Global Airlines - Is it a Fair?

Two airlines that have been found to receive government subsidies are Qatar and Emirates. Both airlines are within violation of the Open Skies policy. The Open Skies policy is an agreement in place to promote travel, increase economic growth and promote job opportunities by eliminating government interference on routes, capacity, and price. Qatar has violated this policy by receiving government aid with over $16 billion in the last decade alone. Qatar’s CEO Akbar Al Baker has publicly denied any government interference with the airline but its financial statements have proven this to be false. Emirates has shown to have received at least $5 billion in subsidies since 2004 (Partnership for Open and Fair Skies, 2015). Last year they made a profit of $1.6 billion of which $700 million was given to shareholders and $300 million in bonuses for its employees.

Though not in the exact same way as the Gulf airlines the U.S. government has been providing subsidies to American aviation companies as well. A government document shows that $155 billion has been received by U.S. airlines between 1919 and 1998. Of the $155 billion spent, $140 was spent by the trust fund that supports FAA spending. Historical data from the FAA also shows that since 1971 passengers and airlines have contributed $247 billion to the trust fund with $10 billion being contributed annually today. Unlike the Gulf airlines the U.S. airlines pay into what they are given to by the government. The Gulf carriers argue that many countries subsidize their commercial airline industries, especially start-ups but they are not exactly parallel events. U.S. airlines started with mail being carried by airlines and being required to carry passengers to lead to a reduction in the need for air mail subsidies. Airlines were provided with more subsidies in the second half of the century. The Gulf carriers are relatively new. Emirates was founded in 1985, Qatar in 1993, and Etihad in 2003. Instead of letting the market expand their airlines over time the Gulf governments spent billions of dollars rapidly to provide the three airlines with the most expensive aircraft and gigantic new airports (Reed, 2015).

Another controversial issue with foreign carriers is their purchasing of aircraft at lower interest rates than U.S. carriers. The Export-Import Bank, the federal creditor of the United States, is accused of reducing the investment required to purchase new aircraft for foreign carriers. The subsidized aircraft are then put onto routes that directly compete with U.S. carriers. U.S. carriers not receiving the same deal and the Bank’s activity in the wide body aircraft sector has resulted in job loss for American airlines (Keep America Flying). Boeing is currently the biggest beneficiary of the bank and according to the Government Accountability Office represents about 28 percent of agency’s financial exposure.  The Bank providing subsidies to foreign airlines to buy Boeing aircraft has cost the U.S. airline industry 7500 jobs and $684,000 each year (Lee, 2015).

I feel that a level playing field with foreign carriers could be achieved but the problem is that it requires everyone to play by the same rules. Governments often get too involved with commercial business especially regarding the airlines and there are different beliefs on what is acceptable or not. In order to have a level playing field the international aviation industry has to come to a conclusion on what defines a level playing field and follow the same procedures. The international business community is not fair and I don’t think it ever will be. 

Keep America Flying. (n.d.). Retrieved from Air Line Pilots Association, International: http://www.alpa.org/~/media/ALPA/Files/pdfs/news-events/white-papers/keep-america-flying.pdf?la=en

Lee, M. Y. (2015, April 10). Does the Export-Import Bank ‘prop’ foreign corporations to compete unfairly with the U.S.? Retrieved from The Washington Post: https://www.washingtonpost.com/news/fact-checker/wp/2015/04/10/does-the-export-import-bank-prop-foreign-corporations-to-compete-unfairly-with-the-u-s/

Partnership for Open and Fair Skies. (2015, January 28). Retrieved from Open and Fair Skies: http://www.openandfairskies.com/wp-content/themes/custom/media/White.Paper.pdf

Reed, T. (2015, April 14). U.S. Airlines Have Paid the Government $250 Billion -- Amazingly, Some Claim They Are Subsidized. Retrieved from Forbes: http://www.forbes.com/sites/tedreed/2015/04/14/u-s-airlines-have-paid-the-government-250-billion-amazingly-some-claim-they-are-subsidized/3/