Subsidies do not violate Open Skies agreements. The US-Qatar Open Skies agreement refers to fair competition in the context of not standing in the way of either country’s flights, not clamping down on subsidies. When Delta called for restrictions on Qatar’s flying to the U.S. they were calling for an abrogation of the treaty.
The Obama administration flatly rejected this call, which is why Delta pinned its hopes on economic nationalists in the Trump administration and started making ugly racist appeals. The matter was finally resolved with Qatar agreeing to publish financial statements in accordance with world standards, and stating they didn’t intend to launch their own flights between the U.S. and Europe.
- Qatar used to operate ‘fifth freedom’ flights between the US and Europe – that was over a decade ago, before they had aircraft which could fly non-stop from Doha to the U.S.
- They don’t need to fly Qatar Airways planes between the US and Europe. They are the largest owner of British Airways, Iberia and Aer Lingus. And they are the largest owner of Air Italy, Italy’s second carrier, which is taking on Delta partner Alitalia, a perennial basket case that is currently living on Italian government subsidies.
It isn’t Italy’s subsidies for Alitalia that Delta is complaining about. Since Delta benefits from an anti-trust immunized revenue-sharing joint venture with Alitalia, those subsidies are met with silence.
Instead Delta’s CEO Ed Bastian has an op-ed this morning complaining about the smaller Air Italy which is 49% owned by Qatar Airways (by the way Delta owns 49% of Virgin Atlantic and up to 49% of Aeromexico).
Since Bastian has no legitimate complaint that Air Italy, or Qatar, is acting against US law or policy he has to resort to deceptive and disingenuous claims in calling for “the Trump Administration to examine this situation and send a strong message to the Qatari government.”
- Air Italy’s expansion is “putting thousands of American jobs at risk.” Delta cares deeply about American jobs which is why they have over 280 Airbus aircraft on order and fewer than 20 planes ordered from Boeing. Meanwhile US airline jobs are at a peak, the US unemployment rate stands at 3.7%, and new service from Air Italy on routes not served by any US airlines adds jobs.
- Qatar is operating unfairly because it has racked up “over $2 billion of operating losses over the past three years.” Delta has lost over $2 billion in a single year (2005). When the federal Pension Benefit Guaranty Corporation took Delta’s pilot pension obligations off its hand its $3 billion underfunding was the sixth largest government takeover in history.
- We don’t need Air Italy because the routes they are flying are “already highly competitive and well-served by existing carriers” of course their new services — Los Angeles, San Francisco, and Chicago O’Hare – Milan — had no non-stop service at all.
The notion that new service shouldn’t be permitted on routes that are ‘well-served’ by incumbents is anti-consumer — we shouldn’t allow more choices, or innovation in products and services. It calls for government planning (pre-deregulation this is a standard the Civil Aeronautics Board used to decide whether to approve new routes) which is incredibly ironic in mounting a claim against a competitor that there’s too much involvement from their government.
- Qatar is “disrespecting the Administration” and “thumbing its nose at the Trump Administration” because Air Italy is flying from Italy to the U.S. when Qatar Airways said they themselves had no plans to do so. It is no coincidence that Bastian uses this rhetoric twice in a 594 word piece. There is nothing whatsoever illegal or improper about Qatar’s flights so the only refuge Delta has is trying to play on the President’s insecurities. Delta’s best chance of winning here is Jared Kushner’s close relationship with the Saudis which are leading the regional blockade of Qatar.
- Bastian says his “No. 1 job is taking care of our 80,000 employees” which is why he’s lobbying the government to limit consumer choices and raise fares — former Delta CEO Richard Anderson was explicit that their goal in attacking Qatar Airways and other Mideast carriers was government rules against lowering prices. Of course he couches this in terms of employees (obviously a claim that this is taking care of customers would be on its face absurd) but he doesn’t explain that what he’s lobbying for is redistributing money from US consumers to Delta shareholders.
Is anyone actually fooled by Bastian’s table pounding other than the incoming Chairman of the House Transportation Committee, bought and paid for by airlines and their unions, and Ted Cruz?
@ Gary — Ed is outsourcing his job to the government?
Ted Cruz has to be the stupidest human to ever walk into the Senate building. You know something is wrong if Ted Cruz supports it. It’s a shame to all Texans that Beto didn’t beat him.
@ Ray — Hopefully Beto can beat the stupidest person ever to walk into the White House.
You may be be right about the legalities of subsidies as they relate to open skies agreements. More problematic is the Qatari government itself (which is pretty much indistinguishable from the airline), and its stance on financing terror. That is the best reason not to “feed the beast”.
capitalism at work
@Ben L – asking the government to give you what you cannot get in the marketplace is not exactly capitalism
Asking for government handouts and protectionism is a time-honored capitalist tradition, Gary
@Gene and Ray. Cruz graduated cum laude from Princeton with a BA, magna cum laude from Harvard with a Juris Doctor Degree. While at Harvard Law, he was the primary editor of the law review. I am guessing he is way smarter than either of you. LOL. I am guessing that Cruz has better grades than Obama; however, there is no way to tell, because Obama’s college records have been sealed.
Thank God Trump’s college records are open to the public. Damn that Obama for having private college records…just like every other college graduate. Nobody sealed Obama’s records. Just like nobody sealed Trump’s.
Well…… focusing on the point of the post rather than pathetic political rantings, let’s talk about Delta.
It has become de rigeur in this forum to beat on Ricahrd Anderson, Bastion’s predecsesor. He was in charge when I moved my business to Delta, and it was a satisfactory exoerience. Anderson also answered his own mail, it wasn’t done by a flunky.
As a premium passenger, delta went downhill *immediately* Bastion took the reigns, causing me to eventually shift my business to another airline. Nothing acute, it was just death by a thousand cuts.
I do not know why he is lauded as a successful airline executive. My personal belief is he is building a house of cards..
Sainted, in heaven, wonder-kin, most ethical Republican Senator ever stated that “President Obama impressed Republican senators by being the smartest man in the room during a series of intimate dinners last year intended to repair relations with Capitol Hill.” (Source: 3/3/14 The Hill). Sorry, my bad, Obama is like the sun, smarter than us all, but pure as the driven snow, certainly better in every way than Cruz. I gravel to my moral superiors for forgiveness. Glen Gall, Ray, and Gene, does that fix it.
Back to the real world, I disagree with Ed Bastion, I do not think that Ted Cruz should have supported his position. Not happy with Delta, American, or United. I am just sick and tired of the name calling.
Unfortunately, crony capitalism is the way of Washington right now. Call companies into Congress for hearings, then hit them up for donations to make it go away. The Swamp is deep on both sides of the aisle. Cruz began his career in 1/9/03 as the Solicitor General of Texas. Since then, he has been in public office fundraising. He may rail against the swamp, but he is a member, and needs to raise money all the time.
@ Other Just Saying — I didn’t say Ted Cruz wasn’t smart. I’m sure he is smarter than I in some ways, and I am smarter than him in other ways. Smart people aren’t typically smart at everything.
Donald Trump on the other hand, is an idiot.
@Gene. You said “Donald Trump on the other hand, is an idiot.” What you mean is Everyone that supports “Donald Trump….is an idiot.” And you are going to pound them. Be more civilized. Argue with Trump’s policies not just make ad hominem attacks against Trump and his supporters.
Good blog post title Gary.
This is the same airline that turned a wannabe warm and fuzzy (seemingly) pro-veterans cabin video…into a crass commercial plea for money. Essentially, the message is: Delta hires veterans –> Passengers buy Delta tickets = Delta helping veterans. Really? And perhaps not as heartwarming when you realize a good number of those vets are probably earning six-figure salaries in the cockpit.
@ Other Just Saying — You are a master of putting words in others’ mouths. I said no such thing nor do I think it.
@Gary – Thanks for calling BS on this.
Truly, these US CEOs are pathetic; they love to play up their ( self ascribed) status as honest brokers and free traders, pointing the finger at others ( usually in a holier-than-thou tone). The reality is quite different, of course, as they have operated in cartel-like arrangements for decades and are little better than the robber barons of past centuries. Of course it’s all grist to the mill in the context of the Trump agenda.
@Paolo – I fervently wish that you were wrong.