Originally published by The Daily Caller on May 19, 2018.
At a time when victories against cronyism seem few and far between, consumers have a new reason to celebrate with the announcement that the United States and the United Arab Emirates (UAE) have reached an agreement that preserves air travel competition. Try as they might to spin it otherwise, the deal represents a blow to the efforts of Delta Air Lines, United Airlines, American Airlines, and their lobbyists to convince Washington to impose protectionist measures against international competition.
For years the three American carriers have targeted Open Skies agreements with Persian Gulf governments. The agreements—which the United States has in place with over 100 jurisdictions—were essential for deregulating and drastically reducing government intervention globally in the airline industry. The result is billions in annual gains for consumers.
Lobbyists for the three U.S. airlines sought to have the agreements ripped up on the basis that Emirates, Etihad Airways, and Qatar Airways were alleged to benefit from government subsidies. Much of the evidence was questionable, at best, but the truly obvious flaw with this complaint is that the American carriers have benefitted just as much, if not more, from a host of government programs.
U.S. air carriers received taxpayer bailouts following 9/11. That might be argued as a unique circumstance, but they also receive ongoing handouts in the form of programs like the Essential Air Service program and its subsidies for airlines serving many rural communities, or the Fly America Act that requires federal agencies to favor U.S. air carriers regardless of cost or convenience.
Contrary to the what the argument from U.S. carriers imply, government handouts are no key to competitive success. Quite the opposite is typically true. Reliance on government saps the competitive pressure to innovate, and it trades long-run success in exchange for immediate access to taxpayer cash. Even if the recipient company remains in business for some time, consumers suffer from an economy that is inefficient and less dynamic. There’s a reason, in other words, why free market economies have bested their state-managed counterparts time and again.
Thankfully, the effort to stymie competition, in this case, appears to have been averted. With this new deal, just as with the one reached with Qatar in January, the U.S. and the UAE will keep the Open Skies agreement in force, including the so-called fifth-freedom flights that allows an airline to carry passengers between two foreign countries if it is part of a route that begins or ends in its own country.
The fifth-freedom routes were a key point of contention because the U.S. airlines objected when Gulf carriers launched nonstop flights from New York to Milan, and Newark to Athens. That, however, is no cause for government intervention, as such competition is good for consumers and industry alike.
As part of the agreement, the UAE said it had no plans to open new U.S.-European fifth-freedom routes in the near feature, though is technically not prevented from doing so in the future. Both sides, in other words, are claiming victory. But the real victors are consumers.
Sometimes the best thing for politicians to do to protect their constituents is nothing, or as close to it as they can get. In negotiating the agreement, the Trump administration wisely settled for mere face-saving gestures to placate U.S. carriers, but otherwise kept the skies open for competition. It’s a rare case where a massive, multiyear lobbying campaign to thwart competition failed to deliver any new forms of cronyism.
