Gillegan

I've been reading these threads for a while now and have to admit that I'm of 2 minds on these issues. (Full disclosure: I worked for Emirates for almost 16 years and I have read the entire White Paper):

Within the paper, which was written entirely to achieve an end and not to present a balanced viewpoint, there is compelling evidence that subsidies have taken place - not to the extent claimed but subsidies nonetheless and which ARE counter to the Open Skies Agreements. What the paper also does is lump everything that might be considered unbalanced, "unfair" or just an advantage and calls them subsidies. I don't buy that. As many have pointed out, there is no such thing as a "level playing field". Government provided infrastructure, landing fees, etc. exist in some form for almost all players. (landing fees are the same for all airlines serving Dubai - it's just that whoever has the most operations benefits the most. Kind of like a new runway- in Atlanta.)

Outlawed unions are definitely an advantage (and Emirates' treatment of their employees is generally awful - something for which they are FINALLY starting to pay). Sanctions to try to level a playing field by identifying structural advantages is a slippery slope that I don't think we really should be going down. The same logic could conclude that since American companies might not pay the same taxes as say, European companies, there needs to be a "leveling mechanism". That's exactly where Chapter 11 fits in. It is a feature of our system that skews the competitive playing field to our advantage. An awful lot of the paper devoted itself to these types of advantages. I would like to see some of these advantages addressed, but don't think it's appropriate to do by punitive means, but rather to get our own house in order. Conversely, if we choose to legislate ourselves into oblivion, I don't think that's anyone else's problem.

Now, what to do about the actual subsidies. I'm amazed that no one has advocated taking this to the WTO. They actually have a pretty good record of separating the wheat from the chaff and recognizing subsidies (which DO exist on both sides of the argument) and applying appropriate measures.

Here's the irony as I see it; the only real subsidy that was stated for Emirates was the government covering their fuel hedge losses. The other complaints about Emirates fell under government supplied infrastructure, wholly owned divisions not operating "at arms length" (how's that different from owning your own refinery?) and Ex-Im bank financing/guarantees for aircraft orders, while the lion's share of direct subsidies was identified as going to Etihad and Qatar, yet Emirates certainly represents the biggest commercial threat to the major U.S. carriers. You could make them pay back the hedge losses (and I wouldn't be opposed to that) but it wouldn't eliminate the threat. That's the point that Typhoon is trying to make. It's like the movie Apollo 13 where Gene Kranz' character says, "work the problem people". The real problem is the changing world demographics.

I know many will reject this next statement outright but here it goes: Emirates is not receiving subsidies to compensate for losses due to the dumping of capacity on markets that cannot support the traffic. Etihad and Qatar, maybe but the paper made no case for Emirates though it cleverly tried to lump them all together. Emirates definitely has a lower cost structure due to a number of factors, some of which were outlined in the paper but one of which is that they control their costs ruthlessly (I wish they had been subsidized. If they weren't such sh!theads, I might still be working there.) They have also been far ahead of others in the industry in recognizing the changing demographics and traffic flows and using their advantageous geographical position to exploit them. The U.S. carriers on the other hand have (for a number of reasons) been mediocre at best in recognizing these changes and have been mostly unsuccessful at taking any kind of advantage of them.

This is why I can't support what the U.S. majors are asking for. They still see the world air traffic market as if it was 1962. They have been given the gift of complete consolidation and are now whining because they finally recognize the very real threat of changing world traffic flows that others (Emirates) recognized almost 20 years ago. I would support addressing the subsidy question directly through the WTO but not allowing the U.S. carriers to dictate number of flights and or seats on any city pairs. (Unless of course no changes or redress occurs regarding the subsidies) I support re-authorizing the Ex-Im bank but agree that it was not intended to place some U.S. companies at a competitive disadvantage. Some changes to it are certainly needed. Unfortunately, as long as the Europeans do the same, it would be suicide to not have the same ability.

The U.S. carriers (and the U.S. government) are going to have to figure out how to compete in the changing world airline market. It's going to have to be a group effort to address how to take advantage of where the traffic is moving and growing. If the U.S. carriers got everything that they have asked for in the White Paper, it would freeze their commercial thinking in 1962 and ultimately still relegate them to second tier status.