Global Airlines

Government subsidies in the airline industry are something that cannot usually be hidden. There are many airlines who receive subsidies from various different places including governments. Two long-haul foreign carriers who are said to have received subsidies are Emirates and Qatar Airways (Jansen, 2015). Both of these airlines are Persian Gulf carriers, Emirates being from the United Arab Emirates and Qatar, being based in Qatar. Both carriers are fast growing and have expanded rapidly into the United States with direct routes to their Middle Eastern hubs. “The advantages have allowed substantial growth in the last decade despite almost no growth in overall passengers, with Emirates reaching the top capacity in the world last year, with Qatar 10th and Etihad 13th, according to the U.S. airline argument” Jansen said in his article. Which goes to prove that these airlines are exceling with their subsidies. Jansen also mentions that these gulf carriers often get benefits like “interest-free government loans, cheaper access to airports and services such as fuel and ground handling that are governed by airline officials” (Jansen, 2015). Therefore three major United States carriers American, Delta, and United have all began to fight back and have been bringing these subsides up in court (Jansen, 2015).

Once Gulf carriers came under fire for them having an interest in government subsides, Etihad Airways decided it will do its own research against United States carriers. According to an article by Peter Fricke, Etihad found what it was looking for. According to Fricke’s article, “American Airlines, Delta Airlines, and United Airlines have received a combined total of $71.48 billion in government benefits over the last 15 years” (Fricke, 2015). I can see how Etihad airways could get upset because if they are getting accused of getting money lets show the truth about the US carriers, but in the end I am not sure that this will really prove anything. At the end of the day all airlines get money from the governments and how they use the money it was really matters.

Foreign carriers have been able to purchase aircraft for less than market rates mainly because of the export-import bank here in the United States and a similar program with Airbus overseas (Drew, 2014). The export-import bank was created part of the new deal in the 1930s, “which backs loans to foreign companies seeking to purchase goods and services made in the United States” (Bordelon, 2013). The biggest beneficiary of these program in the United States is Boeing, and these how foreign carriers are now involved with this program (Drew, 2014). Using these bank for carriers like Emirates purchase the aircraft from Boeing, in which this bank program backs and supports the purchase. According to the article the biggest user of the program is Irish airline Ryanair, which doesn’t even fly to the United States, but purchases the Boeing product made in America (Drew, 2014). Therefore US carriers are buying Boeing products but are not being backed by the bank because they are not exporting the goods.  

Overall I think that the global playing field for long haul carriers is unfair. I think that the airlines that choose to fly to the United States should be happy that they are able to fly to this country. Whether or not these companies get money from various governments to do so, may be right or wrong. But competition is what drives the economy and is some aspects it can be good for US carriers as long as they hold the majority of flights, which they are starting to lose. I think that this special export bank does need to be revaluated because this is definitely unfair to US carriers. On the other side if US carriers continue to post these record profits I would think that they would be able to compete and fly these long flights as well and make a profit.

References

Bordelon, B. (2013, October 30). Bangladeshi airline set to receive loan guaranteed by US government. Retrieved from, http://dailycaller.com/2013/10/30/bangladeshi-airline-set-to-receive-billion-dollar-loan-from-us-taxpayers

Drew, C., & Mouawad, J. (2014, June 27). Airlines’ Rivalry Amplifies Fight Over Bank Guarantees. Retrieved from, http://www.nytimes.com/2014/06/28/business/airlines-rivalry-amplifies-fight-over-bank-guarantees.html?_r=0

Fricke, P. (2015, May 05). Gulf Airline Blasts US For Aviation Subsidies. Retrieved from, http://dailycaller.com/2015/05/15/gulf-airline-blasts-us-for-aviation-subsidies/

Jansen, B. (2015, March 06). U.S. airlines contend Gulf rivals are subsidized unfairly. Retrieved from, http://www.usatoday.com/story/travel/flights/2015/03/05/airline-treaties-american-delta-united-emirates-etihad-qatar-gulf/24422137