US keeps its gates closed for foreign air carriers

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bimjim
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US keeps its gates closed for foreign air carriers

Unread post by bimjim » Wed Dec 02, 2015

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Preserved liberalization –
US keeps its gates closed for foreign air carriers
Monday, 30 November 2015

According to IATA, having served 848 million passengers in 2014, the United States will remain the largest air passenger market, at least for several upcoming decades. But with China’s attempts to rival the status, some would suggest that the U.S. market should be willing to boost competition between airlines in order to make air travel even more available and thus keep growing the traffic numbers. However, both U.S. officials and the private sector have opposed the expansion of foreign airlines with cheaper tickets on numerous occasions. So, did the most liberal country in the world really become the fiercest defender of airline protectionism?

The EU Commission has repeatedly urged the US to liberalize air services in the country. However, Edward Wytkind, the President of Transportation Trade Department, said the US was not interested in seeing its aviation industry – and the jobs it supports – bartered away in a broader trade agreement with Europe.

The European Union and the United States began negotiations for a Transatlantic Trade and Investment Partnership (TTIP) in 2013. The primary goal of this agreement is to reduce impediments to cross-border trade and investment. However, none of the TTIP negotiations have addressed air transport services, simply because the US refuses to let go of the notion that the liberalization of air services for foreign air carriers would damage its industries and economy.

The Transportation Trade Department strongly defends the country’s domestic market implying that foreign air carriers have no place in the US aviation and that including the EU Commission’s proposal in the TTIP would threaten local aviation jobs. Also it would create unfair competition for local carriers, raise domestic security concerns and undermine the Civil Reserve Air Fleet (CRAF) program according to which the US civil air carriers provide personnel for the DOD.

“Transportation infrastructure is at the heart of the U.S. economy. Our economic competitiveness, our businesses and millions of American jobs depend on transit systems,” noted DeFazio, the ranking Democrat on the Transportation and Infrastructure Committee.

Moreover, pilot associations are also highly concerned about this issue. “Allied Pilots Association opposes cabotage (point-to-point flying in the United States by non-U.S. carriers). The U.S. market remains the largest in the world, and there would be no commensurate quid pro quo to permitting foreign carriers to fly point-to-point within the United States,” stated Gregg Overman, Communications Director at Allied Pilots Association.

However, aviation liberalization is not the only issue in the TTIP which worries the United States. According to US DOT, such state-owned Gulf carriers as Emirates Airlines, Etihad Airways and Qatar Airways also contribute to the distortion of the global aviation industry. These three air carriers were accused by Delta Air Lines, American Airlines Group, and United Airlines for receiving $40 billion in government subsidies and creating unfair competition.

"Subsidized Gulf carrier competition is fundamentally distorting the international air transport market, and the impact is being felt well beyond the United States,” stated Charlene Barshefsky, the former U.S. Trade Representative under President Clinton.

It might be that the fears of US airlines are justified - Lufthansa’s biggest hub in Frankfurt has lost nearly a third of its market share since the entry of Gulf carriers. The air carrier had to cut flights to more than 20 cities in Africa, Southeast Asia and the Pacific. What is more, Air France was also forced to terminate its flights to Abu Dhabi, Doha, Jeddah, Chennai, Hanoi and Phnom-Penh due to immediate boost of Gulf carriers.

Meanwhile, Gulf carriers deny these accusations stating that they are unsubsidized and profitable companies that just know how to fully exploit the potential of the industry. Emirates, Etihad and Qatar Airways say that they offer access to cities around the globe that most US airlines ignore. According to Gulf carriers, their Western competitors need to improve the way they run their businesses and offer better service in order to compete.

However, the ‘’know-how’’ business should be run fairly, which is, according to the United States, not the case for Gulf carriers. Some argue that Emirates was not creating any new demand in the States as it was claiming. Instead, it was simply diverting passengers from local carriers. Thus, three US airlines have been forced to suffer from a 14.3% drop in passenger traffic since Emirates started operating flights to the US.

However, it is not only Gulf carriers that the USA is deliberately trying to restrict from operating in the country. Norwegian Air International has been long seeking to receive the permission to operate transatlantic flights under the EU-US ‘’Open Skies’’ agreement, but the USA Department of Transportation seems to be doing its best to delay confirmation.

After Norwegian Air submitted its application to the DOT it has been waiting for the request for longer than it is common with any other such application. Generally, the DOT approves EU carriers’ applications within several weeks, making the delay unprecedented. “As concerns the application from Norwegian Air International to fly to the United States, the European Commission considers it a breach of the EU-US air transport agreement by the US authorities,” noted Alexis Perier, the Press Officer for Transport at the European Commission.

According to some experts, there are several reasons behind the prolonged wait for the permission by Norwegian Air. The low cost air carrier operates under the Irish certificate instead of the Norwegian one, as well as employs low wage crew members from outside the EU, which is a violation of ‘’Open Skies”. However, many informed parties, including the European Commission and trade organizations, as well as many competing airlines, do not believe that these reasons could be considered as sufficient to warrant the refusal to issue the permission. Therefore, it seems that the USA is afraid of new ‘’flag of convenience’’ model which would mean sharing the same market for lower ticket prices.

But why one of the most liberal countries in the world is so desperate in confronting foreign airlines? Is it because of the local airline industry which lobbies protectionistic actions of its government and thus eases market competition? Or is it foreign airlines which simply do not match U.S. regulations? It’s hard to say for certain. But in either case, it seems that with every year the Statue of Liberty becomes less about market freedom and more about protectionism.

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