Delta Exit Underscores Conflict for Airline Industry Trade Group
Delta (DAL) - Get Report said it will leave Airlines for America, the U.S. airline industry's primary trade association, in a move that underscores the association's historically limited ability to speak with a single voice as well as Delta's increasing propensity to go it alone in the airline industry.
"The $5 million that Delta pays in annual dues to A4A can be better used to invest in employees and products to further enhance the Delta experience, and to support what we believe is a more efficient way of communicating in Washington on issues that are important to Delta customers and employees," Delta said Tuesday in a prepared statement announcing its departure, which takes effect April 26, 2016.
Over the past few years, Delta has diverged from A4A on a series of prominent issues. These include opposition to the Export-Import Bank's practice of enabling wealthy foreign carriers to purchase aircraft at a lower cost than U.S. airlines pay; opposition to rapid expansion by the three subsidized Mideast carriers, which takes passengers from U.S. airlines; and most recently, opposition to a plan to privatize air traffic control.
On the first two issues, Delta has been hampered by the A4A's failure to take any position at all, a result of the diverse views of its members, which includes the three global airlines, four domestically focused airlines and three cargo airlines, as well as associate member Air Canada. On air traffic control, Delta simply has a different view than the other airlines.
Beyond the policy differences, however, is the question of how much value Airlines for America provides for the industry, given the cost of membership, the lobbying done by all the major airlines on their own behalf, and the longstanding inability to secure unanimity among members.
Additionally, the management style of Nick Calio, A4A president, has raised a few questions.
Calio became A4A president in 2011, moving from a job as Citigroup's head of government relations. A Republican, he was hired after Republicans scored big gains in the 2010 mid-term elections. He is the subject of a glowing biography in Wikipedia, which emphasizes that he is known for an ability to find common ground between Democrats and Republicans.
But some sources said that he has, at times, acted with limited consultation. "Calio is all about Calio," said an airline industry source who asked not to be named.
A problem for Calio is that an A4A lobbyist, hired during his tenure, has become a focus of Washington gossip. Politico, which publishes political journalism, reported in April that Shelley Rubino, A4A vice president for global government affairs since 2012, is romantically involved with Republican Bill Shuster of Pennsylvania, the chairman of the House Transportation and Infrastructure Committee.
"Shuster is dating a top lobbyist for the leading U.S. airline trade association, an organization that spends millions of dollars trying to influence his panel," Politico said. "The Pennsylvania Republican is currently at the center of high-stakes negotiations to enact the most sweeping overhaul of the Federal Aviation Administration in decades."
Shuster told Politico that Rubino does not lobby him or his staff.
Delta's strong positions and independent streak are not universally applauded. On Wednesday, Kevin Mitchell, founder of the Business Travel Coalition, which advocates for business travelers and supports the Gulf carriers' expansion in the U.S., said he is glad Delta is leaving A4A.
"This is the clearest admission to date by Delta that it is truly estranged from its competitors and customers and doesn't care about the U.S. national interest, broader airline industry interests or the best interests of the traveling public," Mitchell said in a prepared statement. "It apparently cares only about Delta, and its hyper-parochialism has made it impossible to work with industry colleagues and regulators for the greater national good."
Backers said Calio has achieved meaningful results and made A4A far more effective. "Under Nick's leadership, the board moved from conflict to consensus, identifying areas of alignment such as fighting excessive taxes and regulation and improving infrastructure overall," A4A spokeswoman Jean Medina said.
A4A successes, she said, include defeating an effort to increase the airport passenger facility charge from $4.50 to $7 as part of the 2012 Federal Aviation Administration reauthorization; defeating the European Union's emissions trading scheme, which would have cost U.S. airlines $3.1 billion through 2020; ensuring that air traffic controllers returned to work in 10 days following 2013 sequestration legislation;and, last year, defeating a secondary passenger security fee, backed by a Congressional joint budget committee, that would have cost airlines $486 million annually.
In a prepared statement issued by A4A Tuesday, Calio said "the move by Delta was not unexpected as the carrier has not been aligned with other A4A members on a few key industry positions, including the need to modernize and improve the nation's air traffic control system."
Calio thanked Delta CEO Richard Anderson for his work as chairman of the A4A board during the first two years of Calio's tenure. "Under Richard's chairmanship, we were able to change the way A4A operates, moving it to a consensus-driven organization that has the ability to speak with one voice," Calio said.
With Delta gone, that seems somewhat more likely.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.