Barbarians at the gates?

Despite operating from the world’s richest and most protected aviation market that accounts for 25 per cent of world air travel, US airlines are struggling against more vibrant and innovative airlines.

United Airlines, American Airlines and Delta Airlines have asserted that Middle East airlines Qatar, Etihad and Emirates have received subsidies – mostly in the form of interest-free loans – of $40 billion over the last ten years and are urging the Obama administration to curtail the open skies agreements with Qatar and the United Arab Emirates.

The Middle East airline strongly refute the allegations.

The reality is there is no such thing as a level playing field in aviation –never has been, never will be.

For instance, the US airlines have an enormous advantage of a massive and wealthy home market locked in with frequent flyer programs, whereas the Middle East countries of Qatar and the UAE have tiny populations.

And countries across the globe have helped their airlines since aviation first started.

In fact a confidential Congressional Research Service report obtained through WikiLeaks Document Release shows that the US government has supported its airline industry to the tune of $155 billion in the 80 years from 1918 to 1998.

And so it should have as most of the support was for aviation infrastructure and to establish routes.

Governments across the globe either directly or indirectly support aviation.

In the early 1990s various European government tipped $3. 7 billion into Air France, $2. 3 billion to Olympic Airways and $1. 1 billion to TAP Air Portugal.

And the Italian government has poured billions into its national airline.

In China the government stands behind its airlines, funding where necessary, while Thailand and Malaysia have bailed their airlines out at various times.

While the boardrooms of US airlines would like to compare the Gulf state airlines of today with 16th century pirates – who gave the region its then name the Pirate Coast from attacking ships plying the Britain-India trade routes – the reality is that they have replaced US airlines as the pioneers of the industry.

The last major innovation from US airlines was American’s introduction of the frequent flyer program in the early 1980s and the last cabin innovation was Pan American’s tourist (economy) class in 1952 – over 63 years ago!

The reality is that the Gulf carriers have replaced US airlines as the pioneers of the industry.

The latest spat is a twist on events of the 1950s and ’60s that saw European airlines trying to stop innovations from US airlines, such as economy class and giving music headsets free to passengers.

European airlines through the International Air Transport Association even regulated how many vegetables could be served to economy passengers – no more than three! In the late ’60s and ’70s it was then Malaysian Singapore Airlines and Cathay Pacific that snubbed their noses at convention, daring to give economy passengers free drinks.

Those airlines’ emphasis on innovation and putting the passenger first dramatically changed travel habits.

Emirates has won more awards since it formation than any other airline and its list of industry-leading innovations reads like a chronology of passenger firsts – seatback videos for all passengers, fax machines, email and AVOD.

Whereas once US airlines launched all new major aircraft types, that has shifted dramatically due to the lack of profitability of US airlines because of deregulation.

When the US deregulated its airline system on October 24 1978 it started a chain of events that has devastated the US airline system.

Deregulation allowed any airline to fly anywhere it wanted and to ‘cherry pick’ the best routes.

By the 1990s well-credentialed commentators were citing serious effects, including the loss of some of aviation’s greatest companies, the bankruptcies of all but one of the major pre-deregulation carriers, relentless downward pressure on airline wages, and a widespread view that customer service had declined.

One of the benefits claimed for deregulation is that fares have fallen since 1979 and passenger numbers increased.

The reality is fares have fallen across the globe and have done so every year since 1929 when the first reliable records were kept.

And it’s been a financial disaster.

The US industry’s inability to achieve steady profits has impaired its ability to re-equip with more efficient aircraft.

It’s time for US airlines to go back to the future.