Open Skies – the cargo viewpoint

Open Skies is about more than just passengers.

Open Skies is about more than just passengers.

Unless you have been hiding in a cave for the last few weeks, you will be aware that the leaders of the three big US legacy carriers – American, Delta, and United – have been calling for the US government to undertake a review of its Open Skies agreements, with a view to limiting US access for carriers based in the Middle East, particularly the Gulf Region.

The root of the complaint, according to the three American carriers, is that carriers like Emirates, Etihad, and Qatar Airways receive illegal subsidies, giving them an unfair advantage over the US carriers, which are not subsidized.

Whatever the merits of the US carriers’ claim that Gulf Region carriers are illegally subsidized (and ignoring entirely the question of whether US carriers are just as effectively subsidized through their access to Chapter 11 protection), it is important to remember that there are more players in this game than just American, Delta, and United; and that Open Skies is about more than just passengers.

Below, we offer the text of an open letter to the US Secretaries of State, Transportation, and Commerce, written by the head of another US airline  – an airline just as large as any of the three complainants. It is from David Bronczek, President and CEO of FedEx Express, and it represents another point of view entirely. The original is available on the FedEx website, but whether you read it here or there, you should definitely read it. Here it is:

 

Open letter to US Secretary of State John Kerry, Secretary of Transportation Anthony Foxx, and Secretary of Commerce Penny Pritzker

Re: FedEx Support for Open Skies

Dear Secretaries Kerry, Foxx and Pritzker:

I am writing to express FedEx’s strong support of Open Skies and the U.S. government’s long established policy of promoting, negotiating, and then honoring Open Skies bilateral aviation agreements.

FedEx has grown tremendously since its first night of operations in 1973. Our fiscal year 2014 revenue was $45.6 billion and we are among the most admired companies in the world. Thanks to more than 300,000 outstanding FedEx team members, FedEx serves more than 220 countries and territories and continues to offer new products and services around the globe. Our aircraft fleet numbers more than 660 aircraft, including new Boeing 777s and 767s. Here in the U.S. we serve every address in every community and our aircraft can be seen at almost 300 U.S. airports.

Our industry is an essential component of a rebounding American economy. The connectivity we provide for U.S. businesses, both small and large, is critical for their global expansion. FedEx is proud to be a leader in the President’s National Export Initiative.

FedEx and other U.S. cargo carriers depend on Open Skies to provide our aircraft and their important cargo access to global marketplaces. Our ability to exploit the rights set forth in those agreements means that FedEx aircraft span the globe. Air cargo carriers, such as FedEx, move the high-value, time-sensitive products essential for the U.S. to create more high-paying jobs. We also are leader in carrying American products in the B2C markets of e-commerce, where there are new cross-border opportunities for U.S. small and medium enterprises. We cannot operate internationally and provide efficient, cost-effective services without Open Skies.

Recently, several U.S. passenger carriers have questioned Open Skies, specifically as it relates to Middle Eastern carriers. These U.S. passenger carriers do not fly extensively between foreign points like FedEx does. They believe they have little to risk by limiting foreign carrier access to U.S. markets. What they want is for the U.S. government to protect them from competition from able, attractive new entrants.

For FedEx, the Open Skies agreements with the Middle Eastern countries are very valuable. Under the agreement with the U.A.E., we have established a hub in Dubai, where FedEx flights from the U.S. criss-cross with our flights from India and Asia in order to move U.S. products into local markets. This hub also acts as our gateway into Africa. Presently, FedEx alone operates almost two-thirds more flights to the Middle East than all the U.S. passenger carriers combined. Modifications to this agreement might spell the end of these opportunities, closing off those markets to our customers.

Retrenchment in any way from Open Skies by the U.S. would jeopardize the economic growth benefits that air cargo provides. Retrenchment would result in higher fares and fewer options for flying passengers. Retrenchment benefits only a very few. The U.S. should not return to the restrictive, inefficient, expensive agreements of the past where customers, communities, air cargo, and the greater U.S. economy suffered.

FedEx is not alone in its support for Open Skies. Airports, travelers and other U.S. airlines have already addressed this issue publicly. Those groups have laid out the benefits for passengers created by this successful, long-standing policy. We appreciate the opportunity to make the case on the cargo side, in support of U.S. shippers.

FedEx urges the U.S. government to honor the Open Skies agreements it has negotiated with over 110 countries in every region of the world. There is no need to consult with our Open Skies partners absent public proof that alleged unfair competition meets the standards long established in U.S. law. The U.S. should not capitulate to the interests of a few carriers who stand ready to put their narrow, protectionist interests ahead of the economic benefits that Open Skies provides to the people of the United States.

Please feel free to contact me if we can provide you any additional information.

Sincerely

David J. Bronczek

President & CEO

FedEx Express

4 thoughts on “Open Skies – the cargo viewpoint

  1. Excellent letter which I fully support. Let me know if there is anything I can do to help.

    Glenn Hickerson

  2. Spot on! Great rebuttal, transportation at it’s finest! Thank you David Bronczek.

  3. Further food for thought on this issue comes from Philip Tozer Pennington, who included this gem in his aviationnews-online blog:

    In the USA, the state of Georgia is moving to remove Atlanta Hartsfield Jackson Airport’s jet fuel tax breaks, which will damage Delta profits in the future. A bill that has been filled as the state of Georgia looks to increase revenues to assist with much needed infrastructure upgrades. The exemption dates from 2005 and was put into place as Delta was facing bankruptcy and possible collapse. Since then the tax exemption has been extended a number of times until somehow it became permanent in 2012. It remains to be seen if the bill will gain the required support, if it does then Delta will have lost a significant edge that ironically (given press of late regarding Delta) could be described as anti-competitive.

  4. This is a very good plea in favour of maintaining and developing more “full open sky agreements” that is so vital to air cargo. In Europe, all cargo airlines are pursuing the same aim and ambition and are asking the European Commission to proceed with a Cargo First approach as most Passenger Airlines (belly cargo airlines) are hanging on obsolete protectionist approach and thereby obstructing all cargo carriers.

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