and prosper here.

It would be one thing if the Gulf carriers were outcompeting U.S. airlines but that’s not what is happening. The Gulf carriers, acting as economic arms of their governments, are simply not competing fairly. “Dumping” is usually a term applied to goods, but what the government-owned Gulf carriers are doing is dumping subsidized passenger flights into the United States. In doing so, they are abusing the Open Skies agreements that the governments of the UAE and Qatar have both signed with the United States. Those agreements gave the Gulf carriers open access to the lucrative U.S. market but required their governments to allow fair competition. Tens of billion dollars in market-distorting state subsidies do not make for fair competition and they are a clear violation of the agreements.

The United States has entered into nearly 120 Open Skies agreements over the last 25 years, and those agreements have been good for the United States and for the world, fostering unprecedented growth in air travel around the globe. Like any international trade deals, however, Open Skies agreements only work if they are enforced. For the good of North Carolina and every other state in the country, the U.S. Government must enforce the Open Skies agreements with the UAE and Qatar. Both agreements have provisions for bilateral government consultations to resolve any disputes and the Obama Administration should call for those consultations in order to address the Gulf carriers’ enormous subsidies – subsidies that are undermining fair competition and threatening state economies and local jobs across the United States. Not enforcing our Open Skies agreements is simply not good business.