Arab Airlines Pose Economic Threat to US Airline Industry

 

English: Photo I have taken at the 2005 Dubai ...

Emirates Airbus A380  (Photo credit: Wikipedia)

At the Dubai Airshow, aircraft orders by state-owned Emirates, Etihad Airways, Qatar Airways, and Flydubai, totaled $162.6 billion, illustrating the staggering scale of the economic threat to the U.S. airline industry and its employees if the U.S. government continues policies that hand foreign competitors an economic advantage over U.S. airlines in the global marketplace.

 

So far, the total order during the first day of the Dubai Airshow includes the purchase of 113 widebody aircraft from Airbus and 255 from Boeing. “The question of the day is: How many of these widebody aircraft orders will be financed by a U.S. or European taxpayer-backed export credit agency, subsidizing the aircraft orders at rates not available to U.S. airlines,” said Capt. Lee Moak, President of the Air Line Pilots Association, Int’l (ALPA).

 

ALPA calls for the U.S. government to provide U.S. airlines and their workers with a fair opportunity to compete internationally by ending its policies that advantage state-owned foreign airlines while harming U.S. airlines. It calls for urgent U.S. government action, including measures to:

 

  • Reform the high tax burden on U.S. airlines while their foreign competitors often operate in a tax-free business environment at home;
  • Halt its plan to operate U.S. Customs preclearance facilities in Abu Dhabi and possibly other airports where U.S. carriers do not fly that advantages state-owned foreign carriers at the expense of U.S. airlines;
  • Ensure that U.S. Open Skies agreements acknowledge that high labor standards for U.S. airline employees are essential to the competitive landscape;
  • Eliminate low-interest U.S. Export–Import Bank financing for widebody aircraft that isn’t available to U.S. airlines but subsidizes state-owned foreign airlines and saves them millions in financing costs.

 

“These state-owned foreign airlines are spending billions to purchase widebody aircraft so they can increase flights to and from the United States and unfairly compete against U.S. airlines in the global marketplace,” said Capt. Moak. “At the same time, the U.S. Export–Import Bank’s below-market financing allows U.S. airlines’ competitors to save millions when they purchase widebody aircraft like those announced this week.”

 

ALPA strongly maintains that growth in the global airline industry should be driven by fair competition. In providing low-cost financing to foreign airlines, for example, the U.S. Export–Import Bank not only saves the state-owned carriers millions on each aircraft, the financing also enables these airlines to purchase state-of-the-art aircraft that are more fuel efficient and attractive to passengers. As a result, U.S. airlines experience a competitive disadvantage for years if not decades, and the results affect U.S. airline workers throughout the industry.

 

“Skewing global competition against U.S. airlines threatens an economic engine that powers the U.S. gross domestic product and creates good jobs,” concluded Capt. Moak. “U.S. government policies should not disadvantage U.S. airlines while helping our foreign competitors and it is past time for U.S. government leaders to take action to create a fair competitive marketplace for U.S. airlines and their employees.”

 

BLM Implications

 

The US Airline Industry is not in the shape to take on foreign competitors apart from subsidies. Currently, on top of the low fuel prices afforded by airlines coming from the Arab countries for their own carriers, the US airlines face domestic tax burdens, which strike a double whammy on their bottomline. It is difficult to compete when variable costs like fuel prices play a major role in cost of operations, even with fuel hedging employed. The US government may want to take a look at how it should assist its local carriers to achieve a more levelled playing field than they currently have, and on a sustainable basis.  If the US government is unable to provide the necessary subsidies, its own carriers may end up purchasing from up and coming COMAC, which is the new entrant from China. This is likely to create displeasure from the political play that will come as a result of this conflict of interest. However, this is possibly an inevitable route if the progress of issues in this industry continue to place pressure on airlines to suppress costs further against heavier-weighted competitors.

 

 

BLM

 

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