Persian Gulf carriers such as Emirates, Etihad Airways and Qatar Airways have been allegedly benefitting from subsidies that total up to billions of dollars since 2004. "Industry analyst Henry Harteveldt said that while Persian Gulf carriers can turn to their governments for financing, other carriers must find their own means of raising money. Similarly, airports outside the Gulf region must face challenges to expand that Gulf airports don't face" (Rice, 2015). Although these Gulf carriers denied the allegations, supposedly there are supporting evidence corresponding and has details disclosed. It has been claimed that Qatar and Abu Dhabi's Etihad wouldn't be financially viable without financial assistance.
Foreign air carriers benefit from the U.S. Export-Import Bank, which makes available financing to purchase Boeing wide body airliners at rates and terms that are not available to U.S. carriers. "The bank provided $34.5 billion in financing for some 634 aircraft from 2005 to 2010 and another $23 billion in 2011-2012 alone" (Carey, 2014). At this rate, foreign carriers will exceed in the wide body aircraft industry while putting our U.S. carriers and manufacturing affiliates at a disadvantage.
Norwegian Airlines has put forth effort to expand its trans-Atlantic services through its Ireland subsidiary to operate to the United States. Unions allege the airline is seeking to evade Norwegian and international labor laws and pay pilots less by establishing NAI as an Irish airline. "A U.S. foreign carrier permit would allow Norwegian to be the first of a new breed of low-cost carriers to compete on lucrative trans-Atlantic routes, but plans have met resistance from airlines and labor unions as well as some lawmakers in the U.S." (Zander, 2014).
References
Bhaskara, V. (2014, September 2). Forbes. The fight over the export-import bank has no easy answers. Retrieved from http://www.forbes.com/sites/airchive/2014/09/02/the-fight-over-the-export-import-bank-has-no-easy-answers/
Carey, B. (2014, May 29). AINonline. Air Transport. U.S. airline industry in 'survival mode,' says pilots union. Retrieved from http://www.ainonline.com/aviation-news/air-transport/2014-05-29/us-airline-industry-survival-mode-says-pilots-union
Zander, C. (2014, March 12). The Wall Street Journal. Norwegian air may buy another carrier if denied U.S. permit. Retrieved from http://www.wsj.com/articles/SB10001424052702303546204579434840031487838
The U.S. airline industry should be concerned with the Gulf Carriers expanding, but the European airline industry should be even more concerned since they are directly affected more so than the U.S. - The combination of Norway and Gulf Carriers making these moves are going to draw more attention in the near future until something is done (well, I guess we'll wait and see).
ReplyDeleteWhat I wanted to find but couldn't is how much money he Ex-Im bank actually saves a foreign airline like Emirates on a 777 vs what the US carriers have to pay.
ReplyDeleteFrom my research airlines who benefit form the Ex-Im bank saver roughly $20 million through out the life of a new wide body aircraft. Considering the list price for a new 777-200ER is $261.5 million. it roughly 7%
DeleteI think its ridiculous that international companies have the ability to obtain mass quantities of Boeing airplanes at a discount rate because of the import-export regulations. I believe that it brings our economy down and it does not allow the domestic airlines to compete, be profitable or even the chance to create future jobs.
ReplyDeleteIt is hard to believe from the U.S carriers perspective. It is difficult for them to compete with airlines receiving cheaper aircraft, better infrastructure, and seemingly endless funds from their governments.
ReplyDelete