The airline industry in the United
States is highly competitive, constantly changing, and is facing challenges
from a global market that sustains many airlines directly over a distinct breaking
point; between thin profits and bankruptcy.
The market place for air travelers shows many volatile qualities affecting
ticket purchases that are hard to predict and can very easily be harmful to
vulnerable airline companies. As new
competition enters the global market to compete with airlines in the U.S., they
will face even greater threats to their ability to produce a profit. Cost cutting reveals a competitive edge when
used conservatively; unfortunately many airlines have over used this technique
in an effort to sell more airfare at the cost of quality and service. With thousands of factors combining to create
elusive profits and a difficult environment for airlines and their employees,
it is imperative changes be implemented that will provide long term relief and level
the playing field for the American airline industry to have a fair
competitive stance in a rapidly changing global market.
As the world is brought closer together
with air travel increasing in both reach and capacity, airlines will need
tempered relationships with foreign countries.
Early in the 1990’s the U.S. negotiated the first Open
Skies Agreements (OSA) with foreign countries to expand flights and markets
to other countries. With the ultimate
goal of creating more business for American employees in the airlines and
reduce costs to air carriers, these agreements were made with the European
Union, Japan, and India to name a few. These
agreements between nations allow commercial operations to conduct business with
limited government intervention, free market competition, and fair and equal
opportunities for companies to compete. Some
countries (such as the United Arab Emirates) provide their airlines tax free
business benefits as part of national aviation policies; this creates a
distinct disadvantage for any transient countries. Promotion of these agreements as well as
revision of already existing OSAs to identify these exploits would be a crucial
task in creating more even footing in the competitive market. Government regulation may be what is required
to keep countries from taking advantage of these agreements that provides some
airlines a distinct competitive edge through exploitation.
Another significant source of airline
revenue loss is caused by Passenger
Protection Regulations. The
Department of Transportation created these regulations in hopes of creating
better travel experiences for the flying public and protecting passengers. This regulation incurs penalties and costs on
airlines (such as tarmac delays) without allowing for causes of delays that are
not within the airlines control, such as weather or inadequate airport
facilities. Regardless of the cause of
delays or routing changes, the airlines bear the fines and penalties. These additional costs serve to drive up
ticket prices and do not create a more positive experience for the traveler. Revisions need to be made to create passenger
protection within reason. Airlines
cannot be expected to control the weather, or pay the same fees regardless of
aircraft size and type of operation. Enforcement
to control air traffic based on airport capacity and type of aircraft
operations would serve to expedite air traffic with a more efficient use of
limited airport property. There are many
factors this regulation does not account for and creates an unfair direct cost
to air carriers who in turn increase ticket prices: negating the original
intent of the regulation to protect the flying public.
Concerning the future of the airlines, The
Export-Import Bank is going to be influential to the industry. The Bank is responsible for financing deals
both foreign and domestic that will promote American jobs and manufacture of
goods on U.S. soil. The Bank has a
responsibility, however, to determine that any proposed financing will not potentially
be harmful to American workers or their jobs.
Loans have been granted to foreign
countries by the Bank for the purchase of aircraft from manufacturers such
as Boeing. While this is beneficial to
aerospace workers in the U.S. in the short term, these aircraft are ultimately
being delivered to foreign airline companies in direct competition with U.S.
carriers. Even though this has been
considered an unintended consequence, it should be thought of as a form of
negligence; these aircraft are being delivered to foreign airline
competitors. As a result our country’s
air carriers may lose air routes and jobs creating a ripple effect to impact
other aspects of the aviation industry.
Careful planning and research on the Bank’s part can support the U.S.
economy and serve to level the playing field for our domestic air carriers, however
it should not be allowed to subsidize foreign companies that pose direct
competitive threats.
References
Driskill,
M. (2013, April). Delta air lines inc.
has sued the Export-Import Bank of the United States over loan guarantees given
to support purchases of Boeing Co's widebody planes by certain foreign
airlines, according to a court filing. Reuters. Retrieved from http://www.reuters.com/
Air
Line Pilots Association, International (2013) Leveling the Playing Field for U.S. Airlines and Their Employees. Retrieved
from http://www.levelingtheplayingfield.alpa.org
Micco,
A., Serebrisky, T. (2006). Competition regimes and air transport costs: The
effects of open skies agreements. Journal
of International Economics, 70, 25-51.
Schoonover,
M. (2011). Oversold, delayed, rescheduled: Airline passenger rights and
protections. Journal of Law & Policy,
35, 519-545.
