The U.S. Airlines’ Hypocrisy on Protectionism in the Skies

Colin Nagy (@CJN) is executive director at The Barbarian Group.

I’m sitting in Abu Dhabi, fresh off of an Etihad flight from New York, and thinking about the modern day aero-political situation. As you do.

Why?

U.S. airlines were recently in the news, calling for limits on the expansion of Middle Eastern carriers in key American markets.

The core issue is the desire of many Middle Eastern carriers to start running nonstop flights from Europe to the US. Emirates has fired the first salvo with a Dubai-Milan-JFK route and others are not far behind.

According to the New York Times, the American carriers cite unfair competition based on “large government subsidies that put the domestic carriers at a disadvantage.” The Times highlighted the airlines’ issued statements saying similar things about welcoming competition if the playing field is level.

This is a bit rich.

The truth is, US carriers have all received government support in the past. Whether it is Chapter 11 protection, antitrust immunity, and so on.

Predictably, Tim Clark, the CEO of Emirates, fought back.

“If you go down this minefield, you must ask yourself,” he said, “to what extent all the foreign carriers serving the U.S. are subsidized? Take China, take Thailand, take Malaysia, take Japan, take New Zealand. I could go on forever.”

Most scathingly, he continued: “Look at where these people are going and ask yourself where was Delta, where was United, where was American when the world was becoming more globalized?”

In short: Protectionism sure is convenient when it suits you. Also: the US carriers took their eye off the ball in a rapidly evolving global economy.

Unpacking this a bit, there’s two issues at play here:

1. Middle Eastern Carriers are run differently.

There’s no use complaining about it. As Ben Schlappig highlights, Qatar and Etihad are not run as for-profit businesses. Rather, the leadership are using them to boost tourism and put their respective countries on the map.

Qatar Airways’ CEO Akbar Al Baker recently told Skift:

“It is like you open a shop and there’s a neighbor who is already established. Everybody knows him so they mostly go there. You have to do something different for people to come to your shop. We attract customers by giving them a ‘wow’ product.”

He also cites a hugely interesting datapoint (mostly peripheral to this discussion but worth mentioning):

“We are connecting you to a population that is five times the total population of the United States and Europe put together. We are in a position where we can connect more than half of the world’s population within a five-hour radius of Qatar.

Emirates, however, aggressively defends the point that it is not subsidized.

But, geographical/macro ambitions of these carriers aside, here’s the elephant in the room:

2. Widely diverging consumer experiences

While a lot of the Middle Eastern carriers in question have been investing in their onboard products (Etihad offers amenity kits in, wait for it, economy class) US carriers are content to cut, cut and cut some more. This means tighter seating areas, cuts to onboard food programs even in First and Business class, as well as added surcharges for baggage and even to not sit in a middle seat in some cases.

Even the good ones are caving to the pressures.

Take Jet Blue, for example. It was once differentiated as an anomaly in the US market: an airline with character, small little perks and an emphasis on the a great consumer experience from check-in to landing.

The carrier recently announced that it is going back on a lot of what differentiated it in the first place.

Why? The Street. The Jetblue stock recently popped 4% on the announcement of a first-bag fee. Analysts predictably lapped it up.

But how is that playing with consumers? Cue the sad trombone.

Skift recently cited a BrandIndex study showing that these movements have unquestionably affected the airline:

In a YouGov BrandIndex survey of 4,000 likely flyers on January 4, 2015, JetBlue’s satisfaction score fell 11.3 points to 52.5 out of a possible 100 compared with an October 7, 2014 survey. Among U.S. domestic airlines, JetBlue’s satisfaction score was the only one to notch a “significant” drop, according to a spokesperson for YouGov.

So this positions them in the unenviable netherworld in the market as above Spirit and Southwest, but below United, Delta, and American. Have fun with that new brand positioning. And sorry, those blue chips won’t save you.

So, while it is convenient to cry big bad wolf when it suits. American carriers need to take a long, hard look at how uncivilized and bare bones they’ve made their offerings. Especially as they are posting record profits.

Even as oil prices fall — and judging by Saudi movements, they aren’t going up anytime soon — US carriers keep cutting to the bone.

It’s like end of the Giving Tree. With US consumers as the tree.

Perhaps the best riposte to all of this comes from Emirates Chairman Sheikh Ahmed Bin Saeed Al Maktoum:

“Offer the best to the passengers and people will fly with you,” Sheikh Ahmed said in an interview at his office at Dubai International Airport, which overtook London Heathrow as the world’s top hub by international passengers last year. “They don’t mind paying maybe an extra penny to fly if your service is good, at the end of the day it is all about service.”

The takeaway?

I’m all for American carriers succeeding. Lord knows how much of my money I give to American Airlines. But they need to look past the short-term thinking and understand the world is about to get even more global, even more competitive and shaving dollars quarter to quarter isn’t going to save them.

I’m not saying they need to be near the level of an Emirates or an Etihad. In many ways that is financially impossible.

But, with aviation, it is often the little things that matter. And the little things — customer service, small flourishes and gestures of kindness — add up to real loyalty in ways that points schemes do not.