Lee Moak’s Response to Travel Pulse

While I’ve always been an American-made car guy myself, like any motor enthusiast, I can appreciate the German engineering of a Porsche or the sleek profile of an Italian Maserati. I bought my American-made car based on preference, not necessarily an obligation to buy a U.S. made vehicle (though that was a factor, but a personal one), and I agree with Mr. Thomaselli that Americans should have the right, and are smart enough to make their own choices.

However, the reductive, rhetorical questions that Mr. Thomaselli asks throughout his article display his clear lack of understanding in regards to the fundamental structure of Open Skies agreements and how the governments of the United Arab Emirates and Qatar have strategically sought to distort the international aviation marketplace by violating Open Skies agreements to benefit their state-subsidized air carriers. As I said, I own an American car because I had the luxury of purchasing a car based on choice. But my American-made car was designed and manufactured by a company that had to compete in the open marketplace with all other car manufacturers. Toyota competes against Cadillac just like it competes against Audi and Hyundai. Regardless of where a car is coming from, it’s produced by a company who has to make a profit in order to continue to fund the development and distribution of it’s products, as well as meet the fiduciary obligations it has to its shareholders. If it costs BMW $20,000 to produce a car, BMW can’t then turn around and continuously sell that car for $15,000 (taking a loss each time) and expect to stay in business. A loss on every vehicle sold would result in the company going bankrupt if that company is operating in the private, open market place.

This is where we meet a fundamental difference between what is happening with car companies (or any other company competing in an open market) and what is happening with the subsidization of the Gulf airlines. Etihad, Emirates, and Qatar Airways can all “afford” to lose money on routes they fly, because their operations are massively subsidized by their governments. Every time they sell a ticket far below the actual cost per seat of the flight, or have one of their new A380s leave Dallas at 38% capacity as recently reported, these airlines are taking a immense loss that privately owned U.S. airlines could never afford. Given many their flights operate this way, these add up to result in massive losses that can’t be covered by the profitable routes they do have. But, when the governments of the UAE and Qatar continuously make up these losses through subsidies and other benefits directly supporting their expansion, these airlines can continue to buy new planes and sell tickets far below their actual cost to the airline. Because the government owns the airline, the airport, all aspects of tourism in their respective nations, and most of the suppliers to their airlines, these “airlines” can operate at a massive deficit, shifting the airline’s loses to other parts of the government-controlled enterprise, hiding the subsidies, while continuing to expand at an unprecedented rate.

The implication that other carriers, not only in the U.S., but abroad in places like Europe and Australia, could possibly hope to compete with this unprecedented level of subsidization when expected to operate themselves within a competitive marketplace as private entities as dictated by Open Skies agreements, is completely misguided. What Mr. Thomaselli doesn’t seem to comprehend is that US. airlines are strong supporters of Open Skies agreements – however, the Gulf government subsidies have turned the concept of Open Skies on its head with a totally un-level playing field for airlines as a result of the subsidization of the Gulf airlines. Indeed, it’s the worst sort of protectionism when nations like Qatar and the UAE operate their airlines as arms of their government through massive subsidizations.

So yes, Mr. Thomaselli. This is America, land of the free, bastion of capitalism, and home to the greatest economic system in the world. Let’s support those ideals and values, shall we? Let’s do this by restoring fairness to our skies and leveling the playing field for U.S. aviation workers and by ending the subsidization by the UAE and Qatar of their airlines.

In response to: “You Can Buy A Ford, But Not A BMW” Article on Travelpulse.com