June 23, 2015

Airline Globalization’s History: Once An Advantage, Now a Threat

Airline travel in the earliest days before World War II was a dangerous, unpredictable series of short trips that were more of a novelty as opposed to a high-speed efficient mode of transportation.

One of aviation’s most visionary people, Howard Hughes, envisioned larger, faster, and longer range airplanes for his airline, TWA. Working with Lockheed, they created the famed Lockheed Constellation, an airplane that could fly nonstop between Los Angeles and New York, and even between the continents. Use of this airliner was delayed for several years as development was finished at the height of World War II. These airplanes were exclusively purchased by the U.S. government for use in the war effort before becoming available to the market at the close of hostilities.

This new airliner, along with the intercontinental bombers created in World War II, made it evident that the dawn of international aviation had arrived. In December of 1944, 52 countries met in Chicago to establish a body that would establish worldwide standards that, at its essence, would facilitate airline service between nations. This organization became the International Civil Aviation Organization (ICAO).

Iranian Airways Douglas C-47B (DC-3) freighter in 1954

Iranian Airways Douglas C-47B (DC-3) freighter in 1954

After the close of the war, many pilots returned to their home countries and found work in the blossoming private and national airlines. A few of these aviators followed the war surplus airplanes like the Avro York and the Douglas C-47 Dakota (or by its civilian name, the DC-3) and helped establish airline service in Asia and Africa. Many of these expatriate pilots established roots in these countries and lived out their entire lives as residents of them.

The American pilots returning home found work flying both surplus airplanes and the newest airliners from Boeing, Douglas, Convair, and Martin. The government agency, the Civil Aeronautics Board (CAB), and the Air Line Pilots Association (ALPA), both made tremendous improvements to safety during this post-war era. The safety, speed, and convenience of airline travel, along with America’s new love of the automobile devastated the nation’s passenger rail service. The arrival of the intercontinental jets from Boeing, Douglas, and Vickers supplanted oceangoing passenger service effectively ending it in the 1970’s. Today, Amtrak and the Queen Mary II are the remnants of once vibrant industries that became mostly obsolete with the rise of airline service.

Globalization became a tremendous benefit to America’s airlines. They were routinely hauling passengers and cargo not just between the United States and foreign countries, but were often operating routes between and even within other countries. Also, during low seasons and economic recessions, foreign airlines were often able to lease out airframes and/or flight crews from the U.S. carriers for their rapidly expanding operations. In the last 25 years, there have been over 100 Open Skies agreements signed with 111 foreign states, providing a tremendous benefit to the U.S. carriers though the opportunities provided by these agreements.

After the downturn following the 9/11 attacks, airlines were further able to take advantage of globalization by closing U.S. overhaul bases and outsourcing aircraft heavy maintenance to foreign countries. Today it is common to find U.S. airliners undergoing extensive maintenance in China, the Middle East, and the Caribbean. In addition, regional service was largely outsourced to small lift providers flying airliners made in Canada and Brazil. This outsourced flying now makes up half the domestic departures of the United States’ legacy airlines.

Thousands of pilots lost their jobs in the United States during this time, and the pilots that were able to remain lost their pensions and nearly half their pay. Furloughed pilots in the decades prior often found work flying for corporate flight departments and were even willing to work part-time jobs for years waiting, hoping, to return to the lucrative salary and benefits of the airline cockpit. But these furloughed pilots now saw not only the loss of their jobs, but the career they once cherished.

Many of these pilots were able to take advantage of globalization during this time. The rapidly expanding Asian and Middle Eastern airlines were welcoming of the highly trained and experienced U.S. airline pilot that was much in need of respectable work. Asian carriers such as Cathay Pacific, Korean Air Lines, and Japanese carriers offered pilots a lucrative salary and often some stateside basing. The Middle Eastern carriers including Emirates, Etihad Airways, and Qatar Airways offered pilots the opportunity to fly a widebody aircraft with quick upgrade to Captain with the only downside being a need to relocate to the Middle East.

Etihad Airways Airbus A340-600.

Etihad Airways Airbus A340-600.

Since the turn of the century, these three Middle East carriers have undergone a truly impressive expansion. From 2000 to 2015, Emirates increased its fleet size from 36 to 219 airframes, while increasing the number of passengers they carried by ten fold. Etihad Airways, founded only in 2003, currently has over 110 airplanes, and Qatar Airways during this same time went from a handful of airplanes to a fleet of 146, comprising both narrow and widebodies. In comparison, during this same period the American Airlines’ fleet (AA, USAirways, America West, TWA) shrank by 15%, while the fleets of Delta (Delta, Northwest) and United (United, Continental) shrank by 25%. This substantial growth among the Middle East carriers came soon after the United States signed an Open Skies agreement with both United Arab Emirates and Qatar. With a substantial number of widebodies on order, these Middle Eastern carriers are projected to double or triple in size by 2020. During this time, the increases in capacity by the legacy U.S. carriers is projected to lag global GDP, while the capacity of Emirates, Etihad, and Qatar will be more than triple the rate of global GDP. These airlines will continue to hire pilots from the U.S. regionals with the promise of a career that cannot be matched by U.S. airlines.

Recently, there has been a major push by both the legacy air carriers and ALPA (as well as other airline labor unions) to demonstrate the unfair financial advantages of the Middle Eastern carriers. At the same time, the United States’ Export-Import Bank helps finance the sale of Boeing airliners to these Mid-East carriers, who also enjoy the advantage of low labor costs and highly subsidized aviation sectors in their home countries. In addition, these carriers have been the recipients of interest free loans and financial transfers from their governments. The argument has merit, and the U.S. Government has taken notice.

The Dutch government has also taken notice and has limited the flights of these three Middle East carriers to Amsterdam. Schiphol Airport is the base for one of Europe’s largest airline – KLM. This carrier has had a longstanding alliance with Delta Air Lines dating back to the Northwest days, and Delta had been the most vocal of the U.S. airlines on the subject of unfair competition from the Middle East carriers. The legacy U.S. carriers have requested that the government consider a similar action for New York’s airports, which are served by all three. JFK Airport has also become an additional destination for Emirates not from its base in Dubai, but Milan, Italy. This flight connects with Emirate’s partner airlines, JetBlue and EasyJet. Since the commencement of this service in the fall of 2013, U.S. legacy carriers and Alitalia have seen a loss of revenue, joining the chorus of complaints.

Al Baker, CEO of Qatar Airways

Al Baker, CEO of Qatar Airways

Delta Air Lines’ and ALPA’s vocal complaints were joined by United Airlines and American Airlines at The National Press Club recently and by many newspaper editorial pages. The lobbying has prompted the President to open a review, and opposition to the expansion plans of the three Middle East carriers has gathered bipartisan support. Emirates, Etihad Airways, and Qatar Airways have not only denied that they are receiving government subsidies, but also point out the government assistance for the U.S. carriers received in the years after September 11, 2001. The language between Delta’s Richard Anderson and Qatar’s Al Baker has especially been terse on the subject of subsidies, quality, and politics.

These three Middle East carriers are joined by another airline that is extensively using globalization to the fullest advantage – Norwegian Air Shuttle. The airline is financially based in Norway, however the flight operation is officially based in Ireland. The pilots in the Thailand base work under Singaporean labor laws and are officially employed by a company that contracts with Norwegian Air Shuttle. The flight attendants are sourced from around the world, including the United States. And the long haul planes, Boeing 787s, are delivered with favorable loan rates from the United States’ Export-Import Bank.

Like Emirates, Norwegian Air Shuttle is operating a route that does not connect with any of its hubs, Gatwick-JFK. This is one of many routes the company operates out of the Gatwick airport without connecting with flights in either Norway or Ireland. ALPA has been the most outspoken opponent of the scheme, though the three legacy U.S. carriers have also lodged complaints.

Historically, globalization has been a great financial benefit to the U.S. legacy carriers, though at times at the detriment of its employees. The industry is now facing a threat that it considers critical to its revenue, and the unions have joined in by asking the government for help.

John Steffen is a former airline pilot and aviation expert and historian currently residing in New York.

About the Author

John Steffen



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  • ARUN

    We all understand what competition entails. Why does it always have to be advantageous to us? The day it is not we cry foul. Playing the devils advocate here, even if the middle eastern airlines are receiving subsidies, so what? Did the banks not get bailed out when the crash happened? Ask the government to help you out. If not too bad.