Delta’s “Fly America” complaints get stranger the closer you look
Sep 6, 2016
Delta Air Lines’ complaint about JetBlue Airways being awarded a pair of US federal employee travel routes gets only more interesting when you study the so-called “Fly America” system and how the US majors benefit from massive government travel contracts.
As I wrote in this column last week, Delta wrote to the US General Service Administration (GSA) - which manages government operations, including travel for federal employees – complaining about route awards granted to New York-based JetBlue.
The GSA contract permits JetBlue to provide federal travel between New York JFK and Milan, Italy, and also between JFK and Dubai. JetBlue, which operates a fleet of Airbus A320s and Embraer 190s, does not fly either route with its equipment, so they will be operated as a codeshare by JetBlue’s partner, Dubai-based Emirates.
Delta chief legal officer Peter Carter wrote to GSA complaining that this means Emirates “will benefit via codeshare agreement from US taxpayer dollars – not a US flag air carrier as required by the Fly America Act”.
Delta’s complaint hinges on Emirates providing all (rather than some) of the service between JFK and Milan, and in Carter’s words, that “Emirates is not just a foreign air carrier, it is a state-owned Gulf carrier that exploits an improper advantage over US flag carriers by receiving massive subsidies from its home government.”
The first part of the allegation – that JetBlue is using Emirates’ aircraft entirely for the route rather than as a supplement – is puzzling. As I also noted in my previous column, JetBlue’s bid was compliant and far from unique in using the aircraft of foreign partner airlines to provide GSA-awarded routes.
Here are some examples of nonstop GSA city pairs (nonstop routes, of course, being the preferred routing) that Delta was awarded but which it does not operate itself and uses a foreign codeshare airline using its DL code:
- Los Angeles-Brisbane (nonstop flight is operated by Virgin Australia; Delta does not serve Brisbane with its own aircraft);
Honolulu-Seoul (nonstop is operated by Korean Air);
Washington DC-Seoul (nonstop operated by Korean Air);
Los Angeles-Taipei (nonstop operated by China Airlines);
New York-Shanghai (nonstop operated by China Eastern);
Washington DC-Paris (nonstop operated by Air France).
- Chicago-Amman awarded to American (nonstop flight operated by Royal Jordanian carrying the AA code; American does not serve Amman with its own aircraft);
Chicago-Abu Dhabi awarded to American (nonstop operated by Etihad Airways carrying the AA code; American does not serve Abu Dhabi with its own aircraft);
Atlanta-Frankfurt awarded to United (nonstop operated by Lufthansa carrying the UA code);
Washington-Addis Ababa awarded to United (nonstop operated by Ethiopian Airlines carrying the UA code; United does not serve Addis with its own aircraft)
Some other interesting patterns present themselves when looking at these GSA awards. First, American, Delta and United have been awarded 30 of the 39 city pair contracts to Dubai, Abu Dhabi and Doha, with Delta winning 18 of those contracts, all to Dubai, Emirates’ home base.
Delta, for instance, has GSA contracts to serve Dubai from Nashville, Detroit, Phoenix and St. Louis. So Delta is certainly not locked out of the Dubai market and the GSA system gives it a considerable advantage with US federal employees, who must select Delta if they are traveling to Dubai from any of the 18 US cities.
Another observation is that US hub carriers frequently do not have a GSA contract from their hub. For example, the Atlanta-Frankfurt contract is not with Atlanta-based Delta, but with United. Conversely, American has the Denver-London Heathrow route despite Denver being a United hub. And American also has the Houston-Heathrow route, another United hub.
Although this seems counter-intuitive, one explanation might be that the majors prefer not to give away their hub routes to discounted GSA fares. But a GSA contract is one way for the non-hub airline to get a piece of the market in a competitor’s strongly protected home territory.
Turning on JetBlue for a properly-awarded GSA route using a foreign airline partner seems like a case of Delta cutting off its nose to spite its face; a situation American and United seem to want to avoid.
But Delta, which has split from the A4A North American airline lobbying association and is the only major US airline that is against US air traffic management reform, is increasingly also the lone wolf in its pursuit of the Gulf carriers. American and United seem to recognize their campaign did not succeed with Congress or the White House and are focusing their resources and attention elsewhere. United's priority is on fixing itself, addressing long-neglected employee morale and customer service issues. American, as the world’s largest airline, now also wants to be the world’s best.
Essentially, American and United may still see the Gulf carriers as problematic. But competitively, they see Delta as the far larger, closer threat. If it wasn’t so hung up on Emirates, Delta wouldn’t have played the “Fly America” card. American and United seem happy to let their Atlanta rival play Solitaire.