The ‘Open Skies’ Loophole We Need to Close

Our politicians love to boast about the open skies agreements they negotiate.  But are they really truly open?
Our politicians love to boast about the open skies agreements they negotiate. But are they really truly open?  No.

Much is made of the occasional open-skies agreements between the US and foreign nations.

These new ‘open sky’ agreements replace earlier treaties that would specify and restrict which airlines could fly between the two countries.  The former agreements would specify only certain named city-pairs as being allowed to be flown, would name which airlines could fly those routes, how many times a week they could fly, and even what size planes they were allowed to use.

As you can imagine, the former treaties provided a great anti-competitive umbrella for the few favored national airlines to shelter underneath, making for expensive fares, poor service, and inconvenient schedules.

They have been largely replaced by open-sky agreements – indeed the US Department of State lists 111 countries we now have open-skies agreements with (although note some are provisional or partial in nature – the list is somewhat more optimistic than it should be).

The general gist of an open-sky agreement between two countries is to say ‘any of your airlines can fly from any of your cities to any of our cities, and in return, any of our airlines can fly from any of our cities to any of your cities’.  Hello, competition!  Good news for the international traveler, right?

Well, yes, but not as much good news as you might think.

The very formulistic approach to what, where, when and how the airlines can fly between countries are defined in what are labeled by the delightfully Orwellian term of a series of ‘freedoms’.  In truth, they are actually a set of restrictions – imagine the starting point is actually ‘no airline can ever fly anywhere’ and then these ‘freedoms’ present as a series of limited, tightly defined exceptions to the basic scenario of ‘no airline can ever fly anywhere’.  You can see our definitions and explanations of the nine or so airline/aviation freedoms that have been more or less defined here.

So, what’s missing from the explanation of an open-sky(skies) agreement as defined above?  Let’s give an example.

Maybe you live in Portland, OR, and you want to fly to Manchester in England.  Great.  There’s an open skies agreement between the US and UK, so you should have plenty of competition to choose from.  Maybe you’re a frequent flier member of, well, let’s just say ‘Airline A’ and this airline has service from Portland and over to the UK.  But, although it might even offer you non-stop service to London, it doesn’t have any flights at all within the UK to other cities.  Why not?

Or maybe you’re a fan of a British airline instead, let’s call it Airline B.  You could fly on Airline B all the way from, perhaps, San Francisco to Manchester, but – ooops, Airline B has no connecting flights within the US to get you to its gateway cities.

Now don’t be tricked.  You might see all manner of different code share flights showing Airline A flight numbers in England, and Airline B flight numbers in the US, but if for whatever reason you are insisting on only flying on airplanes specifically owned by your preferred airline, you’re out of luck.

The reason the airlines don’t have additional flights within the ‘other’ countries is probably because the ‘open skies’ agreement doesn’t allow for foreign airlines to operate these additional domestic segments within the host country.

Or, let’s take another example.  Maybe you want to fly from Los Angeles to New York, and the last time you were at the airport, you saw on the monitors reference to a Qantas flight, and you decide it would be a fun experience to fly Qantas instead of the regular airline you normally fly.

But you can’t book a ticket on the flight.  Why not?

Because, although Qantas has the additional freedom to pick up passengers in both New York and Los Angeles and then fly them to Australia, it does not have yet another freedom, the right to fly domestic American passengers purely between New York and Los Angeles.  You just know that the huge 747-400 it operates between Los Angeles and New York is three-quarters empty, but they’re not allowed to carry you on that flight.

These examples point to how our so-called open skies agreements are generally more closed than open.  They have a loophole – they do not truly open up our skies.  When it comes to flying within the US, you’re limited to the same, ever smaller number of domestic airlines and that’s it.

Many years ago, there might have been reasons for this.  The airline industry was regulated, and protecting the viability of our airlines was felt to be in the national interest.  There were vapid fears that if airline regulation was removed, then airlines would abandon service to much of the country, and/or various other nebulous concerns, all cited as reasons to leave the airlines behind a protective screen of regulation – with few people realizing that the protective screen primarily benefitted the airlines rather than us, their passengers.

Well, that was then, and this is now.  Airline deregulation occurred in 1978, and in the 35 years subsequently, the sky hasn’t fallen on our heads.  Airlines still offer comprehensive service most places in the country.  None of the fears or concerns used to justify airline regulation proved to have any substance to them at all.

But, one surprising development has been that although many new airlines have started up since deregulation, almost every one of them has subsequently closed down or merged into another airline.  Not only that, the airlines that were operating prior to deregulation have also merged or closed down, and today we find ourselves with only four major airlines to choose between – American, Delta, Southwest and United.

Sure, there are small airlines like Alaska, Hawaiian, Jetblue and Virgin America, but none of them have the same comprehensive route networks that the four majors have, and neither do they have the international globe circling extensions of their networks either.  Heck, if international travel is a factor, your airline choices just dropped down a further notch, and now you only have three (Southwest, although about to start service to some leisure destinations in the Americas, offers nothing further afield).

Every time the DoT and DoJ have approached each airline merger, the airlines involved have promised that in their new merged form, they’ll be stronger and more competitive, and that we, the travelers, will enjoy better service, more flights, and so on.  Some people would suggest that subsequently, and again every time, quite the opposite has happened, and particularly in the last five years or so as the number of airlines has become ridiculously small, we have seen steadily increasing airfares and skyrocketing fees, along with flights jam-packed ever fuller with more and more passengers fighting over what seems to be less and less overhead space.

The consumer benefits from these mergers are apparent only in their absence.  But the airline benefits are clear, with the airlines enjoying record profits, sometimes at levels better than ever before in their history.

The airlines seem to have given up any pretense of competing between themselves.  If you didn’t see the logos and the uniforms, could you ever tell the difference between a United, Delta or American plane, seat, and flight?  What difference in service standards or extra amenities and other experiences exists?

Or, from a similar perspective, why do you choose to fly on whichever of the three or four remaining airlines you have made your preferred airline?  Whatever your answer, it will not be ‘because their fares are appreciably lower’ or ‘because their service is much better’.  It might be ‘because they have the best flight schedules on the routes I generally fly’ or because you have been using them for years and are sort of locked into their frequent flier program, or maybe even because you swore never to fly on one of the other airlines ever again, and for the places you fly, the airline you now fly is your only remaining choice.

How is it that Europe – an agglomeration of fractious states semi-united under the aegis of the EU – and, as we perceive it, hidebound by intrusive government legislation, high taxes, and very expensive unionized workforces – is able to support many vibrant airlines with astonishingly low fares and massively different approaches to the markets they serve?  How is it that ’emerging markets’ in Asia are spawning airlines by the dozen, and the teensy tiny collection of states that make up the UAE is home to three relatively new super-airlines that are growing with seemingly no limit and dominating every market they enter, while all the time offering palpably better service than our domestic carriers?  Why is it that American carriers no longer appear in any list of ‘the best airlines in the world’.

Somehow, the home of free enterprise, good service, and competition has ended up with quite the opposite, and it is impossible to ignore the increasing (and literal) cost to us as passengers that is resulting from the vanished airline competition that we used to enjoy.

It is time to change this.  It is time to bring back airline competition.  We will all be the winners for this, and – as the first round of airline deregulation has clearly shown – there’s no downside risk (see our point by point rebuttal of many of the offered up concerns here).

The problem is that our ‘deregulation’ has only been a partial deregulation.  We need to complete the process.  It is time to allow foreign carriers to operate within the United States, flying regular American people between regular American cities.  Sure, we’ll of course insist that the foreign carriers observe all US standards, but we don’t see the need for them to employ Americans.

The ‘protecting American jobs’ argument doesn’t apply to all the other categories of jobs that have moved off-shore, ranging from manufacturing to call centers to high-tech medical and computer services and just about everything else imaginable, indeed, we’re often told we should be happy that our businesses can now use low-cost labor in Mexico, or contract everything to even lower cost suppliers in China.

For that matter, we’ve all become comfortable with cruise ships that are largely staffed by non-Americans.  Why should airlines and their employees be any different, particularly when the standard of US airline employee seems to so frequently be so dismally low.  Isn’t there something truly wrong when a high paid American employee scowls and sulks, whereas a low paid person from some other country is gracious and charming?

We’ve given our US carriers everything they’ve asked for, every time they’ve told us they need to merge in order to become stronger and ‘better’.  What have we got in return?  Steadily increasing airfares, steadily diminishing in value frequent flier programs, and a panoply of fees and charges and penalties and surcharges that are a million miles removed from any conceivable definition of fairness.

We need true airline competition once more.  We’ve allowed the ever stronger remaining airlines to see off their domestic competitors, and so if competition can’t come from within this enormous nation of 314 million people, we have to allow it to come from outside sources.

It is time to truly open our skies.

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