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   Vol. 16 No. 33
Wednesday April 5, 2017

Trump Effect Pt. 4 - Trump & The Airlines
Trump Effect & The Airlines
     Is Anybody Happy?
     German Chancellor Angela Merkel (L) with President Donald Trump at their joint press conference recently. Now with the age-old question of subsidies and airlines versus trade again in the spotlight, many wonder if a balance will be struck.

(Part Four Of An Exclusive Series)—It’s been almost three months since President Trump took office and he is 100 percent focused on his three primary goals: security, improving the U.S. economy to at least a 3.0 GNP, and revitalizing infrastructure.

On The Job Lessons

     President Trump is learning how to operate with the political system, as was evident in his recent failure to overhaul the U.S. Affordable Health Care System called Obamacare.

Impact On Airlines

     The three goals and their many aspects will have a direct effect on the airline industry. In my previous articles I have covered the Trump Administration’s goal of improving the U.S. economy by discussing the possible implications of trade, increased U.S. jobs, and the effect of the U.S. dollar on the airline industry.
     In all of this I strived to remain neutral and cover the facts as I know them and list both the possible positive as well as negative effects of these policies on our industry.
     In this article, I will attempt to cover the possible effect of President Trump’s “Make America Great Again” efforts on airline routes and jobs.
     To do this, I will cover two areas that U.S. airlines have been complaining about: foreign airline government subsidies and the U.S. government’s open skies policy.

Mums The Word

     The airlines have been relatively silent about Airline Alliances.
     One could argue that these two complaints by U.S. airlines negatively affect U.S. jobs, industry growth, and airline profitability.
     On the other hand, one could also argue that these help U.S. airlines by extending their route coverage, lowering their costs, and increasing their profitability.

Subsidies Same Old Song

     Ever since I started in this business in the 1960s, there have been complaints about foreign governments’ subsidies through direct or indirect ownership of their national carrier.
     Over the years, direct government ownership of the national carriers has been reduced.
     But today there are renewed claims that some carriers are subsidized directly or indirectly by their governments through lower fuel prices, anti-union labor laws, lower airport landing fees, better gate position, lower pilot and cabin crew costs as well as lowering of other airline labor costs.

Like It Is Over There

     When it comes to doing business, the laws and policies of respective home markets drive all of the above listed activities directly or indirectly.
     It is claimed that, as example, the carriers can charge lower ticket costs than U.S. airlines and therefore have an unfair competitive advantage.
     If one read my last article on trade, one could draw the same conclusions for China’s advancement on trade.
     But, unlike what is provable about China’s trade advantage, for years U.S. airlines have been trying to prove the existence of direct and indirect subsidies for some foreign national carriers without much success.

The Big Question

     The question is whether the Trump Administration will have a sympathetic ear to these airline complaints and use its power to deeply investigate their effect on U.S. trade; some experts estimate 40 percent of U.S. trade value is transported by air.

Open Skies

     Here again the airlines and their unions have been complaining that giving other countries free access to the total U.S. market in return for access to their country’s total market is not a fair trade.
     So again, just like President Trump wanting “fair” trade agreements, will this administration change its open skies policy for a “fairer deal?”

Trade Policy & The Airlines

     It has been argued by airlines, their unions, and their employees that these policies hamper their international growth and ability to buy long range widebody aircraft, and force them to give lower rates to match the non-U.S. competitor airlines, whom they view as government-subsidized carriers. The alternative option is to withdraw from those markets.
     They claim this costs American jobs as well as growth to the U.S. airline industry.

Questions Questions Questions

     The question is whether U.S. airlines will now push the subsidy and open skies issues through their lobbying efforts and will the Trump Administration weigh the effect of the issues on the U.S. economy and job growth similarly to the way the administration is looking at “Fair Trade”?
     Will Trump even go as far as stating, “Made in America – Flown by America?”
     If the Trump Administration does, what pressure will the foreign airlines and the governments that support those airlines exert?
     And finally, will elimination of these policies weaken or strengthen the present airline alliances?

Manage The Risk

     The risk, which President Donald Trump is certainly aware of by now, is that including these airline matters may overload and slowdown the U.S. administration’s focus on renegotiating its trade routes to gain “fair deals”.
     The biggest question in all of this for U.S. flags (and everybody else) is whether efforts to drive better airline deals will take a back seat to other bigger trade deals that the U.S. Government may consider more important.
     Maybe President Trump should follow the famous reasoning made immortal from the writings of T.S. Eliot:
              “Only those who will risk going too far can possibly find out how far one can go.”

Bill Boesch

Bill BoeschMr. Boesch started his career in global transportation and logistics in 1965 working for Seaboard World Airlines. He later joined Flying Tiger Airlines and Emery Worldwide. Mr. Boesch then left Emery to become Pan American World Airways’ Senior Vice President where he headed both Passenger and Cargo Sales and Operations. He left Pan Am to lead American Airlines’ Cargo operation and retired from AA in 1998. Under his direction American became a world leader in the air cargo and logistics business.
     Mr. Boesch was part of the extensive on site planning and support of the Iraq drawdown, involvement with the Afghanistan operations, and has worked on all aspects of the Civil Reserve Air Fleet (CRAF) from both an airline and government standpoint.
     Mr. Boesch has also served as Chairman of the International Air Transport Association (IATA) Cargo Executive Subcommittee in 1996 and 1997, Vice Chairman of IATA’s Cargo Committee. Mr. Boesch served on the Board of Directors of Air Cargo Incorporated, Air Cargo International, The International Air Cargo Association (TIACA), Envirotainer, Cargo Logistics Solutions, Deutsche Post/DHL Global Mail, al Seqir and consulted for major U.S. companies including Flight Safety.
     Mr. Boesch is the recipient of numerous awards including the Lifetime Air Cargo Achievement Award, the Ellis Island Medal of Honor and various awards from the U.S. Department of Defense.
     Mr. Boesch is presently continuing his work for the U.S. Government and heads up The Council For Logistics Research.

To Read Part 1 of This Series, Click Here
To Read Part 2 of This Series, Click Here
To Read Part 3 of This Series, Click Here
To Read Trump Effect—India Walks Softly Carries Big Stick, Click Here
To Read Trump Effect—Implications Of A Trump Trade War, Click Here

To Read Trump Effect—Trump Across The Pacific, Click Here

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