Competition among airlines is growing fiercer each and every day. And typically competition is an excellent market force, as it drives prices down and oftentimes ensures that the most efficient airline succeeds. Unfortunately, this has not been the case as of late.
Competition has been largely increasing due the rapid expansion of Middle Eastern airlines, like Emirates Airline, Etihad Airways and Qatar Airways, which have been generously supported by none other than the good ole' Uncle Sam.
Government intrusion into the free marketplace always raises a few eyebrows, but the fact that our federal government is aiding and abetting the direct competitors of American employers is inconceivable.
Take for instance the U.S. Department of Homeland Security’s recent decision to launch a U.S. Customs and Border Protection pre-clearance facility in Abu Dhabi, despite the fact that no U.S. airlines fly to this destination. This diversion of taxpayer dollars for the construction and operation of a facility that will only benefit airlines in the Middle East that compete with domestic carriers is exemplary of the type of government waste that brought us to our current debt predicament, which has now exceeded $17 trillion.
Airlines in the Middle East have also been bolstered by the Export-Import Bank of the United States (Ex-Im Bank). The Ex-Im Bank provides these air carriers with favorable loan rates and terms, which are often better than those available on the open market, to purchase Boeing aircraft.
This year alone, Ex-Im has doled out hundreds of millions of dollars in loans to Emirates Airline and Etihad Airways. And Ex-Im goes much further than simply providing loans. In fact, the Bank backed $1.46 billion worth of bonds for Emirates Airline in 2012 according to a Bloomberg report.
These sweetheart deals are quite rotten for the U.S. airlines, which are forced to idly watch their competitors receive what are essentially subsidies from the American federal government. Historically, only foreign companies have been given the privilege of accessing Ex-Im’s favorable rates.
As a result they have been able to save significant sums of money. These savings have been in turn used to expand their businesses and make a foray into American routes.
Emirates now has 62 weekly flights from Dubai to seven different U.S. destinations according to recent media reports. Qatar has announced it will expand its service to Miami and Philadelphia, despite already flying to Chicago, Houston, New York and Washington.
While Etihad has announced that it plans to begin service to Los Angeles in June. And more routes should be expected as these airlines have been buying Boeing planes in bulk with the three airlines recently announcing that they collectively purchased 225 planes.
The assistance that these Middle Eastern airlines receive from the United States is ample enough, but in addition to that they are also fully funded by their respective governments. This powerful combination has led to their illustrious rise, so much so that they are now at the point where they are threatening the financial well-being of American airline carriers.
But make no mistake, these companies have not succeeded because they are the better companies, they have only seen so much success as a direct result of the corporate welfare that they have received.
Meanwhile our domestic airline carriers have not been afforded access to the exceptional loans and other special privileges that our government hands out to their foreign competitors. Certainly our federal government should not be in the business of giving out corporate handouts, let alone the subsidization of the direct competitors of one of America’s most important industries.
Congress must put forward a policy to address the current inequities, so that we aren’t assisting in the dismantling of a great U.S. industry. At stake is no less than hundreds of thousands of jobs throughout our country.