By: Edwin Fuller
Founder and President of Laguna Strategic Advisors
Roughly two years ago, I blogged about the Big 3 US Airlines’ (American, Delta and United) highly-publicized campaign directed at the Obama Administration to block Etihad Airways, Emirates Airlines and Qatar Airways from expanding their US route network (May, 2014). Since I posted that blog, the US carriers have not only continued their campaign against the 3 Gulf carriers but also blocked Norwegian Air International’s application to begin serving the US.
As you recall, international carriers can fly into and out of US cities under a series of Open Skies agreements. These agreements essentially are free trade pacts for air travel that prohibit countries from regulating routes and capacity among each other’s carriers. These pacts have been in place for more than 3 decades—with the full and active support of the US airlines—and the US now has 114 of these agreements in force with countries in every corner of the globe.
In the past 2 years, the Big 3 US Airlines have generated record profits—thanks largely to lower fuel costs as well as their newly monopolized routes brought about by the continued consolidation of the US airline industry.
European-based carriers like International Airlines Group (IAG) also notched record profits last year. IAG is the largest trans-Atlantic airline group and is a multi-national airline holding company formed in 2011 following the merger of British Airways and Iberia). Interestingly, IAG recently wrote the US Transportation Department (DOT), asking it to reject the Big 3’s contention that Emirates, Qatar and Etihad are unfairly subsidized by their respective governments, and suggesting that DOT continue to take measures to encourage additional competition.
With the airline industry now in relatively good financial shape, one would hope they would turn their attention to improving their on-board customer services and amenities rather than focusing on limiting competition. Instead, the Big 3 have intensified their protectionist efforts against allowing increased international competition.
I was interested to read a consumer survey conducted by the Business Travel Coalition last year that found that 67% of Americans agree “the government should not give into the US airlines’ demands that foreign airline expansion into the US be stopped,” that 61% agree that US airlines need more competition from foreign airlines and that 76% agree that the Gulf airlines have increased travel opportunities from the US to key destinations in the Middle East, India and Southeast Asia.
As a businessman, it’s tempting to wish competition didn’t exist, especially during challenging times. But, I’ve always believed that ultimately competition brings out the best in all of us. It gives consumers a variety of choices at affordable prices and encourages businesses to improve their customer service, thus helping to build market share. Competition also helps businesses succeed because it spurs innovation thereby strengthening the brand and stimulates the business to find improved ways to add value to the entire enterprise.
My hope is that our US air carriers would focus on building the best customer-driven airlines in the world rather than working hard to keep competitors out. During the years when I was with Marriott International, we worked hard on doing the best we could for our customers, our employees and our stakeholders. By concentrating on these 3 areas, we were confident our business would take care of itself. And it did.
Congress will soon be reauthorizing the Federal Aviation Administration. This will give it an opportunity to re-evaluate the benefits of Open Skies. If you share my belief that competition is good and that US air travel choices should not be limited, let your elected Congressional officials know.