Foriegn carriers operating in the US

[DaveGriffin]

Here's an article (short version only, the whole thing is too long to repost) from today's WSJ on foriegn carriers being allowed to operate domestically.
Things are changing quickly.

The Wall Street Journal
23 January 2003

By SCOTT MCCARTNEY

U.S. Airlines Would Benefit From Foreign Competition

Suppose Germany's Lufthansa, a profitable airline, wanted to secure its U.S. partner by buying a controlling stake in UAL Corp.'s United Airlines and bringing it out of bankruptcy.

Sounds a bit like Daimler buying Chrysler, right? That's what free trade and globalization are all about.

Except it can't happen.

U.S. law prohibits foreign entities from owning more than a 25% voting stake in a U.S. airline. That's just one of the ways that the U.S. airline industry remains one of the most protected industries we have.

Unlike U.S. auto makers, who have to compete against many foreign auto makers building cars in the U.S. and selling them here, airlines don't face any foreign competition in domestic markets. A Japan Air Lines flight from New York to Los Angeles can't carry U.S. passengers unless they are going on to Tokyo. British entrepreneur Richard Branson can't bring his discount Virgin brand to the U.S., as he did to Europe and Australia, even though he badly wants to.

Why not? In the past, Europeans wanted to protect their national-flag airlines, and the U.S. didn't want to open the world's largest aviation market to foreign competition. U.S. labor unions fear losing jobs to cheaper workers, and the Pentagon has insisted that U.S. airlines remain under control of U.S. citizens so that their planes are available for ferrying troops. That all rolls up into heavy restrictions on airlines and air travel.
When U.S. airlines are hemorrhaging from domestic competition alone, unions are already on the defensive and the military is preparing for war, it wouldn't seem like the logical time to rethink airline protectionism. But that's probably going to happen anyway, thanks to the European Union.

In a strange shifting of the moral high ground, the EU is pushing hard for liberalization, and the U.S. is maintaining the protectionist stand. Though the chances of anything concrete happening soon are remote, the two sides may start trying to negotiate a broad U.S.-EU aviation treaty, an "Open Aviation Area," to replace the hodgepodge of bilateral treaties in place now. The International Civil Aviation Organization, a United Nations group, plans to hold only its fifth-ever world-wide Air Transport Conference in March, and the topic is liberalization. At the same time, a Republican U.S. Congress is more likely to be receptive to free-trade arguments. Momentum is building.

"It will happen on Bush's watch, assuming he gets re-elected," says Dorothy Robyn, former chief transportation advisor in the Clinton White House who is now a senior consultant at the Brattle Group. "It won't be in the next two years, but I'd be surprised if six years from now it hasn't happened."

The one intriguing exception is what happens if a big, bankrupt U.S. airline finds the only way to continue would be to sell control to a European partner? That's unlikely, but it is one scenario that could lead to quicker liberalization in the name of saving thousands of jobs.

One way or another, it will happen. Travelers will benefit enormously, and in the long run, the airline industry will, too.

Write to Scott at [email protected]
Updated January 22, 2003 11:59 p.m. EST

 

[Cardinal]

Cabotage is simply the most collossal threat airline labor would ever face. It would be the one and only issue that, if debated, would merit a national Supension of Service. It would make this scope discussion seem utterly insignificant. That article paints a rosy picture of European competition, but that would be the least of our concerns. Nigel doesn't want to fly his 777 for any less than than his counterpart at Delta. The threat is from our neghbors in this hemisphere. Groupo TACA has networked effectively throughout South America, and would fancy nothing better than an accessible U.S. market. Just picture it: Third World wages paid while charging First World fares. Every execs dream, but we are screwed. There's a reason that the merchant ships are all registered in Liberia and have crews that speak 17 different languages and work for a pittance.

I mean not to slight fellow aviators, but things seem to work differently down there. When a significant volcano outside Quito, Ecuador erupted CAL and AA parked their aircraft. TAME, the local carrier, swept off the ash and blasted into the pretty sunset as soon as it appeared to have cleared up. Meanwhile a stuck CAL crew chose to ride a van through the mountains and jungle for 10 hours instead of chancing it and deadheading with TAME. Whatever.

On second thought maybe the Europeans are a threat, it appears that If I flew hard for a year I could out-earn a first year Ryanair 737 FO. That's scary.

 

[Cardinal]

On a different note-

Tthe author, at least in this excerpt, doesn't present us with any motivation on the part of the Administration. So far Bush hasn't paid these international alphabet groups much heed on most issues, Kyoto, Iraq, Int'l Court, etc. Why would he start now? And what U.S. political bloc would really support this? While there may be broad, long-term economic justification for such a move, in the short term U.S. airline shareholders, labor, and management would all get raped during the period of transition. ATA members would collectively have everything to lose, and precious little to gain.