The Big Lie The US Legacy Airlines Want You To Believe


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The big 3 US legacy airlines are continuing their relentless battle with the big 3 Middle Eastern carriers and are attempting to persuade the US government to impose restrictions on the likes of Etihad, Emirates and Qatar Airways. The US airlines believe that the Middle Eastern carriers have an unfair advantage thanks to government subsidies they’ve received (according to the US carriers) and they’re doing everything possible to persuade lawmakers and the public to take their side.

The problem is that, in attempting to get the public on their side, I think the US carriers are actually doing quite a bit of lying.

Let me get one thing out of the way before I go any further with this blog post – I don’t care how you feel about the battle between the US legacy airlines (US3) and the big three Middle Eastern carriers (ME3). I really don’t.

I’m not typing this to persuade anyone that their side of the argument is right or wrong and I’m not trying to persuade anyone who, up until now, has shown little interest in this case that now’s the time to sit up and take notice.

What I’m trying to do it to take one significant part of the argument being used by the US legacy airlines against the ME3 and show what a staggeringly hypocritical stance it is. More importantly, not only is this part of the US3’s argument hypocritical, it also attempts to paint the US3 in a light that’s clearly untrue.

Image courtesy of Wiki Commons Media

It’s All About Protecting US Jobs

If you’ve read any of the statements issued directly by the US legacy carriers or the statements they’ve issued through their mouthpieces like “Americans for Fair Skies” or the “Partnership For Open & Fair Skies” you could be forgiven for thinking that the US3 are on a brave quest to protect US jobs.

It’s common to see headlines like “Trade Cheating by Three Gulf Carriers Threatens More Than 25,000 Illinois Jobs” or statements that read:

The UAE and Qatar’s trade violations are a major threat to the jobs of thousands of Illinois workers

[A] net 1,500- U.S. based jobs are lost for every route lost or forgone to one of the Gulf carriers (source)

[F]or every international flight that U.S. airlines are forced to close due to subsidy-fueled Gulf carrier expansion, economists estimate that over 1,500 American jobs are lost (source)

Wow. That’s not at all good is it?

Just by reading statements like those you could be forgiven for thinking that the US3 are the last line of defence against a huge loss in US aviation jobs.

You may even think that it’s important to support corporations like the US3 as they’re the only ones looking out for the good ol’ jobs of the US aviation worker…..except that’s not really true.

Not only is it not true, the reality is very different.

You see, the US3 are great at banging the drum of “protecting US jobs” when they think it will work as a rallying cry to their cause, but they’re not really quite so good about protecting US jobs in reality.

Allow me to explain.

Aircraft Maintenance

Take a look at this picture:

I took this picture last week and it shows an American Airlines aircraft in a hangar and a United Airlines aircraft waiting in line behind it ready to enter the hangar too.

Nothing wrong with that at all…..except for the fact that I took this picture in Hong Kong.

Since 2012 American Airlines has used HAECO in Hong Kong for all its maintenance work on its Boeing 777 aircraft.  Also, per this HAECO newsletter, the Hong Kong facility is “currently working on a cabin retrofit programme for American Airlines’ entire Boeing 777-200ER fleet”.

That’s strange isn’t it? Boeing aircraft are made in the US so you’d think that the US would have workers capable of maintaining and refitting the aircraft their country built….and it does.

The job of maintaining American’s 777 fleet used to be performed at Fort Worth’s Alliance airport but, in 2012, American’s management decided that it would be more economical to outsource all the work to Hong Kong where it still takes place to this day.

An American Airlines 777-300ER

I’m not sure when United Airlines started using HAECO in Hong Kong but this newsletter from 2013 discusses the work HAECO does on United’s Boeing aircraft (yes, those would be US built aircraft once again), this article discusses work that HAECO has done on United’s shiny new Boeing 787 Dreamliners and the fact that I saw a United Aircraft at HAECO last week shows that the relationship still exists.

The same newsletter from 2013 also mentions similar work has been done for Air New Zealand and….wait for it…Delta!

Wow! We have a hat trick!

The three airlines that would have you believe that they’re all about protecting US jobs all outsource maintenance work, on US built aircraft, to Hong Kong.

Let’s be clear here. Yes, HAECO does have facilities in the US but this work is being done specifically at the company’s Hong Kong base.

How is that in any way good for US jobs?

That’s not all….not by a long way.

Aircraft Purchases

In 2011 American proudly announced “the largest aircraft order in history” and, because we all know how patriotic American Airlines is and how invested the airline is in “protecting US jobs”, clearly that world record deal centers on doing just that….right?

Erm…no. No it doesn’t.

Rather than hand the massive ($38 billion) deal to Boeing (you know, the corporation based in the US which employs thousands of US workers) American split it between Boeing and Airbus (the European aircraft manufacturer).

Of the 460 single-aisle planes ordered, 260 were from the Airbus A320 family and 200 from Boeing 737 family (link to AA press release)

A European-built American Airlines Airbus A321 at LAX

That’s interesting. It would appear that American Airlines is all about “protecting US jobs” right up to the point where that aim no longer suits it. 

American Airlines isn’t alone in this by the way…oh no.

Delta, the airline that makes the most noise about US jobs and the evils of the Middle Eastern carriers, is just as bad.

Delta had an order for 18 Boeing Dreamliners that it inherited from its merger with Northwest but, in December 2016, the order was cancelled. That would be an order for 18 aircraft designed and built in the US by US workers.

Delta’s European-built Airbus A350

At the same time as the Boeing order was cancelled Bloomberg news noted that Delta was pressing ahead with its order for 25 European built Airbus A350 aircraft and 25 Airbus A330 neo aircraft.

It would seem as if Delta is indeed interested in supporting jobs in the aviation industry….just not ones in the US.

The Truth

The US legacy airlines couldn’t care less about US jobs unless shouting about them helps to achieve their business goals.

Whether anyone likes it or not the US airlines’ responsibility is not to protect or to create US jobs it’s to create wealth for their shareholders – that is the legal duty of their boards of directors. If creating wealth for their shareholders happens to coincide with protecting a few US jobs then that’s just a bonus.

As the outsourced aircraft maintenance contracts and the aircraft orders show, the US airlines are only interested in good deals they can make and the profit figures they report to their shareholders – everything else is secondary.

If the US3 were serious about protecting US jobs they’d do their maintenance at home and buy Boeing aircraft rather than Airbus…but they don’t.

Try remembering that the next time a US legacy airline tries to get you all riled up about foreign airlines being a danger to US jobs.

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29 COMMENTS

  1. Umm…it is not a lie that they will go bankrupt competing against a government, that is a virtual certainty. Why does it seem every blogger is willfully oblivious to the fact that they can’t find financials, statements of equity, tax returns or any financial data on the ME3? You all seem extremely convinced you are right for folks who could not have possibly gotten access to the data that it would take to be so certain.

    • Firstly you don’t appear to be dealing with the subject matter at hand. I’m discussing the fact that the US3 do not care about US jobs they care about their bottom line – their willingness to outsource maintenance that was once done in the US and their willingness to buy foreign-built aircraft proves that.

      Secondly, on just how many routes do you think the US actually compete with (or want to compete with) the ME3 – it really isn’t that many.

      Thirdly – if they’re really in so much danger of going bankrupt how come two out of the three US3 carriers keep banging on about the record revenue/profits they’re making? Are they lying or are you wrong?

      • 1) You are correct, I am not addressing the maintenance and plane purchases you are talking about because that is a straw man argument that you set up just so you can knock it down. Those are not the jobs the US carriers are talking about, and therefore not a lie. They are talking about the jobs that will be lost at THEIR companies when they eventually go bankrupt trying compete with perpetual loss machines that can pump oil money out of the ground to support indefinite losses. That is not fair competition… that is a foreign government stealing our private industry by “dumping.”

        2) The fact that they don’t directly compete on many routes is a support of my argument, not yours. The US carriers have purposefully withdrawn from competing on routes where it is going to face losses due to capacity dumping. The ME3 have already succeeded in those routes and have tipped their hand of their intentions.
        .

        • Claiming that I’m making a straw man argument is utter nonsense.

          The US3 aren’t making any differentiations when telling the US public that they’re in this fight to “protect US jobs” – they’re deliberately scaremongering to get people on their side.

          Interesting how they don’t mention the jobs created/protected by the ME3 ordering Boeing aircraft.

          Interesting how they fail to mention the jobs they themselves have shifted abroad to meet their own ends.

          Interesting how they don’t focus on all the government aid they themselves have received since they came into existence.

          Interesting how they don’t mention how they wouldn’t exist had it not been for generous US bankruptcy laws that allowed them to foist their pension liabilities on to the US taxpayer.

          You talk about “inconvenient truths”….well there’s four of them right there.

          The US3 like to talk about wanting a level playing field when in fact what they really want is all the advantages for themselves and the ladder then pulled up before anyone else can take advantage too.

          The fact remains that the US3 are painting themselves as defenders of the US aviation worker while the reality is that they’ve done just as much as anyone to kill jobs in the the industry.

          This is hypocrisy of the highest level and it’s sickening to listen too.

          • So in your eyes there is some kind of equivalence between bankruptcy events and bailing out pensioners and the pouring of $150 billion of capital into flooding global aviation routes with fancy planes?

          • First of all this entire blog post was written to expose the lie that the US3 are all about protecting US jobs – nothing else.

            You seem to be very keen to move away from that point and focus on the subsidy issue which I deliberately didn’t touch. Any chance you agree that the US3 aren’t the knights in shining armour they paint themselves to be?

            That aside let’s examine what you just wrote:

            You’re choosing to use a bleeding heart story to justify why it’s ok for the US3 to have received state-sponsored aid while at the same time bashing the ME3 for apparently doing the same.

            So let’s expand on that shall we.

            Are you saying it’s ok for the US3 to receive state sponsored aid to support US citizens but it’s not ok for the ME3 to receive state sponsored aid to support theirs?

            Because that’s exactly what it sounds like you’re saying.

            Let’s take the subsidy thing a little further.

            How come it’s ok that Delta got it’s hub in Tokyo thanks to the spoils of war following WWII?

            How come it’s ok that Delta gets state subsidies for its oil refinery in Pennsylvania?

            How come it’s ok that all of the 3 US legacy carriers get state (and sometimes government) subsidies to keep certain domestic routes open?

            All three legacy carriers are where they are today thanks to state and federal subsidies (in various guises) and now that they’re doing just fine (and in some cases gone through multiple bankruptcies to ensure that they’re just fine) they don’t want any other airline to get one iota of help.

            Another brilliant example of hypocrisy.

            Lastly….if the ME3 really are such a huge danger to world aviation why is it only the pathetic US legacy airlines complain ing about them and begging the federal government to help them out?

            The ME3 fly many more routes into Europe and Asia than they do to the US and yet I don’t hear Air France, Lufthansa, Singapore Airlines, Cathay Pacific or any other carrier in those regions bleating on about how unfair everything is?

            The fact is that the US3 are acting like spoiled little brats and the sooner they’re slapped into line the better.

          • Your article is saying they are lying about caring about US jobs. I’m pointing out that the jobs they mean are there own, not the jobs you are pretending they are talking about. That’s it. It gets into subsidies because that is the reason they will go under.

          • The other major thing you seem to get wrong is you think because the company is still called Delta, that you should be counting things that happened decades (and several bankruptcies) ago.

          • So, by that argument, it’s ok for the US entities to have been subsidised in the past (and therefore, presumably, have big advantages over their competition) but we can’t possibly have foreign entities subsidised now because that scares the poor defenceless US3?

          • The owners of Delta today are not the owners that received any of the benefits you described. That is like saying your house was subsidized because the owner before you got a loan from his father to buy it.

          • 1) You’ve already admitted that the US government was forced to bail out the pension schemes of the US legacy airlines so that their workers and pensioners didn’t lose everything…so how is running your business into the ground (on numerous occasions!) in line with caring about your workers?

            2) In no statement issued by the US3 (or their mouthpieces) do they limit the jobs they care about to their own workforce – they need as much of the public as possible to support them so they’re very careful to make it seem as if it’s jobs everywhere that are on the line.

            3) US airlines went under without out the help of the ME3 on multiple occasions in the past so it doesn’t look like they need any help doing that.

            Also, how do you reconcile the record profits at least 2 of the US airlines are currently making and the fact that no other major airline seems to be complaining about the ME3’s existence with the idea that US airlines are going to go bankrupt.

            Don’t get me wrong – I’m perfectly happy to believe that one or more of the US3 will eventually go bust….but based on past history it will have nothing to do with the ME3 and everything to do with the stupidity of management (and possibly even the unions).

          • “The owners of Delta today are not the owners that received any of the benefits you described. That is like saying your house was subsidized because the owner before you got a loan from his father to buy it.”

            The is an entity called “Delta” in existence today because of bailouts and subsidies received in the past and subsidies being received today. Period.

            The same is true of the entities called United Airlines and American Airlines.

            Without government aid and government protection not one of the US3 would be in the position it is in today and none of them would be around to have owners in the first place.

            If I ran my business like the US3 have run theirs it wouldn’t be in existence today (in any guise) yet thanks to government intervention all of the US3 survive.

            Also, if Delta, United & American were really in favor of the “level playing field” they so often mention, why don’t we go for a truly level playing field and allow foreign airlines to fly intra-US?

            Presumably you’re not suggesting that all foreign airlines are subsidized so why don’t we let the likes of Cathay, Singapore, Qantas, JAL, ANA, Korean etc…(you know, the airlines that actually offer a decent product and service) fly within the US and compete directly with the dinosaurs we have to put up with today?

            It’s funny how everyone is in favor of a “free market economy” or a “level playing field” right up to the point where that freedom or levelling effect impacts their bottom line.

          • You don’t seem to appreciate the difference between subsidization as a lifeline versus subsidization as a weapon. Subsidization that did not lead to dumping is fine. The ME3 are pouring $100 billion new money in coming years that is not under any circumstances going to be profitable other than monopolization.

          • Oh come on…you can do better than that! You’re now saying that only the kind of subsidies that work for the US3 are ok while all others are not! Either all government subsidies are bad or none are….you and the US3 don’t get to choose which ones you’re happy to approve.

          • I mean, I know you think this is all theoretical and everyone has an opinion, but it really isn’t. This is a very common occurrence in international trade, and dumping in the hopes of someday creating a monopoly has happened all throughout history. We know what it looks like, we know how to deal with it…and it will be dealt with.

          • Funny how the US3 aren’t worried about the very real anti-competitive monopoly they have right now in the US (one built out of mergers pushed through thanks to millions of dollars spent lobbying successive US governments) but they’re not so happy about a completely hypothetical monopoly (which no other major airline appears to be worried about) that they claim will work against them.

          • See again, you are casting an aspersion on them based on the false accusation they have a monopoly. At best it is an oligopoly, but the key behind a monopoly or oligopoly is pricing power and I’m sorry but that is absolutely not the case. If they raise prices they will lose business.

          • To whom are the US3 going to lose business on the super-premium transcontinental routes?

            To whom are the US going to lose business on premium cabin sales?

            The US3 have intra-North America route networks like no one else – there is no other airline that can compete with them.

            With a bit of disciple (which luckily for us they all lack) they could easily jack up prices without overtly colluding…an their CEOs have even alluded to this in the past.

          • Are you seriously arguing they have monopoly pricing power? If so, they would be the first monopolies in the history of the world to trade at a 9 PE ratio. If you truly believe that, you should put every dime you have and can borrow into airline stocks.

        • No, I’m suggesting that if they had any discipline whatsoever (which I’ve already pointed out that they do not) they could increase prices.

          Anyway – good job of changing the subject.

          What happened to the argument of “some subsidies are ok just not the ones the ME3 are getting (allegedly)”?

          What happened to the denial that the US3 have been given and are still getting subsidies to this very day?

          What happened to the argument that the US3 are truly concerned about their workers….so much so that they’re killed off more jobs through mismanagement, bankruptcies (that the government then had to help them out with) and mergers than the ME3 could ever manage.

          How about discussing how Delta doesn’t complain about its partner airlines (in China and Italy being subsidised to an enormous degree)?

          How about discussing why American is more than happy to partner with Etihad and Qatar while bleating away about how bad those airlines are?

          The US3 lie and lie and lie and cry and cry and cry not because they can’t compete with the ME3 financially….but because they can’t compete with them (or the likes of Singapore, Korean, JAL, ANA etc…) on quality of product offered.

          What the US3 really want is for the government to put barriers in place for other airlines (and you’d better believe they’d love the barriers to apply to every airline not just the ME3) so that they don’t have to worry about competing on quality…because they wouldn’t know quality if it bit them on the ***

          • Oh, it’s about discipline? I didn’t know there was a way to discipline your business into monopoly pricing power. I guess I was absent that day in B-School. Let’s just agree to disagree.Asking me what happened to the argument 6 times is clear we are just descending into ranting at this point.

          • I assume you’re being obtuse deliberately – by “discipline” I was referring to capacity discipline that the US3 have talked about over and over again.

            I asked about the 6 various arguments (again) because you’ve failed to explain how any of those points ties in to the picture the US3 are attempting to paint.

            There isn’t a rant in there….just incredible frustration that propaganda and lies seem to be fooling some of the public….including you.

          • It’s all good bro. I get it. You are convinced and I failed to convince you otherwise. I would only recommend reading up on international trade dumping and predatory pricing. Or even the EU’s beef with China labeling them as a non-market economy, that is a similar situation.

      • 3) The “they are profitable now so what’s the problem” argument would be a good argument if it weren’t for the inconvenient fact that there is going to be a tomorrow. With 500 planes on order, the ME3 are about to flood routes across the globe with unprofitable capacity, and the US carriers see the writing on the wall. In all fairness, they are right. It is not fair. How can 3 companies that have never turned a profit raise the capital to buy 500 more $200 million planes on the strength of their financial performance? (that’s 100 billion dollars total capital by the way). That is not fair competition, that is a government making the strategic decision to direct its national oil wealth toward taking over the global aviation industry against private enterprise that it knows cannot match its resources.

    • Yes, I do know that. As of this year it employs under 1,000 workers…which leaves just the 70,000+ non-US based Airbus employees in countries like France, Germany, Spain and the UK.

      I’m pretty sure most of them aren’t US citizens but they are still no doubt very grateful to have their jobs supported by the US3.

      Interestingly the plant was opened in 2015…..which is quite a few years after American Airlines decided to give over half of its huge order to a non-US corporation. I doubt that the US jobs created in Alabama played any part in American deciding not to buy Boeing aircraft.

  2. The US airlines convinced the government to ban laptops on the ME3 ( and a few others ). Now it’s gone.

    The US airlines are all beneficiaries of taxpayer funded subsidies when they were baled out of bankruptcy.

    The US airlines told us when they all merged ( remember Continental, US, Northwest, America West et al ) it would not lead to job cuts. Let’s look at the numbers. Show them for the liars they are.

    The US airlines continue to abuse us as customers and passengers by reducing seat size, reducing service, increasing fares, so what do they expect us to do? Put up with it? Of course we will look elsewhere.

    I flew American the other day from LAX-DFW-LIR. In Business. The flight attendant to LIR were so grumpy and hagged it was incredible. By the time they got to our seats 1J and 1K they had run out of meal options. There was only 12 seats in Premium and they still could not offer a choice. And the way the flight attendant handled it was appalling. She was extremely rude. “That’s it, the salad or nothing”. They were her exact words to a Premium paying passnger. I was going to say something but the poor darlings might have accused me of terrorism. I thought to my self at the time – imagine a flight attendant on Qatar saying that to a premium paying customer. He / She would be fired. The old-bag from AA should be fired too.

    So the American carriers should shut the hell up, stop complaining, whining, bitching like stuffed pigs and lift their game. Get rid of the old stewardesses and stewards, fire the damn lot of them, start again with a young, fresh team happy to be there, especially for the high paying Premium passengers.

    Order some new aircraft and compete. It’s what America is famous for.

    I am sure Mr Al-Baker knows about Americans service agreements in HKG, but that is gold. What hypocrites they are.

    • I would agree with you Robbo, but…. Where exactly do companies that have gone bankrupt multiple times over the past 50 years raise the $100 billion it would require to even match the 500 new planes the ME3 have on order? Hi Mr. capital markets, I’m AA, DL and UA, together we have a combined market cap of $80 billion but would like to borrow $100 billion so we can buy new fancy planes to compete against the oil wealth of the entire gulf region. How’s about it?

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