Tuesday, December 9, 2014
The US Open Skies policy is under attack by some airlines intent on blocking foreign carriers.
In 2007, the United States and the European Union signed an “Open Skies” agreement, which liberalized competition and ownership restrictions.
But the supply of domestic air services (flights between two points within the United States or within the EU) is still limited to national carriers, and foreign ownership is still restricted to minority status.
Welcome to the unfriendly skies.
Airlines are ramping up the fight against the expansion of low-cost transatlantic service being proposed by carriers such as Norwegian Air International.
This low-cost airline which already has a bigger European route structure than any American airline, is being stonewalled the US competition, and DOT has withheld permission for the airline to expand service.
It’s the same story for Middle Eastern airlines such as Emirates, Etihad and Qatar Airways. They are being held back by Delta, American and United which all came out against their upscale service. The growth of these Middle Eastern airlines has been astronomical, and Emirates has been called the next Pan Am.
Airline competition is the hot topic this coming year. FlyersRights has written
about foreign pressure building.
It is cheaper to fly from the West Coast of the USA to Asia than it is from the East Coast to Europe, roughly half the distance. Cartel behavior is evident as well as possible price fixing. Load factors are high on both routes, equipment is similar or identical.
Internationally, airlines are banding together to halt competition. The three global alliances (Star Alliance, oneworld, Star Team) have enjoyed antitrust immunity from the Department of Transportation (DOT).
So on transatlantic routes, members within each of the world’s three big alliances share costs and agree on prices.
For this reason, the CAPA Center for Aviation
calls these global alliances the “poor man’s merger”. If airlines aren’t already members of one of the big three, then they aspire to be.
The airline industry illustrates the phenomenon of regulatory capture – the tendency for regulators to see through the eyes of the industry they regulate.
complains that not enough airlines are competing domestically either.
Due to mergers, only four airlines control 87 percent of the domestic market. Many domestic airports have service from only two major airlines. At smaller airports, there is often no meaningful competition.
ConsumerTraveler points out that because so few airlines are in charge of pricing, any new airfare increases are matched by the other airlines and fees go up regularly.
As FlyersRights has found, the DOT’s protection of domestic airlines results in prices five or six times the price of equivalent routes within Europe.
One factor in the probable success of budget carriers on long-haul routes is that the US carriers are mercilessly turning their Economy Class seats into Cattle Class.
So if there is zero difference in comfort and convenience between United/Delta/American and an economy carrier offering the same route for 50% less, we’ll choose the economy carrier.
By allowing foreign airlines to serve American domestic markets, the process of creating a truly free market in airline services in this country would be complete and, as in the case of international markets, would provide travelers with more flight choices and lower fares.
Domestic airlines are opposed to such a policy. But they should realize that their current strategy to maximize profits – reducing flights and raising fares – runs the risk of alienating the American flying public and spawning new regulation.
One possible solution is to slightly open up domestic markets by allowing foreign carriers to serve any midsize and regional airport in the United States that have lost service in the past few years.
New entrants would be able to integrate those markets with their international routes, something that could put many smaller American cities on the global business map.
“The post merger behavior of US airlines’ big four (American, Delta, Southwest and United) in raising prices in spite of lower costs, cutting flights, and squeezing passengers every way conceivable should wake up the Obama justice department,” said Paul Hudson, FlyersRights president.
He continued, “The Antitrust Division needs to start an investigation. The incoming antitrust committees in the Senate and House should also be holding hearings. No competition without regulation equals only one thing: Monopoly-like cartels.”
“Air travel is vital to the global economy. As the old OPEC fades, airlines seem headed toward establishing a new OPEC”, Hudson concluded.
The public can comment on Norwegian Air International’s application to the DOT. Please click on the document number and leave your opinion: