On airline cronyism, Trump puts America first
Last week, the United States and United Arab Emirates (UAE) announced an Open Skies deal that put an end to a years-long dispute between U.S. and UAE airlines over government subsidies. The deal demonstrates the Trump administration's willingness to overcome moneyed lobbyists and ignore cronyist rhetoric to find solutions that benefit all Americans.
Open Skies advocates support the deregulation of the international aviation industry – especially commercial aviation – in order to create a competitive free-market environment for the airline industry, which, because of the industry's peculiar economic history, is sorely lacking. Since the end of World War II, many countries have invested heavily in the creation and subsidization of domestic airlines, sometimes called legacy airlines. Because many of these airlines were government-owned, their economic activity was rarely governed by free market forces and was often supported by protectionist policies.
Since 2015, the U.S.'s Big Three carriers, American, Delta, and United, have alleged that the Gulf carriers – Emirates, Etihad, and Qatar Airways – are unfairly subsidized in violation of an earlier U.S. Open Skies agreement and petitioned the executive branch to renegotiate with Qatar and the UAE to ensure that some routes would be the exclusive domain of American legacy carriers. These routes are often referred to as "fifth-freedom flights," which U.S. carriers contend cut into their business by providing flights from the UAE to the U.S. via places such as Europe.
The new deal, which resembles one that the administration made with Qatar in January, thankfully preserves our existing Open Skies agreement with the UAE while forcing the UAE's carriers to make some beneficial concessions. Now UAE airlines will have to publish yearly reports on their finances that are up to international standards. Likewise, to the delight of American legacy airlines, the Emiratis stated in the deal that they have no plans to add new fifth-freedom routes, though the deal doesn't prevent them from doing so in the future.
Essentially, the deal increases financial transparency and ensures that American legacy carriers don't receive any more cronyist advantages, which is great. The substance of U.S. legacy airliners' claims that Gulf carriers were unfairly subsidized by their government has always been undercut by the fact that airlines in America enjoy billions of dollars in various government subsidies. Additionally, it's hard to make the case for protectionism when the benefits of Open Skies are so plentiful.
In 2016, under Open Skies agreements, Gulf carriers brought 1.7 million international visitors to the U.S. These tourists purchased a total of $7.8 billion's worth of travel goods and services, ranging from lodging and food to recreation and retail shopping. In that same year, 57 percent of total inbound traffic to the U.S. on Gulf flights originated in South and Southeast Asia, and nearly a third came from the Middle East, which is notable because less than 1 percent of inbound traffic for U.S. carriers came from those areas. This means that Gulf carriers are helping American businesses reach new customers. Even better, airfares have fallen by a third on routes affected by Open Skies agreements relatives to protected routes.
The president ran his campaign, in part, on the premise that the United States needs trade that is "free and fair." This recent agreement fits the bill. Open Skies agreements help businesses reach new customers, lower the cost of travel, and increase competition for airliners. The administration should continue to preserve existing Open Skies agreements and work to further deregulate the industry.
Shak Hill is a Republican candidate for United States Congress in Virginia's 10th District, a former Air Force pilot and combat veteran, and a constitutional pro-America conservative.