Open Skies & Subsidies

The US Legacy Carriers Complain About Gulf Carriers, But Benefit from Alliances with Foreign Government-Owned Airlines

Delta, United and American Airlines (“Legacy Carriers”) complain about competition from state-owned carriers Emirates, Qatar and Etihad.

But the Legacy Carriers are more than happy to benefit from deep-pocketed foreign governments through their alliance with foreign carriers, many of which are state-owned or -invested.

In fact, the Legacy Carriers participate in global alliances that include 28 state-owned or state-invested airlines, many of which are notorious recipients of subsidies:

  • China Eastern (Delta), China Southern (Delta) and Air China (United) (together with Hainan Airlines) received at least US$1.1 billion in subsidies in 2014 alone. (Centre For Aviation, 5/3/15)
    • Delta and American benefit not only by their alliances with these carriers but also by direct investments in them (Delta – $450 million in China Eastern; American – $200 million in China Southern). (Bloomberg, 12/12/16; Dallas Morning News, 3/28/17)
  • South African Airways (United) recently received a 10 billion rand (US$1.5 billion) subsidy. (The South African, 9/14/17).
  • SriLankan Airlines (American), the troubled national carrier, owes US$3.25 billion backed by the government and has been unable to attract private investment. (Asian Mirror, 4/26/16)
  • Aerolíneas Argentinas (Delta) has just “burned through $5 billion in subsidies” according to Argentinian Transport Minister Guillermo Dietrich. (Wall Street Journal, 9/20/16)
  • Aeroflot (Delta) is 51% owned by the Russian government, which funnels $170-420 million per year to the airline through overflight fees, in addition to subsidies for special new regional services, such as to Crimea. (Aviation Advocacy; Air Transport World, 4/6/17)

Other state-owned partners of the Legacy Carriers have been successful but do not draw the same criticism from the Legacy Carriers as the Middle East carriers. Singapore Airlines, for example, a United partner, is one of the top airlines in the world and majority-owned by the government for 70 years.

 

Delta’s partners in SkyTeam (10 out of 20 alliance members are state-owned or -invested)

  • Aeroflot:                       51% owned by government of Russia (Airline Update, 10/29/17)
  • Aerolíneas Argentinas:   Majority owned by government of Argentina, renationalized in 2008 (Centre For Aviation)
  • Air France:                    17.6% owned by government of France (Air France, 3/31/16)
  • China Eastern:              62% owned by government of China (Centre For Aviation)
  • China Southern:            Majority owned by government of China (Centre For Aviation)
  • Kenya Airways:             29.8% owned by government of Kenya (Financial Times, 9/21/17)
  • Middle East Airlines:      Majority owned by Banque du Liban (Centre For Aviation)
  • Saudia:                         100% owed by the Kingdom of Saudi Arabia (Centre For Aviation)
  • TAROM:                        97% owned by government of Romania (TAROM)
  • Vietnam Airlines:           Majority owned by government of Vietnam (Centre For Aviation)

United’s partners in Star Alliance (14 out of 28 alliance members are state-owned or -invested)

  • Air China:                      Majority owned by government of China (Centre For Aviation)
  • Air India:                       100% owned by government of India, but slated to be privatized (Centre For Aviation; CNN, 6/29/17)
  • Air New Zealand:           52% owned by government of New Zealand (Air New Zealand)
  • Croatia Airlines:             96.8% owned by government of Croatia (Croatia Airlines)
  • EgyptAir:                      100% owned by government of Egypt (Centre For Aviation)
  • Ethiopian Airlines:          100% owned by government of Ethiopia (Ethiopian Airlines)
  • LOT:                            99.9% owned by the Treasury of Poland (Polish Airlines)
  • SAS:                             State investments by governments of Sweden (17.1%), Denmark (14.2%) and Norway (11.4%) (SAS)
  • Shenzen Airlines:          Majority owned by Air China (majority government owned) (Centre For Aviation)
  • Singapore Airlines:        54.5% owned by government holding company (Centre For Aviation)
  • South Africa:                 100% owned by government of South Africa (Centre For Aviation)
  • TAP Portugal:              50% owned by government of Portugal (Aviation Gazette, 2/8/16)
  • Thai Airways:                Majority owned by Thai Ministry of Finance (Thai Airways)
  • Turkish:                        49% owned by Turkish Wealth Fund (Turkish Airlines)

American’s partners in oneworld (4 out of 13 members are state-owned or -invested)

  • Cathay Pacific:              29.99% owned by Air China (majority owned by P.R. China) (Cathay Pacific)
  • Finnair:                         66% owned by government of Finland (Finn Air)
  • Malaysia Airlines:          Renationalized in 2014, now 100% owned by Malaysia’s sovereign wealth fund (Centre For Aviation; Daily Mail, 8/9/14)
  • Sri Lankan:                   100% owned by government of Sri Lanka (Reuters, 5/5/17)

 

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2017-11-16T21:11:29+00:00