Global Airlines

                Two long-haul carriers listed in the U.S-UAE Open Skies Agreement are Emirates and Etihad Airways. Emirates, a subsidiary of the Emirates Group is the largest airlines in the world in terms of global capacity, a million passengers every week. They are also the world’s largest operator of Airbus A380 which flies out of the world’s largest terminal at the world busiest airport (Gerchick, 2016). Etihad Airways is the national air carrier of the UAE.   

                U.S air carriers have been subsidized by the government. One way the government subsidizes the airlines is trough Essential Air Service, which is a Federal program that provides airlines subsidizes to fly less profitable routes to prevent a certain location from losing air travel all together (U.S Department of Transportation, 2016). Another way the government has been subsidized is through government bailout. 9/11 caused a drop in air travel in the United States, which caused U.S Airways, United, Northwest, Delta, and American to file bankruptcy (Sasso & Yousef, 2015). To prevent the U.S aviation industry from collapsing the government bailed out the airlines. During the aftermath of 9/11, Congress passed the Air Transportation Safety and System Stabilization Act, which offered airlines $5 billion in cash assistance and $10 billion in loan guarantees (Sasso & Yousef, 2015).

                The Export-Import Bank is a credit agency that provide financing of large purchases of American manufactured exports through guaranteed loans (EXIM, n.d.). Boeing has been relying on the Ex-Im Bank to sells their aircraft to foreign airlines that otherwise may not be able to afford them. The issue is whether the existence of the Ex-Im Bank has provided foreign air carriers an unfair advantage. Since the Ex-Im Bank provides guaranteed loans to foreign airlines to purchase Boeing aircraft at a lower cost, some have argued that foreign airlines will use their guarantees to lower the ticket price of international flights thus rendering U.S air carriers uncompetitive (Weisman & Lipton, 2015). However, it is believed that should the Ex-Im Bank shutdown, Gulf carriers will be unaffected since their strategy is to diversify their source of financing. 

                I believe that the playing field is unfair towards U.S air carriers. While the U.S government does subsidizes the airline, it is nowhere near as much as the Gulf carriers. All the Gulf carriers are state-owned which means the government has a special interest its operation. The pressure to make the biggest profit while minimizing cost is not great as privately owned airlines. Boeing’s use of the Ex-Im Bank prevents U.S air carriers from upgrading or expanding their fleets are fast as their Gulf counterparts, which makes it more difficult to compete. Not only do they receive subsidies from their respective government, Gulf carriers do not use ethical business practices which gives them an unfair advantage. Trade unions are illegal in the UAE and Qatar, which means that their employees don’t have a voice in regards to their employment ultimately giving the airlines tremendous power over how they treat their employees (Britton, 2015).

References

Britton, R. (2015, July 17). Is this a luxury you want to buy?. In Huffington Post. Retrieved November 4, 2016, from http://www.huffingtonpost.com/rob-britton/is-this-a-luxury-you-want_b_7810644.html

EXIM. (n.d.). About us. In EXIM. Retrieved November 4, 2016, from http://www.exim.gov/about

Gerchick, M. L. (2016, April 30). The rise of the aerostate: U.S. carriers scramble as Persian Gulf rivals emerge. In The Washington Post. Retrieved November 4, 2016, from https://www.washingtonpost.com/business/the-rise-of-the-aerostate-us-carriers-scramble-as-persian-gulf-rivals-emerge/2016/04/29/a14da5f6-0b2c-11e6-a6b6-2e6de3695b0e_story.html

Sasso, M., & Yousef, D. K. (2015, February 18). Delta CEO’s 9/11 Comment on Open Skies Riles Gulf Carrier Chiefs. In Bloomberg. Retrieved November 4, 2016, from http://www.bloomberg.com/news/articles/2015-02-19/delta-ceo-s-9-11-comment-on-open-skies-riles-gulf-carrier-chiefs

U.S Department of Transportation. (2016, May 17). Essential Air Service . In Department of Transportation. Retrieved November 4, 2016, from https://www.transportation.gov/policy/aviation-policy/small-community-rural-air-service/essential-air-service

Weisman, J., & Lipton, E. (2015, April 6). Boeing and Delta Spend Millions in Fight Over Export-Import Bank’s Existence. In New York Times. Retrieved November 4, 2016, from http://www.nytimes.com/2015/04/07/business/boeing-delta-air-lines-export-import-bank.html?_r=1