Global Airline Issue

1) Two long haul foreign carriers that receive government subsidies from their respective countries are Emirates Airline which is an airline that is the subsidiary of The Emirates Group; a group that is wholly owned by the government of Dubai's Investment Corporation of Dubai (wikipedia.org/Emirates_(airline)). Another long haul foreign carrier is Qatar Airways which as of May 2014, is fully owned by the Qatari government and is the state-owned flag carrier of Qatar (wikipedia.org/Qatar_Airways). Emirates was conceived in March 1985 when Gulf Air began cutting back its services to Dubai. Since then, Emirates has continued to grow as an international airline and currently is the 3rd largest international carrier by scheduled passenger-kilometers flown and the 7th largest airline in the world in terms of revenue (wikipedia.org/Emirates_(airline)). Qatar Airways began operating in January 1994 and has been expanding its fleet and routes ever since. The Qatar Airways Group recorded its first ever profit in the fiscal year of 2004 and was also the first Middle Eastern airline to receive the Dreamliner (Boeing 787) as a part of its fleet (wikipedia.orgQatar_Airways). Both of these airlines are owned by their respective countries/governments and have been receiving subsidies from the government and according to Tim Canoll in a recent Huffington Post article, "The government in Dubai is currently spending tens of billions of dollars on airport infrastructure to benefit Emirates and shielded the airline in 2009 from $4 billion in fuel-hedging losses. The government of Qatar has granted more than $17 billion in interest-free loans, shareholder advances and other types of support to Qatar airways to underwrite the airlines' massive growth." These Persian Gulf airlines are not the only airlines to receive government subsides however, the US had their time when government subsidies were apart of the airline industry.

2) During the times before deregulation the US airline industry was government owned and therefore received funding from the government for their airmail routes. Also, the Federal Airport Act of 1946 brought about government spending to improve and increase the amount of airports and runways available in the US through the Federal Aid Airport Program. Because of this Act and the program it brought about, roughly 75 million dollars was the be allocated to airport construction annually (avstop.com). Let's not forget about the EAS (Essential Air Service) program that still is implemented today which provides government subsidies to smaller communities in order to ensure they still receive scheduled air service they otherwise would not receive due to deregulation. These may not be long-haul flights (most are 30-50 seat aircraft on regional jets), but long haul carriers like Delta do provide air service to some of these communities through their Delta Connection flights (specifically Sault Ste. Marie,MI, Escanaba,MI, Pellston,MI, and Muskegon,MI) just to name a few. According to an article by Keith Laing on The Hill, "U.S. Airlines receive about $1 billion per year in tax breaks from state and local governments" which could be seen as a government subsidy even if it isn't direct government money going into the airline. The article goes on further to say that if airlines were not to receive these tax breaks then airline ticket fees would be higher and there would be less investment in new aircraft, customer amenities, and training (which I agree with) but still, it can be argued that the US airlines receive government subsidies in the form of tax breaks.

3) Two of the three Gulf carrier airlines have received financing (close to $5 billion) from the Export-Import Bank of the United States. According to their website, the Export-Import Bank is an independent, self-sustaining Executive Branch agency that is the official export credit agency of the US; it's mission is to support American jobs by facilitating the export of U.S. goods and services (exim.gov/about). "According to the banks database, Emirates received close to $3.7 billion from Ex-Im since 2007" (Quinn 2015). Quinn also states that the loans awarded to Emirates and Etihad were used for the purchase of Boeing aircraft and seeing as Boeing is an American "good" so to say, this is why the loans were given out. You see, Ex-Im provides taxpayer-backed loans and loan guarantees to foreign countries and companies for the purchased of U.S. exports. This is how the foreign carriers are able to purchase aircraft at below market interest rates.

4) Seeing as the subsides that U.S. carriers receive are through tax breaks and not actual government funds being put into the airlines, no, I do not see the global "playing field" as fair. The reason being is that the Persian Gulf carriers can continue to purchase newer aircraft for cheaper (using their governments money) and allow their ticket prices to be much more competitive than the US carriers because essentially, they don't have to worry about a loss, or paying back their loans. To a degree they do, but with their governments funding part of the bill, the carriers are allowed to cut ticket prices and include more customer amenities (like showers in the airplane *cough cough* Emirates) to attract a larger customer base to their airlines. This causes US airlines to try and step up their competitiveness but it becomes difficult without still trying to maintain their own profit goals for each year. Also, the loans being paid back by the US carriers has much more interest on it than the foreign carriers do which I find unfair regardless if it means providing more purchases of Boeing aircraft. I am in full agreement with the Americans for Fair Skies movement and have signed the petition on behalf of my company to ensure these foreign carriers properly obey the Open Skies agreement and I suggest you do too.

Works Cited

(n.d.). Retrieved March 07, 2016, from https://en.wikipedia.org/wiki/Qatar_Airways

(n.d.). Retrieved March 07, 2016, from https://en.wikipedia.org/wiki/Emirates_(airline)

 

 Canoll, T., Cpt. (2015, July 6). Gulf Airline Subsidies Have No Parallel in U.S. Retrieved March 07, 2016, from http://www.huffingtonpost.com/captain-tim-canoll/gulf-airline-subsidies-ha_b_7738462.html

 

Federal Airport Act of 1946. (n.d.). Retrieved March 07, 2016, from http://avstop.com/history/needregulations/act1946.htm

 

Laing, K. (2014, August 25). Study: Airlines receive $1B in tax breaks from states annually. Retrieved March 07, 2016, from http://thehill.com/policy/transportation/215921-study-airlines-receive-1b-in-tax-breaks-from-states-annually 

http://www.exim.gov/about

Quinn, M. (2015, April 13). Gulf Airlines Win Big With Subsidies, Taxpayer-Backed Loans. Retrieved March 07, 2016, from http://dailysignal.com/2015/04/13/bank-rolled-how-foreign-airlines-win-big-with-government-subsidies-and-u-s-taxpayer-backed-loans/