U.S. Carriers Target Fair Competition and Boeing in Fight With Emirates, Etihad and Qatar Airlines

NEW YORK (TheStreet) -- It's salad days for major U.S. airlines but they're still hungry for more. 

Low fuel prices have been a windfall for carriers like United Continental (UAL), Delta Airlines (DAL), American Airlines (AAL), JetBlue (JBLU) and their shareholders. As the price of their largest cost has gone down, that of tickets for air travelers has not, meaning that these companies have been able to line their pockets with cheap fuel profits. The cost of jet fuel has fallen more than 40% worldwide compared to a year ago and even New York Senator Chuck Schumer has found it confounding that airline prices have remained stubbornly high.

What's more -- and this is truly galling -- airlines are now asking the government to squash competition from foreign competitors that they accuse of being subsidized. 

Airlines and the unions that represent their workers are asking the Obama administration to renegotiate international trade agreements with the goal of limiting competition on flights to and from American cities to regions like South Asia. These "open skies" agreements ensure that airlines around the world have relatively low barriers to doing business across borders, meaning more passenger and cargo air travel, according to the U.S. Department of State.

Domestic players contend that several foreign airlines, such as Emirates, Etihad Airlines and Qatar Airways, are being heavily subsidized by United Arab Emirates and Qatar and that these agreements should be amended to reflect this unfair advantage. U.S. pilot unions, including the Air Line Pilots Association that backs Delta and United pilots, have chimed in, saying the subsidies are "massive." The Persian Gulf carriers deny the charge.

If the allegations are true, 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."

Also, consider that the open skies agreements have mechanisms in place to resolve legitimate fair competition disputes.

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 for consumers, 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.

Let's not forget that any success by the airlines to get these agreements renegotiated could impact revenue and possibly jobs at other companies. Case in point is Boeing (BA), which counts Emirates, Etihad and Qatar Airways as key customers with more than $120 billion in pending orders. Given the competitive nature of the aerospace business, any renegotiation could reduce the need for additional aircraft on the part of the Gulf airlines resulting in order cancellations at Boeing or shift in future orders to its European rival Airbus (AIR).

If we look at these agreements from different perspective, they are enablers for U.S. airlines to expand their presences across the globe. A great example is JetBlue, which has seen its international business prosper thanks to the open skies agreements its ability to ink a number of partnerships with overseas airlines. It could be argued that without the open skies agreements, JetBlue's success in serving the Caribbean and Latin America could not have been possible.

Perhaps, United Continental, American and Delta Air Lines should focus on winning business on their own merits rather than call on the government to intervene when the air treaties contain dispute-resolution mechanisms to deal with fair competition disputes.

 

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

Follow Chris Versace on Twitter and Facebook.

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