How ‘Open Skies’ Agreements are Threatening to Sink U.S. Airlines in the Not-Too-Distant Future

Officially, the U.S. Department of State describes the lofty-sounding open skies agreements as “designed to eliminate government involvement in airline decision-making about routes, capacity, and pricing in international markets. Open skies agreements have vastly expanded international passenger and cargo flights to and from the United States, promoting increased travel and trade, enhancing productivity, and spurring high-quality job opportunities and economic growth.”

In short, these agreements allow U.S. airlines to operate unfettered overseas, and for international airlines to run routes in the United States without the government interfering too much.

It sounds great in theory — in reality, the issue isn’t clear-cut. For the better part of a decade, it’s proven a sticky wicket on the economic platforms of both Obama and Trump.

Domestic air carriers note some foreign airlines — most notably the “Gulf Three,” which is comprised of Emirates, Qatar Airways, and Etihad — have received massive government subsidies to the tune of $52 billion since 2004. The U.S. airlines claim their foreign competitors would never be profitable if it weren’t for these handouts.

When asked whether he believed the Gulf carriers were enjoying backdoor subsidies, United Airlines president Scott Kirby put it in no uncertain terms: “I think it’s a front door, back door, side door, windows,” Kirby said. “I think they are just getting subsidies across the board … The only debate is what we should do about it.”

In a classic “I know you are, but what am I?” rebuttal, the Gulf Three countered that their domestic rivals have received equivalent — perhaps even more — government assistance. Most notably, they cite post-9/11 industry bailouts, wide-scale bankruptcy debt forgiveness, and public financing of airports and related infrastructure. Plus, the foreign airlines say they’re doing the United States economy a favor by guaranteeing hundreds of thousands of American jobs in the aviation sector. Given that all of the above is historically true, it seems no airline’s hands are entirely clean.

For now, as airlines all over the world over engage in this competitive bloodbath, we will enjoy the spoils. The mess equates to dirt-cheap airfare for consumers. It seems every week presents us with a new roundtrip international flight for less than 50 percent of the fare we were charged few years ago.

Unfortunately, all good things must come to an end. Like any business, airlines need to maintain profitability to survive. If domestic carriers are forced to cancel routes because they can’t put asses in the seats (as Delta did on its previous non-stop Atlanta to Dubai, flight which Emirates has since taken over), the first ones to fill that demand will be their foreign competitors. In that competition-free vacuum, the Gulf Three will likely set their prices however they like. So, enjoy the open (and budget-friendly) skies while you can. It seems they won’t last long.

Feature image by Photo by William Perugini.