One of the biggest misimpressions about the free market is the mistaken belief that corporate interests support free competition. While companies will raise their voices at regulations and mandates that drive up the cost of their doing business, corporate interests love government interference in the market when it gives them a leg up against their competition. Evidence of that reality is on display in the D.C. Metro System from the group "Americans for Fair Skies" that has plastered ads promoting policy to limit access to the American commercial airline market.
Americans for Fair Skies, a coalition of union activists and companies in the airline industry, is claiming foreign airlines have an "unfair advantage" in the marketplace.
Rather than compete in the marketplace on the merits of their businesses, the airlines industry has turned to Washington, DC, lobbying Congress and the Obama administration to restrict access from foreign airlines. The argument goes that several foreign airlines, such as Emirates, Etihad Airlines and Qatar Airways, are being heavily subsidized by United Arab Emirates and Qatar. Several U.S. pilot unions, including the Air Line Pilots Association that backs Delta and United pilots, have also chimed in saying the subsidies are “massive.” Lobbyists for the airlines and the unions are asking the Obama administration to renegotiate several open skies agreements that would limit competition on flights to and from American cities to regions like South Asia. Tensions are high as are the barbs back and forth, and supporters of the coalition have been forced to apologize for comments linking Gulf-based airlines to the terrorist attacks on 9/11.
To the casual reader, this may resemble an uneven playing field, but as Roger Dow, CEO of the U.S. Travel Association, pointed out recently the three largest U.S. airlines have been helped enough by the federal government over the years. In Dow’s words "playing the subsidy card strains credulity in the extreme" especially when the agreements have mechanisms in place to resolve legitimate fair competition disputes.
Having been the recipients of billions of dollars of government aid and support, the airlines are trying to have it both ways. Delta and other airlines lobbied for and received $18.6 billion in bailouts from the federal government in 2001. Delta and Northwest lobbied for and received a pension bailout from the Pension Guarantee Benefit Corporation, a federal agency, when Delta underfunded its pension plan by $3 billion and filed for bankruptcy. Delta Airlines received an $84.8 million loan guarantee from the Export-Import Bank in April 2012. It's hard to argue with a straight face that you can't compete against companies that receive government aid when your own pockets were filled with government aid. In fact, Delta has been a chief opponent of efforts to allow the exportation of American oil overseas, demonstrating a track record of opposition to free trade.
If we took a market-based approach to the problem, travelers would fly the best airline at the best price based on flights to and from their destination spots. Rather than grumbling over competition that would serve to offer better service and pricing, perhaps American and United should be more concerned with the 2014 Wall Street Journal Airline Scorecard rankings that placed them dead last overall and in the bottom third for complaints.
After all, if we look at the open skies agreements from different perspective, they can be enablers for US airlines to expand their presence across the globe. A great example is JetBlue, which has seen its international business prosper thanks to the agreement and its ability to ink a number of partnerships with overseas airlines.
Perhaps history could once again be an effective guide. The American economic engine of free market capitalism has always competed against a world of subsidies and state-run enterprises. Americans were able to out-compete Soviet-dominated Eastern Europe industries that were owned, operated and subsidized by the respective governments. Government subsidies do not guarantee a beneficial outcome. If you’re still unsure about the effectiveness of government subsidies, take another look at the ballooning number of food stamp recipients – currently more than 46.1 million Americans up from 17.5 million in 2000. If we were to value the effectiveness of that subsidy by its growth rate, only then would the food stamp program be judged a success.
