ATW Editor's Blog

EDITORIAL: Planes, Politics & Protectionism

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It’s ironic that the US is seeing a surge in activity that smacks of protectionism under a Republican president; one who campaigned on his credentials as a businessman.

The Bombardier CSeries aircraft sale to Delta Air Lines may have merited scrutiny. Canada and Quebec government support of the Canadian manufacturer is well documented and it is believed that the Atlanta carrier secured its 75 CS100s at an extremely attractive price.

However, Boeing, which leveled accusations of subsidies and price-dumping at the CSeries, has also enjoyed considerable financial support from the states where it builds aircraft. It’s common practice by all aircraft manufacturers to heavily discount prices to launch customers [Delta is launch customer for the CSeries in the US, a critical market]. Regardless, US Commerce’s decision to recommend import duties on the CSeries totaling 300% was outrageously heavy handed and looked like a preemptive, protectionist strike. So the October surprise, that Airbus is taking a majority stake in the CSeries production partnership and might even create a CSeries final assembly line at its Mobile, Alabama plant, means those Delta planes could be rolled out under a “made in America” banner.

In Washington DC, meanwhile, there’s a growing sense that the long-running dispute over the US Open Skies agreements with the UAE and Qatar is coming to a head. How the cards will finally fall is still not clear, but American Airlines, Delta and United Airlines, along with some US labor organizations like ALPA, seem confident they have the ear of President Donald Trump as they accuse the Gulf carriers of being supported by major government subsidies.

The CSeries and Gulf carrier trade fights are different. But what probably links them in 2017 is the recognition that this US president likes sabre rattling and flag waving. His “America First” campaign has opened opportunities for US businesses to proffer the White House flags to wave from the Rose Garden in a presidency thus far short on legislative accomplishments.

But Washington would be wrong to fly these particular flags. The commercial aviation industry is global. Where scrutiny of alleged anti-competitive behavior is warranted, it should not be done on a unilateral basis. Airlines and airports are significant drivers of GDP. If the US rescinds its Gulf Open Skies agreements, other US airlines will be harmed--especially cargo carriers.

And on the subject of harm, it’s worth pointing out that the US International Trade Commission (ITC) still has to rule on the CSeries issue and determine whether the alleged CSeries subsidies and price-dumping caused material damage to Boeing. In other words, harm must be proved. Given that American, Delta and United are posting record profits and believe their wealth is now sustainable, where is the evidence of economic harm that the Gulf carriers have inflicted on US airline finances?

Delta CEO Ed Bastian told journalists this week that  the alleged government subsidies to Middle East carriers Emirates Airline, Etihad Airways and Qatar Airways mean “we’re being harmed in the Middle East.” But none of the three US majors, including Delta, were serving the Middle East or the Indian subcontinent in any meaningful way before the Gulf carriers created  their hubs and those markets. So when Bastian says he's “mystified” why Boeing has taken such a hard stance against the CSeries when it does not offer an aircraft in the same size range, he’s effectively calling for one rule for his suppliers and another for his competitors.

Bombardier's innovation was seeing a gap in the market and building the right, niche product for it. It's exactly the same with the Gulf carriers - they spotted emerging, underserved markets and tailored their products to them.

Airbus insists its CSeries deal was not a reaction to Boeing’s actions, but the fact is that Airbus-backed CSeries is a far more competitive product.

If the White House restricts the Gulf carriers’ access to the US market, they will ultimately find new and innovative ways to restore their competitiveness. Protectionism has a way of making those being shut out fight all the harder.

Karen Walker karen.walker@penton.com

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