The United States and United Arab Emirates, has both agreed on an international treaty allowing "open-skies" for both operators. The agreement highlights that commercial carriers can operator within the air space of both nations as long as there is little to no government interference what so ever. In other words, the government can not regulate the operation and may not offer huge amounts of subsidies to its commercial carriers. Those subsides, if given in huge amount, may allow those international carriers like Fly Emirates to offer cheaper tickets and therefore competing with our own big long-haul carriers. According to the United States Department of State, the following are some of the highlights of the right and duties of parties under the agreement.
- The right to fly across its territory without landing.
- the right to make stops in its territory for non-traffic purposes.
- Each Party shall have the right to designate as many airlines as it wishes to conduct international air transportation in accordance with this Agreement and to withdraw or alter such designations.
- On receipt of such a designation, and of applications from the designated airline, in the form and manner prescribed for operating authorizations and technical permissions, the other Party shall grant appropriate authorizations and permissions with minimum procedural delay.
- While entering, within, or leaving the territory of one Party, its laws and regulations relating to the operation and navigation of aircraft shall be complied with by the other Party's airlines.
- Either Party may request consultations concerning the safety standards maintained by the other Party relating to aeronautical facilities, aircrews, aircraft, and operation of the designated airlines.
- The airlines of each Party shall have the right to establish offices in the territory of the other Party for the promotion and sale of air transportation.
- The airlines of each Party shall be permitted to pay for local expenses, including purchases of fuel, in the territory of the other Party in local currency.
The purpose of the "open-skies" agreement, as mentioned above, is to provide fair competition among those international carriers (US Department of State, 2002). To sum everything up, flights operated by Fly Emirates into our airspace can not be funded by their government. If those flights were to be funded by the UAE government, then they must be conducted and flagged as a U.S. carrier. The Middle Eastern airlines are huge when it comes to government funds, specially Fly Emirate and Qatar Airways. Based on my knowledge, I can say that Etihad Airways and Qatar Airways are listed under this agreement too. They operate similar to Fly Emirates, in terms of government subsides and all of that good stuff.
Our own long-haul carriers receive no where near those subsidies given to Middle Eastern operators by their wealthy governments. Although research does indicate that there have been subsidies paid out to american long-haul carriers. For example, recent research show that American Airlines received subsidized loans by the federal government on their first big aircraft orders (Leff, 2017). Our government is no where near being able to pay anything for our carriers. Our country is just not as rich as those Middle Eastern ones, and we must accept that.
The Export-Import bank provides many opportunities to foreign companies to increase United States exports. They offer many financing programs, such as loans, at below-market interest rates in order to keep make foreigners contribute to our economic growth. So basically, when a foreign long-haul carrier purchases an aircraft from the United States, they get a much much lower export rate (EXIM, n.d.). With this being said, the amount those long-haul carriers pay when purchasing a american aircraft are is lower than the amount and american carrier would pay. This option is unavailable to United States carriers due to the fact that most of those companies pay huge amount of taxes when making aircraft purchases.
There are currently many issues going on with the international air travels and the "open-skies" agreements between the United States and other nations. In regards to Norwegian Air, Posaner states the Following: "Norwegian Air has been waiting two years for approval for its Ireland-registered offshoot, Norwegian Air International (NAI), to start direct flights from Cork and Shannon to Boston, and later New York. Approval for such a move is supposed to be fairly straightforward thanks to the ‘open skies’ agreement, which allows any EU or U.S. airline to fly between any point in each other’s jurisdiction. But U.S. regulators are stalling, under pressure from some in Congress" (Posaner, 2016). If the stalling continues, the trade between Europe and our nation could get affected in a very bad way. On the other hands, our system is also facing a huge problem with international airliners, such as Emirate and Qatar, as they seem to be a very big threat to american airliners. Emirate and Qatar, are still to this day, receiving huge amounts of government subsidies. If this was to be true, it could raise madness within our carriers and it would mean that Emirates and Qatar are not complying with the "open-skies" treaty.
Now, and in all honesty, I do not know where I stand regarding whether the global airline playing field is fair or not. One thing for sure, the United States government have every right in the world to go after and against those international airliners if they were to jeopardize business growth. Emirates and Qatar are supported by the world's richest governments. We all know that is not the case for airlines like Delta and Spirit, for example. I totally agree that flights operated by those long-haul international carrier must have no government interference if they want to conduct business on U.S. airspaces. Emirates and Qatar airways are where I want to end up but that does not mean they get to put our domestics airlines out of business, because that will hurt our aviation industry economically.
References
Export-Import Bank of the United States. (n.d.). Export Finance Solutions to Increase Sales for U.S. Businesses [PDF file]. Retrieved march 13, 2018, from https://www.exim.gov/learning-resources/publications
Leff, G. (2017, October 29). More Hypocrisy By US Airlines on Subsidies: Where's the Outrage Over the Latest Bailout? Retrieved March 13, 2018, from https://viewfromthewing.boardingarea.com/2017/10/30/hypocrisy-us-airlines-subsidies-wheres-outrage-latest-bailout/
Posaner, J. (2016, September 02). Norwegian airline clouds open skies. Retrieved March 13, 2018, from https://www.politico.eu/article/norwegian-airline-nai-ireland-us-open-skies/
US Department of State. (2002, March 11). Air transport agreement: U.S. UAE air transport agreement of March 11, 2002. Retrieved March 13, 2018, from https://www.state.gov/e/eb/rls/othr/ata/u/
This is a well written blog post. I like the structure and it seems very well put together. I sort of reminded me of a column in a news paper or something to cheers to that. As far as the content of your message, you seem pretty spot on with most of your findings, at least compared to what I found while I was researching. One question I struggled in finding an answer to was how foreign centuries buy aircraft at "much lower than average interest rates". I ultimately came up with a similar solution that you found in your researcher. Mine said that their governments were loaning them large amounts of money to spend on aircraft, and these loans were lower than average interest rates.
ReplyDeleteThank you very much Cody. So you are absolutely right about saying that their government loans them huge amounts of money ("oil money"). It is that first and second when they buy aircrafts from the U.S. they get taxed less, due to Export-Import international policies, which this option is not available to american carriers.
ReplyDeleteEhab,
ReplyDeleteYour blog post is quite interesting, same beliefs. You’re absolutely correct in that it isn’t fair, but we are basing that currently on UAE and Qatar being rich that only America can ever dream. However, let’s turn the tables, what if United States was wealthier than any other country out there, I’m betting billions that we would be doing the same thing if not worst in trying to control the aviation industry. You read my post and it’s a known fact that the US3 better known as Delta, United and American Airlines have been receiving government subsidies and they complain only because it’s not on a greater monetary scale as UAE and Qatar. I’m in the same boat as you, I don’t want to see anyone fail in the aviation industry because our future does depend on it, but like anything else, there will always be competition, this is what makes the world turn.
It is interesting that the ‘open skies’ agreement states that there is supposed to be little to no government interference or regulation, but really. I think that that most governments want what is best for their countries. I have worked with government programs and they taught us that a lot of countries take information from us to help their country’s companies, allies like France and China are at the top of the list among others. So even if our country is trying to stay with the terms of the agreement, I do not think other countries are. At the end of the day, everyone wants to win and most people to what it takes to.
ReplyDeletePilot Gano,
ReplyDeleteIn my opinion you have written a really interesting post. I, like you, have mixed feeling about this topic but I am leaning more towards the side of the Gulf carriers. This because US carriers in the past received substantial amounts of funds from the federal government and now they want to be seen as the ones with perfectly clean hands, which we all know that it is not the case. While researching about this topic I came across some really interesting facts. I found out, that there are so many more airlines out there, that receive government subsidies, such as China Eastern, China Southern, Air China, South African Airways, just to mention a few. Well why are the American carriers not pointing fingers also at them, due to the money that they received or are receiving from their governments? Simply because they are gaining benefits from the deep pockets of the previously stated airlines governments, throughout the alliances that they have with them. This is what in my eyes seems really unfair. If they want to start pointing fingers at air carriers that are receiving government subsites, perfect, but they should at least be fair and start calling out all of them and not only the ones that represent the greatest threats in terms of competition.
-Nenne747-
Reference:
Open Skies & Subsidies. (2017, November 16). Retrieved from http://openskiescoalition.com/open-skies-
and-subsidies/
The Export-Import Bank is a tricky situation. Boeing (an American company) benefits from the Ex-Im Bank because they can sell more aircraft, but American airlines are at a disadvantage because they have to pay more than the foreign carriers as you mentioned. What do you think about the idea of keeping the Ex-Im Bank, and compensating domestic carriers in a different way to keep it fair?
ReplyDeleteMy biggest gripe is, airlines like Lufthansa, British Airways, Singapore, etc. have to compete for their spots as the best airline in the world, but analysts keep choosing Qatar because of their product "superiority". Their money is from the government and not their own operating revenue, so it's unfair.
ReplyDelete