Release #: Vol. 84, No. 3
April 01, 2015

Four Global Aviation Challenges: Leveling the Playing Field Around the World

1. State-Owned Enterprises & Open Skies

Call them what you will: the Gulf carriers, the Persian Gulf carriers, the Middle Eastern carriers, or the ME3, the monikers all refer to the same state-owned and state-supported airlines that receive enormous, documented subsidies from their governments in direct violation of the Open Skies agreements their countries signed with the United States.

The debate on this issue has exploded in the news media, shedding a new light on the United States’ current Open Skies policy and what it means for fair competition and North American jobs in today’s business environment.

The global economic climate has changed dramatically since the United States signed Open Skies agreements with Qatar and the United Arab Emirates in 2001 and 2002, a time when no one could have imagined the massive scale and strategic consistency of the subsidies these countries now provide to their airlines.

As a result, ALPA, along with our coalition partners, are calling upon the Obama administration to open consultations with Qatar and the United Arab Emirates, as allowed by the existing air transport agreements, to get the facts about their airlines’ finances. These consultations must address the flow of subsidized air service to the United States. They must also include the request for a freeze on current passenger service for these countries while consultations are under way.

More than 5,000 individuals have signed the petition in support of ALPA’s position, and the support is not limited to North America. During the U.S. Chamber of Commerce Foundation’s 2015 Annual Aviation Summit, Carsten Spohr, chairman of the Executive Board and CEO of the Lufthansa Group, voiced his full agreement with ALPA’s position on subsidies, stating that he would convey that same message when meeting with U.S. government officials. 

In his remarks, Mr. Spohr said that other global airlines are being “increasingly attacked” by heavily subsidized Middle Eastern carriers, adding that his company will compete with anyone on a level playing field, but it can’t compete with these Middle Eastern carriers that receive billions of dollars in subsidies from their governments. 

Additionally, the governments of Germany and France have both gone on record supporting our union’s position on Open Skies, with Germany putting a freeze on any route expansion with the Middle Eastern carriers. ALPA’s position is also supported by other international pilot unions.

We know that the U.S. government is engaged and seeking answers about the subsidies and the questions the economic advantage provoke about fair competition in the global marketplace. With the facts and numbers on our side, ALPA is pressing hard for the U.S. government to make the right call, not only for the sake of the jobs of North American aviation workers but for airline industry employees around the world.

2. Export-Import Bank Reforms

On June 30, the Export-Import Bank’s reauthorization expires. In preparation, ALPA and others are urging Congress to consider how the Bank’s current financing practices affect the U.S. airline industry and the hundreds of thousands of jobs it provides.

Although ALPA supports the reauthorization and mission of the Bank, we are calling for targeted reforms to its widebody aircraft lending practices. The Bank’s providing below-market financing rates for U.S. airlines’ foreign competitors to purchase widebody aircraft is harming the U.S. airline industry and its workers’ ability to compete in the global marketplace.

The Bank’s support can result in a $20 million per airplane financing cost-savings advantage for an airline. While U.S. airlines are not eligible to receive financing, foreign airlines can use Bank-financed aircraft to compete directly with U.S. airlines on international routes. They can flood the market with excess capacity and drastically undercut market-driven pricing. As a result, U.S. airlines are at a competitive disadvantage and our industry’s workers have already experienced job loss.

3.  Flags of Convenience

ALPA continues to strongly oppose the Norwegian Air International (NAI) business model, which is a “flag of circumvention” practice that seeks to avoid tax and employment laws and bypass international agreements to gain an unfair competitive advantage against U.S. airlines and their workers.

NAI’s business model seeks to undercut U.S. airlines by obtaining an air operator certificate from and registering airplanes in a country to which it doesn’t fly. It would then take advantage of that country’s relaxed employment laws to employ outsourced, foreign-domiciled workers at wage and benefit levels substantially lower than if it operated as a Norwegian airline headquartered in Norway. 

As part of our union’s fight for a fair global marketplace, ALPA and many other supporters (bipartisan support in Congress, aviation industry stakeholders and 37,000 individuals who have signed the petition) continue to call for the U.S. government to not only deny NAI’s application, but also to reform U.S. international aviation policy to make certain any similar plan will not threaten fair competition for U.S. airlines in the future.

NAI has applied to the Department of Transportation (DOT) for both a temporary and permanent authorization to serve U.S. markets. In September 2014, the DOT dismissed NAI’s request for a temporary foreign air carrier operating authorization, which would have allowed it to operate to U.S. markets while its permit application is pending.

4. Atypical Employment Models

The proliferation of new business models has given rise to “numerous trends in contemporary employment relations” for pilots and cabin crew members, a recent report on the European aviation market concludes.

Self-employment, fixed-term work, temporary work agencies, zero-hour contracts, pay-to-fly schemes, and other atypical employment techniques have proved detrimental to both fair competition and workers’ rights. 

The study concluded “Both airlines’ and flightcrew members’ concerns should be taken seriously both with regard to legitimate demands for flexibility and workers’ rights, fair competition (between airlines as well as between flightcrew members), and—last but certainly not least—legitimate safety-issue concerns. In this respect, a fair balance between safety provisions and employers’ and workers’ rights is of paramount importance.

Through each of these global challenges, our union and its pilot volunteers and professional staff will continue to call for and forge a fair opportunity for North American airline workers to compete internationally.

Read the sidebar to this story, Fair Competition, Fair Skies Around the World By Capt. Philippe Raffin, SNPL Air France ALPA.

This article is from the April 2015 issue of Air Line Pilot magazine, the Official Journal of the Air Line Pilots Association, International—a monthly publication for all ALPA members.

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