Clearing the Air on Open Skies

In a recent Huffington Post column, adjunct professor and former American Airlines employee Rob Britton calls for "honesty" in the debate over the international passenger aviation accords known as Open Skies. He pronounces himself "offended" by my support for U.S. Open Skies agreements with the United Arab Emirates (UAE) and Qatar and my opposition to demands by three major U.S. airlines to freeze new flights to the U.S. by Gulf airlines.

At the risk of causing further offense, I have to point out that the last place a reader will find "honesty" in this debate is in Mr. Britton's diatribe.

Mr. Britton asserts that the Gulf airlines (Emirates, Etihad and Qatar Airways) are stimulating "virtually no traffic" and are just stealing passengers from the Big 3 (American, Delta and United). This falsehood is easily disproved, which may be why Mr. Britton offers no evidence whatsoever to support his claim.

According to a comprehensive study recently released by Oxford Economics, the Gulf carriers brought 1.1 million international visitors to the U.S. in 2014. Of the 1,700 routes flown by the Big 3 and the Gulf carriers, they compete head-to-head on exactly two routes. Only 0.7 percent of passengers brought to the U.S. on a Big 3 flight had the option of flying that same route on a Gulf carrier.

A deeper look at the data clearly shows that the two airline groups serve vastly different markets. In 2014, more than 52 percent of inbound traffic to the U.S. on Gulf carriers originated in South Asia compared to only 1 percent for U.S. carriers. And nearly 30 percent of Gulf carrier traffic to the U.S. came from the Middle East, compared to just 3.7 percent for U.S. carriers. By the way, visitors arriving in the U.S. on Gulf carriers contributed $4.1 billion to U.S. GDP last year, supported nearly 50,000 jobs and generated $1.1 billion in federal, state and local taxes.

Mr. Britton goes on to accuse me of saying the Big 3 don't support Open Skies. As I've pointed out elsewhere, the Big 3 were 100 percent behind Open Skies when these agreements allowed them to break into the European Union and Central and South America, enabling them to evolve into global powerhouses. They also were happy to hide behind Open Skies to help them win the anti-trust immunity that allows them to coordinate on pricing and capacity decisions within their massive global networks.

They even supported Open Skies agreements with the UAE and Qatar and voiced no concerns about the Gulf carriers -- until those airlines started to compete. Today, however, the Big 3 are demanding a freeze in new flights, which would effectively void our Open Skies agreements with the UAE and Qatar. So in effect, they want to reap all the benefits of Open Skies, then quickly pull up the drawbridge when other airlines start using the same privileges. It's hard to square this position with support for Open Skies.

Mr. Britton suggests scrapping Open Skies agreements with the UAE and Qatar is justified because, according to a study compiled by the Big 3, the Gulf carriers have received $42 billion in subsidies. For their part, the Gulf airlines counter that the Big 3 have received more than $70 billion in subsidies since 2000. I won't sort out every dollar here, but if you look deep enough, every airline in the world is subsidized to some degree.

Mr. Britton argues that it's unfair to call Chapter 11 bankruptcy protection a subsidy. I'll leave it to others to decide whether using the power of government to wipe out billions in debts and offload underfunded pensions onto taxpayers is a subsidy or not. But that's hardly the only example of government largesse to the Big 3.

In a recent editorial, the Economist demolishes claims that the Big 3 have stayed clear of the government dole. The magazine points out that Delta--to give just one example--pocketed tens of millions of dollars a year in aviation fuel subsidies that only got cancelled recently by a vote in the Georgia legislature.

Mr. Britton goes on to claim that the Gulf carriers are damaging small- and medium-sized cities. Again, he cites no facts because the facts are clear. According to Oxford Economics' study, the 1.1 million travelers arriving in the U.S. last year on Gulf carriers connected to more than 250 U.S. destinations, spreading economic benefits across the country. Along the way, they directly contributed $140 million in passenger revenue for U.S. carriers. In fact, nearly 30 percent of all passengers who arrived in the U.S. on a Gulf flight--620,000 total--transferred directly to a U.S. airline to complete their journey.

Finally, Mr. Britton accuses me of jumping into this debate because U.S. Travel Association members -- the hotels, destinations, car rental companies, cruise lines and other providers of travel services -- benefit from greater international travel. On that I plead guilty as charged. Preserving Open Skies is critical to thousands of businesses all across America and millions of U.S. jobs that depend on international travel. These agreements exist to benefit the entire travel industry and the broader U.S. economy, not just three airlines.