Working Together to Preserve U.S. Airline Jobs

When it comes to relations between management and labor, fights always make the news, while cases of collaboration are seldom mentioned. In the aviation industry, it’s rare that you hear about airline management and employees aligned on an issue. For the past year, a strong partnership has emerged in the U.S. airline industry, with American Airlines, Delta Air Lines, and United Airlines joining with seven aviation trade unions to urge the Obama Administration to uphold provisions of legal agreements between the U.S. and the United Arab Emirates and Qatar.

The three fast-growing state-owned airlines of these countries, Emirates, Etihad Airways, and Qatar Airways, received more than $42 billion in subsidies and unfair benefits just since 2004. The subsidies violate the provisions of the “Open Skies” agreements and give these airlines unlimited access to the largest market in the world. Importantly, these subsidies have allowed the Gulf carriers to grow without stimulating demand. In fact, just since January, the trio has added or announced plans to grow service into the U.S., expanding their daily seats to and from the U.S. by more than 35 percent. Their unfair advantage is harming U.S. airlines and their European joint-venture partners, and threatening good-paying U.S. jobs.

American Airlines, Delta Air Lines, and United Airlines employ tens of thousands of Americans in positions pay well above U.S. averages and deliver health care, paid-vacation, and other benefits that, sadly, are quickly disappearing from the American economy. These are precisely the kinds of jobs that elected officials love to talk about, and wish for more.

But unfortunately, these are the very jobs that are at risk as the Gulf carriers continue their campaign to dominate much of global aviation. In fact, for every U.S. route that a U.S. carrier is forced to cede to a Gulf carrier, more than 1,500 American jobs are lost — hardworking pilots, flight attendants, ground crew, and others.

Airline unions and management are also aligned on the fundamental issue of worker fairness at the Gulf airlines. In the UAE and Qatar, not only are trade unions illegal, but workers have almost no access to the due process that every employee in the United States takes for granted. Much of this inequity stems from the Gulf airlines’ human resources strategy of filling most jobs with workers from poor countries. Their approach is clever because places like India, Pakistan, Bangladesh, Indonesia, and the Philippines are filled with millions of people eager to work in the Gulf or elsewhere, and send money home to their families. The power that Emirates, Etihad and Qatar Airways managers hold over their workforce offends the sensibilities of fair-minded Americans and U.S. airline leadership alike.

There’s a disconnect here: the three Gulf airline brands exude quality, modernity, and luxury. But what is modern about a feudal employment model? And would you feel good about quality aloft knowing that the people delivering the service are so poorly treated?

Unfortunately, this trade dispute has become muddied with exaggerated rhetoric about “protectionism” and the like. In the nearly 40 years since the American airline industry was opened to genuine competition, U.S. airlines and their employees have learned to keep their edge. The adjustment was often painful, with wage reductions and the woes of bankruptcy reorganization, but in the end the business emerged stronger and better able to serve U.S. travelers now and into the future. No one is asking for protection nor special favors. The U.S. airlines and their workers are only asking for a level playing field.

In my 30+ years working for and near three large U.S. airlines, I sometimes disagreed with airline unions, but I always respected their right to organize workers and bargain with management. And I witnessed many occasions when the entire company – rank and file, union leadership, senior management, everyone – pulled together to get things done. This is another of those moments, and it’s time for our government to step forward and do what’s both legally and morally right to protect U.S. jobs.

Originally Published on The Huffington Post.

americans4fairskies2015Working Together to Preserve U.S. Airline Jobs
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Americans for Fair Skies Statement on Commissioner Bulc’s Arbitration Plans

When European Commissioner for Transport, Violeta Bulc, comes to Washington, DC later this month, she plans to call for consultations within the EU-US Open Skies in support of EU aviation workers over a EU-US route approval process.

This is significant, because it shows the consultation process set forth in Open Skies being used by one of the parties to the agreement. This is the very same process Americans for Fair Skies and our allies and partners have been asking the United States government to employ to ensure enforcement of our Open Skies agreements with the United Arab Emirates and the State of Qatar.

Our government currently has evidence that the State of Qatar and the United Arab Emirates are acting in deliberate violation of their Open Skies Agreements, but has yet to take action. More than $52 billion in subsidies has been documented, yet the government fails to take action to safeguard U.S. jobs and rectify this obvious trade violation.

The merits of Commissioner Bulc’s case with the U.S. can be debated, but she is to be applauded for having the courage to execute the EU’s right to open consultations within the Open Skies agreement.

As a nation, we fail our citizens when we do not stand up for American industries and our workers. It’s time for fair skies and fair competition. It’s time for the United States to show leadership for our aviation workers, and open consultations with the State of Qatar and the United Arab Emirates.

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European Commission agrees to help end deadlock on Cork-US flights

The European Commission is stepping in to break the deadlock threatening the launch of the first transatlantic flights from Cork.

The commission has agreed to invoke an arbitration process between EU and US transport officials, as is provided for by the EU-US Open Skies Agreement.

European Affairs Minister Dara Murphy last night confirmed the development, which he said followed intensive lobbying by the Government.

He described the commission’s decision as “hugely significant”, amid mounting concerns that the proposed May launch of the service is at risk.

“I would hope that this decision would help move the discussions forward and that it would result in an urgent resolution,” said Mr Murphy.

However, the complex arbitration process could take up to four months, putting it two months beyond the May launch of the proposed Cork-to-Boston service.

A spokesperson for European Transport Commissioner, Violeta Bulc, declined last night to comment on the process, but said contacts with the US authorities are ongoing.

He said Ms Bulc will be in Washington DC this month for discussions with the US authorities on the decarbonisation of aviation and he said it is expected that the issue of the Cork-to-US flights will be addressed.

Cllr Alan Coleman, who was part of a county council delegation which lobbied key figures in Boston late last year on the matter, welcomed the arbitration, but said it is “far from a result”.

“This process will take time and the Cork region will likely miss out unnecessarily on a tourism season, due to a lack of cooperation from the US authorities,” he said.

“The Irish government are facilitating the US in other facets, including allowing US troops to land in Shannon Airport.

“Whether you agree with Shannon being used for this purpose or not is irrelevant. It is a diplomatic concession by the Irish government to the US government.

“In short, Taoiseach Enda Kenny needs to contact Barack Obama and request that his authorities cooperate. An open skies agreement is in place, it is not being honoured, and going through a long drawn-out legal process, in my opinion, is a smoke-screen before next week’s election. Our taoiseach needs to act now and call the White House.”

The move to arbitration follows increased diplomatic efforts in recent weeks, prompted by the unprecedented two-year delay by the US Department of Transportation (DoT) in making a decision on an application from Norwegian airline’s Irish subsidiary, Norwegian Air International (NAI), for a foreign carrier permit to launch Cork-to-Boston flights in May. The low-cost operator is also planning to launch a Cork-to-New York service next year. The airline says despite the delays, it is still committed to launching the services.

The proposed first transatlantic flights from Cork have been described by business, tourism, and political leaders in the south west as hugely important for the region.

Originally Published on Irish Examiner.

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Etihad strategy flies into difficulties

From the Seychelles to Serbia, Etihad Airways has been busy forging its own airline alliance by buying stakes in regional carriers.

But the Abu Dhabi-based company’s bold plan to fill its aircraft with partner airlines’ passengers is coming under threat in both Europe and the US, where rivals are complaining of unfair competition from fast-growing Gulf carriers.

The issue has become more acute as Etihad, Emirates Airline and Qatar Airways moved over the past decade from being fringe players in aviation to the most disruptive force in the industry, successfully wooing travellers who previously flew with longer established airlines based in Asia, Europe and the US.

Etihad, the youngest of the three Gulf carriers, has pursued a different strategy to its two larger peers, acquiring stakes in airlines and using code-sharing partnerships — in which companies sell seats on each other’s flights — to dramatically grow its network. Over the past four years, it had spent in excess of $1bn on stakes in seven airlines, including Air Seychelles, Air Serbia, India’s Jet Airways and Virgin Australia. But there are signs this strategy is running into significant problems. Some of the airlines that Etihad has invested in have required further cash injections and much management time. Etihad’s first deal — the purchase of a 29 per cent stake in Airberlin in 2011 — has developed into a legal battle with Germany’s transport ministry over the two airlines’ code-sharing agreement. “Their strategy of growth by acquisition buys numbers in terms of volumes,” says John Strickland, analyst at JLS Consulting. “But the kind of companies they have been investing in means they have also been acquiring complexity and the challenge of how much management time that takes.”

Last year, Etihad had to navigate through management upheaval at Alitalia, the lossmaking Italian flag carrier that it bought a 49 per cent stake in, and which has not reported a full-year profit since 2002.

But Etihad’s biggest headache in recent months has been Airberlin, the lossmaking German carrier. Hailed in 2011 as widening Etihad’s European network for less than the cost of a single long-range passenger jet, over four years later the investment has spiralled and caused more problems than the Gulf carrier ever anticipated.

The German transport ministry, having initially approved the code-sharing arrangement between Etihad and Airberlin, last year decided it was not allowed under an existing bilateral air services agreement with the United Arab Emirates.
The code-share is important to both companies. It provides Airberlin, which is undergoing a turnround, with important income, while Etihad supposedly gains more access to Germany’s top airports.

Etihad scored a victory in the legal battle last month, when a German appeals court supported its right jointly to sell tickets on 26 of the disputed 31 code-share routes with Airberlin until March 26. However, industry insiders believe the dispute is far from over.

A spokesman for the German transport ministry says it plans to “check the grounds for the court’s ruling and will then decide on our future actions”.

“In principle, the German government was and is open for talks with the UAE to find viable solutions for air traffic law issues,” he adds.

Any potential restriction to its code-share with Airberlin could have a big impact for Etihad. According to flight data from OAG, the aviation consultancy, as many as 92 per cent of Etihad’s worldwide flights this week will be operated on other airlines’ jets under a code-sharing agreement — compared with 74 per cent at Emirates and 65 per cent at Qatar. James Hogan, Etihad’s chief executive, has not been shy about pointing the finger at Lufthansa, Germany’s flag carrier, as the cause of its recent problems. “Our commitment continues to be undermined by the lobbying efforts and protectionist antics of Lufthansa,” he said in January. Over the past year, tensions between Gulf carriers and their counterparts in both Europe and the US have been growing. The big three US airlines — American Airlines, Delta and United — are urging Washington to review the Gulf carriers’ access to the US market. They claim that $42bn in subsidies the state-controlled carriers are alleged to have received over the past decade breach international open skies agreements. In Europe, there are signs the European Commission is listening to calls from certain airlines, notably Lufthansa, to take action. In December, the commission revealed plans to use aviation negotiations with Gulf countries as a way to address competition concerns.

However, some analysts question Lufthansa’s lobbying to restrict Etihad and Airberlin’s code-sharing in Germany, noting the possible negative knock-on effects if Airberlin collapsed.

“It’s in Lufthansa’s interest for Airberlin to exist, because if they didn’t it would attract stronger competitors like Ryanair and easyJet to expand even faster on short haul routes in Germany,” says Oliver Sleath, analyst at Barclays.

Etihad is confident regulators will recognise the benefits its equity alliance strategy offers to air travellers. “Unfortunately, we have seen an anti-competitive backlash from these mega-carriers, as they try to protect their dominant market positions against this new or improved competition,” said Mr Hogan.

Originally Posted on Financial Times

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Mid-East subsidies threaten the integrity of civil air transport

Every year, airlines transport passengers literally billions of miles around the globe safely, reliably and efficiently.  No other mode of transportation, and no other industry, comes close to matching the worldwide performance of the airline industry.  It is a remarkable achievement, but it did not happen by accident.

It started in 1944 when the administration of President Franklin D. Roosevelt invited the allied powers to a historic conference in Chicago to plan for a post-war world where civil aviation would become an important instrument of peace and commerce.  The initiative reflected remarkable vision.  In the years leading up to war, aviation had become an instrument of economic and political rivalry among nations that subsidized their own airlines and frustrated the opportunities of airlines of rival states.

The Chicago Conference was designed to stop those practices and to usher in a new era of cooperation among states to foster a civil air transport industry isolated from state sponsored rivalry.  The chairman of the U.S. delegation to the conference, also the president of the conference, addressed this subject in his opening remarks, stating unequivocally the position of the United States that “devices such as subsidies…designed to drive other planes out of the air” would not be U.S. policy and that the United States “would oppose any such policy if it were practiced by others.”  The chairman of the U.K. delegation spoke next, stating “we want to discourage and, when possible, to end subsidies whether they be opened or concealed.”

The conference produced the Chicago Convention, the successful multilateral treaty that forms the charter, the constitution if you will, of the air transport system today.  Over 190 countries are party to the convention, including virtually all of the members of the United Nations.  The convention established the highly respected International Civil Aviation Organization and empowered it to promote the goals of the convention, including investigating “subsidies paid to airlines from public funds.”  But it left the implementation of route rights to bilateral agreements between governments.

Since the 1990’s, the United States has pursued a policy to liberalize the operation of international air services by negotiating new bilateral agreements with each of its trading partners.  These Open Skies Agreements eliminate government interference with airline pricing, routes and capacity, all in a continuing effort to provide more affordable and convenient air services for the flying public.  They ensure carriers of both sides a “fair and equal” opportunity to compete in the market.

Unfortunately, these new bilateral agreements also have created opportunities for some Mid-East governments to reintroduce the state-sponsored rivalries that the parties to the Chicago Convention sought to eliminate, by providing billions of dollars of subsidies to state-owned airlines to promote their own national economic development strategies.  Specifically, the Partnership for Open and Fair Skies has documented over $42 billion in unfair government subsidies and benefits received by Emirates, Qatar Airways and Etihad Airways.

These practices deprive U.S. airlines of the “fair and equal” opportunity to compete that these agreements literally guarantee.  They threaten not only the goals of the Open Skies Agreements, but also the integrity of the air transport system established by the Chicago Convention.  Unfortunately, the U.S. government so far has been unable to take the steps necessary to nip the emergence of these subsidies in the bud.  The longer it waits, the more difficult it will be to address them.

Problems with bilateral aviation agreements are not new. The United States encountered a similar challenge in the 1980’s when it came to the realization that its agreements lacked adequate measures to address the threat of terrorism.  The United States rightly insisted that its aviation partners agree to those measures to protect the air transport system and the goals of the Chicago Convention; and ultimately they did.

The same kind of leadership and clarity is required of the U.S. government today.  The threat posed by public subsidies paid to airlines by wealthy states is serious. The international air transport system is far too important to allow states to ignore the rules established in 1944 and recreate the state-sponsored rivalries the founders of the aviation system wisely sought to avoid.

Originally Published on The Hill.

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