China Southern is majority-owned by the Chinese government and supervised by its State-owned Assets Supervision and Administration Commission. It has just raised $4.36 billion in new capital from government-backed and government-linked investment funds “to implement the relevant requirements of the Central Committee of the Communist Party of China and the State Council on deepening the [equity diversification] reform of state-owned enterprises.”
The funds will be used for investment in the airline business in ways which advance the Chinese state’s ‘Belt and Road’ foreign policy initiative of investment in other nations to develop the country’s influence.
Last week American Airlines CEO Doug Parker met with President Trump to make the case that certain airlines are acting against the interests of the U.S. and its workers. Parker described the meeting thusly,
We asked President Trump personally to do everything he can to stand up for American workers and ensure that all airlines are playing by the rules. Our 130,000 extraordinary team members and the investments we are making in our business enable us to compete against any airline in the world, but we shouldn’t be forced to compete against governments that don’t play by the rules.
So what actions did Parker ask the Trump administration to take against Chinese state airlines being used to foster their country’s foreign policy goals? None, Parker has made no such concerns public at all. In fact American Airlines has both an investment in and codesharing partnership with China Southern.
He deploys the argument that “state subsidies are destabilizing the global airline industry and threatening to undermine our nation’s entire system of trade enforcement” and that “[l]eft unchecked, they send a signal that other countries can ignore our trade deals and trample upon our workers without consequences” shall we say… selectively.
Two years ago American Airlines provided $200 million in funding for the state-owned carrier whose overseas investments are being used to further Chinese government foreign policy interests.
That’s $200 million of course that hasn’t been spent completing their merger with US Airways by getting a contract with their separate mechanics groups, or making good on US Airways pensions that were shed in bankruptcy while retaining tax loss carry forwards to reduce future taxes on profits.
Parker, of course, isn’t alone in his hypocrisy on airline subsidies. Four years ago Delta made a $450 million investment in China Eastern which has been called China’s most subsidized airline.
United hasn’t made direct investments in its partner Air China, but continues to lobby for protection of its Washington Dulles hub against competition on flights greater than 1250 miles departing Washington National, and lost its last CEO in a bribery scandal after providing vacation flights to the Chair of the Port Authority of New York New Jersey in exchange for favorable action at its Newark hub.