December 9, 2014
Globalization’s Effect on U.S. Airline Operations
Panelists participating in a discussion titled “Competition from Abroad and Foreign Ownership” examined the implications of new airline business models for competition in the international marketplace. Among other things, they discussed whether the rapid growth of government-backed carriers and the emergence of “flag of convenience” airlines might warrant reconsideration of the existing regulatory frameworks in the Unites States and the European Union.
“Aviation by its nature is an international business, but just how open and free that international regulatory structure should be is something that is constantly debated,” said Aaron Karp, senior editor of Air Transport World, who moderated this discussion. Karp posed a variety of intriguing questions—like whether ICAO should develop a single Open Skies agreement for all nations—to the panelists.
ALPA president Capt. Lee Moak talked about the history of U.S.-based airlines since deregulation, including 9/11 and the subsequent phases of bankruptcy and consolidation. Today, U.S. carriers are “trying to compete in a global economic environment with increasing difficult geopolitical considerations from our own government,” he said. “For us to be able to succeed in that environment we have the need, at a minimum, to have a level playing field.” Moak spoke about ongoing challenges to fair competition, including the EU’s previous attempt to establish a carbon emissions tax for U.S. airlines flying into and out of European airspace.
“High-technology industries are always going to have a certain amount of trade conflict,” said Capt. Duane Woerth, former U.S. ambassador to ICAO. The former ALPA president observed that, with the globalization of the airline industry, ICAO has recently been asked to intercede on competition-related questions—topics the United Nations’ agency has little experience with.
Steve Taylor, vice president of Regulatory and Industry Affairs for FedEx Express, related his concerns about what he called a “retrenching from liberalization.” In the years following World War II, the United States was an avid proponent of aviation liberalization. Taylor discussed how the current policies affect the air cargo market and raised concerns about “protectionism in aviation.”
Representing the European Commission’s view in this dialogue was David Batchelor, SESAR Joint Undertaking’s liaison officer at the Delegation of the European Union to the United States. Batchelor laid out the history of the development of an integrated European domestic air transport market and how Europeans hoped that key aspects of this approach, such as the elimination of ownership and control restrictions, would be adopted by other nations. A proponent for increased liberalization, he asked the group, “Why should the airline industry be treated differently from other industries?”
The four panelists also spoke at length about the game-changing business model posed by Norwegian Air International’s flag-of-convenience operation, and the challenges that that airline’s business model poses for airlines, airline employees, and government regulators on both sides of the Atlantic.