It is well-illustrated that Delta Air Lines, American Airlines, United Airlines (Big 3) and their front lobbying groups do not let a small thing like facts get in the way of their anti-competitive narrative and political rhetoric. The latest whopper comes from Delta and the Big 3’s multi-million dollar funded Partnership for Open and Fair Skies.
Delta and the Partnership both recently touted the US-India air service market as a prime example of purported unfair competition by Emirates Airline, Etihad Airways and Qatar Airways (Gulf Carriers). Their fictitious claim is that the Big 3 were driven out of the US-India non-stop market. The Partnership claims “all three U.S. carriers [Big 3] used to do a lot of work there.” Delta, in a scare video for employees, said it will return to the non-stop US-India market only if the US Government abandons Open Skies and restricts competition from the Gulf Carriers. Delta offered the additional political carrot that it might buy new long-haul aircraft to fly those routes. However, that would be no reason for celebration by US workers. Recent history strongly suggests Delta would purchase Airbus wide-bodies, not Boeing long-haul jets supporting American aerospace manufacturing jobs.
As with other political spin by anti-Open Skies advocates, these claims do not withstand the spotlight of facts. At the same time the Big 3 moan about US-India and claim that repudiation of Open Skies with the United Arab Emirates and Qatar is required to make non-stop service in that market commercially viable, Air India just added another US-India flight and its Chairman Ashwani Lohani said it is “looking to significantly expand its operations in the US.”
Delta’s claim that Gulf Carrier competition is responsible for its absence in the US-India non-stop market is thoroughly rebutted by two Delta senior executives. In 2012, then Delta SVP and General Counsel Ben Hirst blamed Export Import Bank’s lending to Air India for Boeing 787s (and the resulting US aerospace manufacturing jobs) for its decision to terminate its New York JFK-Mumbai flight and for its absence from the US-India non-stop market.
“In 2006, Delta initiated nonstop service between New York and Mumbai, competing with Air India’s one-stop service. But between 2006 and 2009, Ex-Im provided Air India $3.3 billion in loan guarantees, which the airline used to finance long-range aircraft at below-market rates. Air India then used its new subsidized capacity to flood the U.S.-India market, dropping ticket prices by more than 30 percent, a level at which Delta could not compete.”
In that op-ed, Hirst also blamed Ex Im for American’s decision to end its short-lived, unprofitable Chicago-New Delhi non-stop flight. In fact, American cancelled that flight, as well as others, shortly after it filed for Chapter 11 reorganization. Hirst didn’t even mention Gulf Carrier competition, much less blame it for exits from the US-India market. Take a look for yourself – http://btcnews.co/2temTSR.
Glen Hauenstein, now Delta’s President, was asked by a Wall Street analyst whether Gulf Carrier competition was causing competitive harm to Delta, specifically in the US-India market. Unequivocally, Hauenstein, Delta’s EVP and Chief Revenue Officer at the time, candidly responded: “we are not.” Hauenstein went on to describe the US-India non-stop market as “a missed opportunity” by Delta. See for yourself.
Delta Air Lines’ (DAL) Q2 2015 Results – Earnings Call Transcript
Jul. 15, 2015
Michael Linenberg – Deutsche Bank
Yes I am just — but I’m wondering Glen are you seeing some displacement of that traffic to competitors such as Emirates or Etihad or Qatar as they continue to add more and more seats into the marketplace? And I’m looking more like U.S. into India, Middle East, Africa because there is a decent amount of flow traffic between you and your partners.
Glen Hauenstein – EVP and Chief Revenue Officer Correct. As we’ve stated in the past, we are not — we have not been the largest player in the U.S. to India or the Indian Subcontinent but it is a significant long-term threat to us. As much a missed opportunity, we believe that under the right and clear circumstances that we should be able to fly non-stop from the U.S. into India.
So what is the truth about the near absence of the Big 3 from the US-India non-stop market? Why is it that Air India operates five non-stop US-India flights (New York-Delhi, Chicago-Delhi, Newark-Mumbai, San Francisco-Delhi, Washington-Delhi) and recently announced it soon will add two additional US cities (Los Angeles and Houston or Dallas) yet the Big 3, with coffers overflowing from record-setting profits, only offer two daily non-stop US-India flights (United from Newark to Mumbai and New Delhi)?
It has nothing to do with Gulf Carrier competition, and everything to do with airline alliances and commercial decisions made by Big 3 executives. Instead of offering non-stop US-India service (and thereby creating US airline jobs with those flights), the Big 3 have chosen to connect their US-India passengers via European hubs onto the flights of alliance partners such as Lufthansa, Air France/KLM and British Airways (and instead to create European airline jobs and support European hub airports).
In Delta’s specific case, the US-India customers it complains about did not disappear. Instead, Delta has chosen to inconveniently route them through European partner hubs like Paris and Amsterdam and connect them onto Europe-India flights offered by its partners such as Air France/KLM and India’s Jet Airways (in which Delta is rumored to be eyeing a 24 percent equity stake). It is Delta’s choice, not the fault of Gulf Carrier competition.
US-India is but the latest example of the Delta corporate mantra to blame Gulf Carrier competition whenever possible, irrespective of the facts or what Delta executives have said before. Another example is Delta’s decision to cancel its Atlanta-Dubai monopoly non-stop flight and redeploy the aircraft to the more profitable US-Europe oligopoly market in anticipation of what Hauenstein told Wall Street analyst would be a record-setting Summer season for the North Atlantic market. A profit maximizing choice by management. Nevertheless, Delta could not resist blaming Gulf Carriers for it.
Simply put, the Big 3’s US-India narrative is a myth. One of their biggest whoppers to date. This latest installment of blame Gulf Carriers to try to convince the Trump Administration to abandon Open Skies shows just how hollow and desperate their 2.5 year failed campaign against competition and consumer choice is, and how bereft it is of factual support. I am confident the Trump Administration will see it for what it is – a political fiction as meritless and unconvincing as the excuses the Big 3 give for not having the confidence and courage to file an International Air Transportation Fair Competitive Practices Act complaint with the Department of Transportation.