American Airlines Chairman and CEO Doug Parker offered an opinion piece this week in the Wall Street Journal calling on the Obama administration to do something about the scourge of low fares and flight choices that consumers have thanks to service offered by Emirates, Etihad, and Qatar.
He repeats the claim that these three airlines are subsidized (making no claim of course that major US airlines aren’t, and continuing to lump these three very different carriers together). And he contends that his airline is playing “a rigged game that has gone on too long” when it’s reporting profits of approximately $2 billion per quarter and finds itself with more cash than it can productively invest so has authorized share buyback programs this year totaling $6 billion.
His subsidy claim,
Over the past decade, the governments of the United Arab Emirates and Qatar have given their airlines more than $42 billion in subsidies—including funds for land, airport upgrades, new airplanes and government assumption of fuel hedging losses—causing significant market distortions.
The original airline document making the subsidy case turned out to be a fraud, doctoring quotes. Emirates probably isn’t subsidized, or at least may even be less subsidized than the US airlines are.
The US airlines of course have had $23 billion in pension obligations taken off their books and assumed by the federal government’s Pension Benefit Guaranty Corporation.
Just this week Mr. Parker’s American sought tax subsidies for a new headquarters building. It’s original large aircraft order came thanks to the federal government’s Reconstruction Finance Corporation. And American codeshares with Etihad and partners with Qatar through the oneworld alliance.
Not to mention the subsidy US airlines receive by not having to compete against foreign-owned airlines on domestic US routes.
Parker claims though that his calls for protectionism aren’t to benefit his own airline. It’s for the jobs.
When unfair competition forces U.S. airlines to cut service, the result is loss of American jobs. Those hit hardest are the pilots, flight attendants, ground crews, customer-service representatives and many others who support the commercial aviation industry.
The impetus for concern by the CEOs of United, Delta, and American of course cannot be ‘for the jobs’ when major US airlines outsource maintenance work and buy foreign-made aircraft. There’s nothing wrong with that, of course, maintenance work is supervised and inspected and meets the highest standards of safety.
At the same time, US airline employment is at a seven year high even as the Gulf carriers expand their presence in US markets. Indeed, airlines like Alaska and JetBlue are growing as a result of their partnerships with Emirates.
And the growth of these carriers has meant more jobs in travel and tourism, and in aircraft manufacturing, as well as trade.
It’s a cynical and self-serving piece. And, sharing a byline with the President of American’s pilots union, I can only imagine it’s designed to curry favor as he attempts to combine seniority lists for legacy America West, US Airways, and American Airlines pilots with the least acrimony possible.
Great post! And bonus points for the South Park clip, one of my favorite episodes!
It doesn’t seem like Parker and others are making much headway with the public or politicians, which I hope remains the case. The domestic airlines’ whining is getting old.
Note to author: Doug Parker has absolutely nothing to do with combining the pilot seniority list. That is a union issue.
@MG Yes and no. That needs to happen before the airline can optimize its fleet. They’re maintaining separate pilot seniority lists and assigning legacy pilots from one airline to legacy aircraft and routes from that same airline. They can do a limited amount of cross-fleeting, but it’s costly and complicated to do it until seniority integration occurs.
Furthermore, the airline is a party to the talks, and relations with pilots are important, the seniority issue is just the most immediate. Now, it’s true that merely getting along with the head of the pilots union doesn’t get it done. But they’ll work together to sell the solution to the membership and there’s also shared involvement in the litigation.
Yes, good point and good post! Mr. Parker should know that when he points a finger at those “evil” airlines, he has 3 fingers pointed at himself. Hypocrisy and self-interest still play a huge role in this “argument” which, in reality, is all whining by the big 3…
What a whiner. It’s not enough to own a huge chunk of the US market and to collude with your two competitors. He has the audacity to complain that there is competition in any market. They (ME carriers) offer a better product, at a comparable price. AA is innovating in the bitching and moaning arena, while cancelling more flights than its competitors and offering crappier service, crappier food and an overall mediocre to bad experience. He has decided that AA doesn’t need to compete, they just need to tow the line. Now all he needs is the government to intercede on his behalf to suppress competition and then he and the other members of the torpid trifecta can appease the shareholders at the expense of the flying public until it’s time for him to jump ship, with a nice golden umbrella.
Come on Doug, you couldn’t grow an airline so you merged to become one of the big boys and now you whine and complain like Dickie does. You should look at the product you produce first and how many “programs” you have used!
The more the big three cry the less sympathy they get from the traveling public, and we vote !
John K. …Great comment and my thoughts exactly. These “big 3” CEO’s must really think the flying public are morons to swallow this drivel.
Parker is just one of the three biggest liars in the industry. Oh, yeah. Schmuck is gone, so does that mean there’s only two now?
Gary, you mention the out sourcing of maintenance by us carriers. Did you read the article by James B. Steele in the December issue of Vanity Fair? It reveals a catalog of woeful inspections and calamitous errors carried out by poorly trained technicians. While AA doesn’t outsource (at the moment) I feel it’s only a matter of time. I’m afraid I don’t have the link to share as I write. But would highly recommend you and your audience read it.
Agree with everyone here, but especially John K and especially about the whining.
@David I read it, I wasn’t impressed.
And reading Smisek’s comments makes me question UA as well as AA’s ability to gain customers without mergers.
Off topic, but has South Park done a piece on the airlines yet? If not, it’s long over due.
“Oh really? Too bad.
Whatever! I do what I want!”
Great post Gary. Maybe if the “Big 3” improved their service levels we’d all want to fly ’em. US carriers don’t hold a candle to the Gulf airlines. And how dare Parker et all talk about subsidies. US carriers have and continue to receive substantial tax breaks from our gov’t while racking up obscene profits. Thanks for all you do for all of us.
@Gary: Let’s get back to your original point. Maybe easier to for me to say it this way: Seniority is a sensitive, and complicated issue and combining the lists rests in the hands of the Union. No amount of smack-talk Parker makes about the Middle East carriers will influence the speed and outcome. Further, there is a hard stop date on when they have to have it done.
@DreeN. Southpark did something on the airlines/airports shortly after 9/11
“It still beats what you go through at he airport”
http://youtu.be/JscQXDsSgco
When giant companies take bail outs, subsidies, and all benefit from subsidized fuel… and then complain about someone else getting similar subsidies, I’m floored.
And the crazy part is people repeat this stuff as if it makes sense!
For example, people complain about Tesla customers getting tax breaks. Okay, compare that to GM or Ford.
Would be interesting to list all the breaks, subsidies, bailouts, etc.. in the airline industry by airline. 😀