Ensuring adequate competition in airports large and small gives those airports more negotiating power against the big three national carriers, and could ensure adequate infrastructure for more visitors from abroad to spend their travel dollars in the US. This last is, after all, the mandate of organizations like the US Travel Association.
As airlines in the United States push for a review of established Open Skies treaties, a conflict has developed between the interests of select aviation industry groups and those of U.S. travel and tourism organizations.
The U.S.’s three major carriers, American Airlines, Delta Airlines, and United Airlines, which, after mass industry consolidation in recent years, control the bulk of the nation’s domestic and international traffic, have recently appealed to the White House asking for limits on Gulf carriers and protested the Open Skies bid from Norwegian Air International (NAI). They have already delayed approval of the airline’s application for service out of its Dublin base.
Roger Dow, President and CEO of the US Travel Association has characterized requests to review the policy of Open Skies as both alarming and disappointing, pointing out that it “has both made it easier and cheaper for American citizens to travel abroad and helped expand the lucrative inbound international travel market to the U.S.,” adding that “to abrogate Open Skies would fly in the face of competition and consumer choice, and ultimately harm demand for travel to the U.S.”
Kevin Mitchell, the chairman of the Business Travel Coalition wrote a letter to government officials stating: “Now that U.S. airlines have secured antitrust immunity, industry consolidation and concomitantly rising airfares and ancillary fees, and are achieving record unprecedented profits, some carriers shamelessly seek to close off U.S. markets to competition from foreign carriers.”
Increased service from foreign carriers, both traditional and low-cost, would help spur those who might otherwise consider the U.S. an unaffordable destination to make the trip.
“Travel to and within the United States has lately been under assault from protectionist, anti-competitive forces, and the move against Open Skies is the latest example,” said Dow. “The all-out blitzkrieg to keep out Norwegian Airlines, a low-cost carrier whose entrée to the U.S. market would help bring new economic activity to our shores, is another.”
“Inbound travel is the country’s second-largest industry export, and has vastly outperformed the rest of the economy in many key respects during the recovery—especially job creation,” Dow added. “But the international travel marketplace is hyper-competitive, and we have only just returned to gaining market share after a number of years of decline. The fact that airfares are declining to literally every country except ours bodes poorly for our ability to keep pace with the rest of the world.”
And the skies are not the only split between U.S. tourism organizations and the interests of larger U.S. airlines. The dispute has landed at the nation’s airports too. The US Travel Association’s support of the Obama Administration’s proposed Passenger Facility Charge (PFC) which would fund airport in to help build US infrastructure is diametrically opposed to the position of Airlines for America (A4A).
“Travel demand—and therefore the $2.1 trillion boost that travel gives the US economy annually—cannot grow at the projected pace unless we aggressively tackle the crisis with our air travel infrastructure. We have studied the issue in great depth, and our research shows conclusively that addressing travelers’ desire for a better and more efficient flying experience trumps any other proposal for growing the U.S. travel economy,” Dow said in a recent statement on the matter. “The PFC is really an ideal fiscal instrument, because it is rigorously designed in such a way that 100 percent of the funds it raises pay for projects that materially benefit travelers.”
However, A4A has characterized the increased PFC charge as one of “several unnecessary tax increases” in the FY 2016 White House budget proposal, saying: “airports have ample funding resources without dramatically increasing a tax on airline passengers.” The organization added: “U.S. airlines support infrastructure improvements and are committed to enhancing the passenger experience at airports and in the air as evidenced by more than $52 billion spent on airport infrastructure at the country’s 30 largest airports since 2008.”
For their part, airport organizations, like Airports Council International-North America, have applauded the administration’s proposal, stating: “Allowing airports the flexibility to implement a modest increase in the maximum PFCs they would be able to charge is an important first step in getting investment in our nation’s airport infrastructure back on track with the rest of the world.” The organization cited a Capital Needs Study which “found that US airports have more than $71 billion in total projects considered essential for completion by 2017, and the number of domestic passengers alone is expected to surpass 1 billion enplanements in the next 15 years.”
ACI-NA President and CEO Kevin M. Burke pointed out that the infrastructural support is also necessary to ensure service to smaller airports, which in turn would ensure that those smaller cities can host visitors to their attractions. “Pitting large hubs against smaller, regional airports for limited resources is not a productive long-term solution for ensuring the global competitiveness of American airports,” said Burke.
This support of airport infrastructure is also related to arguments over Open Skies arguments. Burke shared the organization’s position on Open Skies with North American airport directors this Monday, stating:
“At the ACI-NA Board of Directors meeting last Wednesday, our members affirmed our longstanding strong support for Open Skies. Tomorrow, I will be sending a letter to Secretaries of State, Commerce and Transportation emphasizing the importance of continuing Open Skies to allow airports to bring additional price and service competition for their passengers and communities. Over the last 22 years the 114 Open Skies agreements the U.S. has negotiated have generated millions of dollars of economic development for communities throughout the United States. We cannot let the parochial position of a few airlines or their labor unions jeopardize a system that greatly benefits U.S. airports and the communities they serve. ACI-NA is well positioned to champion this cause, given our unique position in representing airports on U.S. delegations in negotiations on international air transport agreements since 1983. We will continue aggressively promote airports’ interests and counter the airlines’ campaign to limit competition in international air service.”
The US Travel Association’s members include representatives from local governments and tourism boards which fund developments at these regional airports, and who have made those investments to ensure a beneficial flow of travellers to their destinations. Inadequate airport infrastructure, heavily dependent on ongoing support by the big three national carriers, limits the growth prospects of those travel destinations and keeps them at risk of losing air service to their region and/or inadequately supports increases to visitor numbers. While foreign carriers might be interested in capitalizing on that tourism demand, disputes over Open Skies can stifle or kill this secure air service alternative which would support growth.
Photo credit: Gulf airlines and low-cost carriers such as Norwegian Air have struck fear in the boardrooms of American Airlines, Delta, and United, which are seeking to scrap the Open Skies agreement to protect their position. Norwegian Air Shuttle