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Stormy Weather Over Government Subsidies And The Fight For The Open Skies

World Travel – Airlines

Open Eyes Opinion {source: BTC}

Government Subsidies to National Airlines.

photo credit: commons.wikimedia.org

The USG Spent $155 Billion In Support Of Airlines

Alleged $42 Billion In Aid To Gulf Carriers Dwarfed By USG Assistance To Airlines Documented By The Congressional Research Service 

 Financial support continues decades after the industry was established 

WASHINGTON, DC and LONDON, England – The Business Travel Coalition (BTC)  in reacting to a little known U.S. Congressional Research Service (CRS) report on massive government subsidies and financial aid to the U.S. airline industry urged Washington to not lose sight of the enormous benefits of vigorous airline competition and the economic value that Open Skies, versus more restrictive aviation policies, has delivered to consumers, tourism, the U.S. aerospace sector, cargo carriers, shippers and the U.S. national economy.

The CRS finalized a study in 1999 that conservatively found that between 1918 and 1998 the federal government spent $155 billion dollars in support of aviation activities. The full report apparently was never published. WikiLeaks secured a copy of the full report and quietly released it in 2009.

Publisher: United States Congressional Research Service

Title: AVIATION: DIRECT FEDERAL SPENDING, 1918-1998

CRS report number: RL30050

Author(s): John W. Fischer and Robert S. Kirk, Economics Division

Date: February 3, 1999

ABSTRACT

The federal government has provided large financial resources in support of commercial aviation since 1918. This report details the amounts and types of federal spending that have occurred over this 80-year period. It also discusses some of the issues that have shaped federal policy toward aviation and identifies some of the issues likely to affect federal spending in the future.

(Access the full CRS report at http://businesstravelcoalition.com/documents/1998-crs-study.pdf.)

“A central argument of some U.S. airlines seeking government protection from foreign competition is that the Persian Gulf States have been inappropriately and unfairly helping the Gulf carriers become established with financial aid. What this report shines a bright light on is the simple fact that government assistance has long been provided on a very large scale to airlines around the world, including in the U.S.,” stated BTC Chairman Kevin Mitchell. What’s more, the U.S. Government, fully cognizant of this reality, endorsed an Open Skies policy over two decades ago that, while it provides sufficient flexibility to deal with major market distortions, is not premised on the complete absence of government aid to aviation, much less on some subjectively-perfect level playing field,” added Mitchell.

CRS REPORT QUOTES

“In the early years of federal support for aviation most assistance came in the form of designated subsidies to foster the growth of what has become the commercial aviation industry. This was in keeping with the aviation sector’s embryonic nature. As the industry has matured, the level and expense of the federal effort has expanded and spending for capital infrastructure and operational activities have become specific components of annual federal budgets.”

“In the intervening 80 years the federal government has spent $155 billion in support of aviation activities.”

“The aircraft loan guarantee program began in 1957 and expired in 1983. During its lifetime, the program authorized federal guarantees of up to 90 percent of private loans for the purchase of equipment by local, short-haul, and feeder air carriers.”

BTC observes that since the 1999 CRS report, the U.S. airline industry has benefited from billions of dollars of additional federal, state and local government subsidies and bailouts and unique structural advantages. U.S. carriers can reduce (and indeed have significantly) expenses in bankruptcy proceedings, shift pension liabilities to the Pension Benefit Guaranty Corporation, benefit from general revenues from the U.S. Treasury that flow into the Airport and Airway Trust Fund and avoid ticket taxes on billions of dollars in revenues through ancillary fees and carrier-imposed charges.

Importantly, the industry has been consolidated to the very powerful BIG 3 mega airlines and they operate in and from the largest aviation market in the world and the most important and stable country, and a country whose greenback serves as the world’s reserve currency. The list goes on and on and U.S. airlines have logically and deftly leveraged all these powerful advantages.

However, in this instance, asking the U.S. government to protect them from new foreign entrants would only help Delta, American and United – the three most profitable airlines in the world – at the expense of all manner of commercial and cargo airline consumers as well as numerous other Open Skies stakeholders.

Read additional statements and analyses on this issue at http://BTC.travel

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Background Note: Business Travel Coalition (BTC)

MISSION

Founded in 1994, the mission of Business Travel Coalition is to interpret industry and government policies and practices and provide a platform so that the managed travel community can influence issues of strategic importance to their organizations.

BACKGROUND

With support from CIGNA Corporation and 16 other major corporations, Kevin Mitchell formed the Business Travel Contractors Corporation (BTCC) in 1994 as a corporate buying group to advance fundamental reforms to the airline industry distribution system. The broad industry shift to net airfares and travel agency fee-based pricing during the 1990s are initiatives that BTCC advanced. (See 10-year anniversary article here.) (See 15-year anniversary article here.)

In 1996 BTCC was rebranded as Business Travel Coalition (BTC), an advocacy organization to bring transparency to industry and government policies and practices so that the managed travel community could influence issues of strategic importance to their organizations.

BTC represents the interests of the managed travel community in Washington and Brussels and within the travel industry.

As chairman, Kevin Mitchell writes and speaks on airline competition, travel distribution, passenger issues and aviation system security. Mitchell frequently testifies before the U.S. Congress and other governmental bodies in the U.S. and abroad. Additionally, BTC publishes its daily news compendium Travelogue in 80 countries and provides the industry with a variety of business services.

Mitchell was recognized by Business Travel News as one of the 25 most influential travel industry executives for 1994, 1996, 1997 and 2008 and was designated Man of the Year in 1998 by the Commercial Travelers Association and Person of The Year for 1998 and 1999 by Travel Agent Magazine. Mitchell is sought after for commentary on travel industry developments by all manner of news outlets.

Mitchell is a graduate of Saint Joseph’s University in Philadelphia where he received a Bachelor’s Degree in International Relations. Mitchell worked for CIGNA Corp. for 12 years where as Vice President, Human Resources and Services his responsibilities included:

Corporate Travel 

     Corporate Aviation

     Meetings and Incentives

     Event Marketing

     Communications

     Corporate Safety

     Eagle Lodge Conference Resort

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