LOVE: JetBlue DOT Filing Details United’s Hypocrisy

Airlines write letters to the US Department of Transportation over all kinds of things. Sometimes they’re dozens of pages long, so you’d think they’d be super boring. Nope. As it turns out, airline lawyers are often extremely entertaining characters who love to throw shade at their competitors, and that often comes through in these letters.

I just came across a letter from JetBlue to the DOT that’s one of the most amusing things I’ve read in a long time. This. Is. Epic. First let’s talk a bit about the backstory here.

Air China’s new Houston to Panama route

At the beginning of February I wrote about how Air China intends to launch a new flight between Houston, Texas, and Panama City, Panama. Air China already flies from Beijing to Houston, so they’d simply add on a fifth freedom flight from Houston to Panama City, and presumably would adjust the schedule of their existing flight by a bit.

Air China intends to use a Boeing 777-300ER for the route. This isn’t Air China’s first fifth freedom flight to Latin America — Air China also flies from Beijing to Montreal to Havana, and from Beijing to Madrid to Sao Paulo.

Not all US airlines are against the Gulf carriers

These two topics may seem unrelated, but in this case they’re not. As most of you probably know, American, Delta, and United, have spent the past several years running a smear campaign against Emirates, Etihad, and Qatar. They argue that because they’re government subsidized they shouldn’t be allowed to compete, and also warn of the dangers of them operating fifth freedom routes.

Recently the US and Qatar reached an agreement, which I’d consider to be a victory for Qatar, since the “big three” US carriers get almost nothing out of it.

But not all US carriers are against the Gulf carriers. Many have realized the benefit of working with them — in particular, Alaska and JetBlue — and actively support their expansion.

JetBlue’s hilarious DOT filing regarding Air China & United

On February 20, 2018, JetBlue’s SVP of Government Affairs and Associate General Counsel sent the DOT a letter regarding Air China’s proposed Houston to Panama City route.

The gist of the letter is that JetBlue encourages the DOT to approve Air China’s route request, even though they have nothing to gain from doing so. Sorry for the amount of this letter that I’m quoting below, but it’s just so good that I can’t not.

Why would JetBlue bother sending a letter about a new route where they have no interest, one way or another? Because they were able to issue one of the most amazing takedowns we’ve seen of US carriers in this debate:

JetBlue is a firm proponent of Open-Skies, which includes unrestricted 5th-freedom rights. Open-Skies is one of the most successful policies ever implemented by the United States and has benefited countless customers and communities across the country. Nonetheless, several U.S. legacy carriers, led by Delta and supported by American and United, have launched unprecedented attacks on Open-Skies agreements and overtly called for restrictions on 5th-freedom service to the United States for certain carriers with whom they are not commercially aligned.

The letter goes on to note that the “agreement” that the US and Qatar came to adds almost virtually no restrictions, which they’re happy about:

JetBlue is pleased that the resolution leaves in place the United States-Qatar Open-Skies Agreement and does not restrict the ability of Qatari carriers to exercise their 5th-freedom operating rights under the Agreement. JetBlue strongly believes that Qatari carriers and Chinese carriers, and indeed, all carriers, should be able to exercise 5th-freedom rights, consistent with U.S. international aviation agreements.

This is where it gets good. Really, really good (bolding mine):

Air China’s codeshare and alliance partner, United, apparently does not share this view. When asked recently if Chinese carriers are subsidized, United’s President answered “I don’t know” and claimed that “they are not allowed to do things like fly [5th-freedom flights].” United’s state-owned Chinese partner now proposes to operate a bilaterally-authorized 5th-freedom flight from United’s Houston hub. When a Middle East carrier, one that is not a member of any of the three major global alliances, launched a Newark-Athens 5th-freedom flight, United, concerned with the competition, complained even though United itself does not operate year-round Newark-Athens service. In the Houston-Panama City market, however, United operates up to three daily year-round flights with approximately 500 seats per day each way. The 777-300ER that Air China will use on the Houston-Panama City route seats between 300 and 400 customers. If the Department approves Air China’s application, United will face competition in an important market. In fact, United will probably face far greater competition in the Houston-Panama City market than in the Newark-Athens market. Yet United is silent about Chinese carrier 5th-freedom growth.

If the United States Government is to adopt conditions for state-owned carriers in one context, it must do the same for similarly-situated carriers in all other identical contexts. Chinese state-owned carriers should not be treated differently than any other state-owned carriers. Ironically, United itself is widely believed to be a beneficiary of Chinese subsidies. One Wall Street airline analyst recently noted the widely-held view that “United received financial support from local [Chinese] governments to serve several secondary Chinese cities.” Some have speculated that United only ended service to secondary Chinese cities once the Chinese government stopped subsidizing United.

Since 2015, when the three legacy carriers began their anti-Open Skies campaign, JetBlue and others have warned that their actions and policy proposals could have unintended consequences. American, Delta and United should not be allowed to create arbitrary standards for three state-owned airlines from the Middle East, which happen to be competitors, and not have those same standards applied to other state-owned airlines.

Bottom line

Thank you JetBlue for the amazing entertainment. Absolutely brilliantly written, and it perfectly captures the issue that many of us have with the argument that the “big three” US carriers have been making. There’s a chance I might support American, Delta, and United if they made a consistent case against government subsidized or state owned airlines. But they don’t. They conveniently target three airlines, while leaving out plenty of other airlines operating similar business models.

Despite their negativity towards United, I love that the message of this is ultimately positive, as they’re sharing their support of Air China, just as they support other airlines.

I should note (since otherwise someone will point it out) that China doesn’t participate in Open Skies, but rather is governed by a bilateral agreement, which includes the right to operate fifth freedom routes. But that doesn’t do much to alter the core of the argument here, which is that the “big three” US carriers supposedly take issues with government owned and subsidized airlines operating fifth freedom flights that are unlikely to make money.

Comments

  1. The ME guys are all transit/connection carriers, while the Chinese ones are home-based and ferrying enormous numbers of people (and growing). If China wasn’t a boom market for air travel then the US legacies would be all up in arms.

    Tl;dr – Chinese economic weight keeps US legacies quiet.

  2. In their ongoing need to urgently seek funding for their overleveraged properties that might to go into default, convicted felon Charlie Kushner and his son Jared apparently pushed the blockade of Qatar — bizarre enough, given that Qatar is host of the biggest US base in the Mideast — leading to the well-chronicled Qatari flight paths reroutes.

    But they somehow didn’t threaten Qatar’s landing rights in the US.

    Oh well, why seek logical explanations from the illogical….

  3. @ADP , brilliant point! there is a fundamental difference between Chinese airlines or US airlines vs. ME3. The former are all national airlines in nature while the latter intended to be international airlines which break current business models.

  4. @ ADP — I’m curious, is the issue exclusively that they’re mostly carrying transit passengers, is the issue that they’re state owned, or is the issue that you perceive they lose money? Because I agree China is carrying mostly local traffic, but I also believe Chinese airlines are mostly losing money and are government owned. If the objection is exclusively that they are mostly carrying international transit passengers, I can think of plenty of other carriers besides Emirates, Etihad, and Qatar where that’s the case. And that’s my issue with the argument by American, Delta, and United — they’re arbitrarily targeting three airlines.

  5. United and Air China are partners

    If traffic rights are given UA CA can benefit each other through cooperation and offering connections at IAH

    Passengers can fly Panama – IAH on CA and connect to UA’s domestic and international network.

    I assume CA and UA have a fare and SPA agreement, and they already have reciprocal lounge and frequent flier benefits etc etc

    If Delta decided to fly from Amsterdam or Paris to Delhi one can be sure there would be no objections – they would cooperate with their partners

    On the other hand if emirates flew to Panama via Houston it would be competition however they wouldn’t benefit from fare and other reciprocity

    Jet blue is talking BS

  6. UA and CA cannot discuss a fare and schedule alignment (which is basically a JV). US DOT prohibits JV without Open Skies.

  7. The key difference here is the fifth freedom is of operational necessity. The tag allows Air China to serve Panama City where it could not reach there directly otherwise. The purpose of the flight is for China to Panama City with some local Houston traffic to support the flight. The purpose of the Emirates Athens to Newark flight was not to serve Newark to Dubai but to capture the New York/NJ to Athens market as they already have plenty of JFK services already.

    Other services that likely have originated for historical services that are mostly O&D as there are now non-stop options to skip the tag include China Airlines (NRT-HNL) and Cathay’s YVR-JFK. Although for Cathay you can argue the HKG-YVR-JFK routing allows for timings that would not be possible with a non-stop.

  8. I personally would love to see full deregulation of the US domestic market to allow foreign carriers to operate domestic flights in the US. Can you imagine if Emirates or others operates coast to coast in the US? Can you imagine JetBlue supporting that? No

  9. The fight with ME3 and their government “subsidies” is more about the vastly superior product offered by the ME3 over the legacy US3. If the ME3 were all of the same caliber of Kuwait Airlines no one would be complaining because no one would be losing high revenue customers to such an airline. The legacy US3 need to step up their game and compete on product rather than continuing to chant the new Doug Parker AA mantra, ‘f*** it, it’s good enough’

  10. This is a nice tongue-in-cheek jab [at United] by JetBlue, ha.

    Okay, and now a little one for you, Lucky. It seems you are the only boardingarea.com blogger who has no link-back to the main parent site on your blog. What did you do to become so special? 🙂

  11. ^^^
    Edit: Never mind my jabber, Lucky, your blog actually has that little tab [to Boarding Area] at the bottom-right of the page. Very interesting/unique web page implementation.

  12. That was amusing, but you hyped it up such that there was no way it could live up to expectations.

  13. @Lucky – In a world where governments view their airlines as tools of national policy and act to support them in one way or another, the salivating prospect of enormous revenue from the noveau riche Chinese is enough to sway the business calculus of the legacies in favoring keeping quiet – they just want a piece of that pie.

    The ME folks (aside from maybe Turkey and Iran) can only use plane orders as aviation-related political chits. It’s interesting to note that after UA’s Dr. Dao debacle, Mr. Munoz flew to China to help smooth matters over – especially given Dr. Dao wasn’t even of Chinese heritage.

  14. It always come down to how much potential business one can get. With China, you have billions of customers. With ME, well, not so much. US3 can afford to offend the ME customers because much smaller and fragmented customer base (and frankly why would they even want to fly on crappy US3 airplanes anyway). China, on the other hand, has US3 flashing dollar (RMB) signs in their eyes. Plus China has a lot more political capital than the ME countries. With US pumping out so much oil and soon to be energy independent, ME countries have a lot less leverage with US government.

  15. Entertainment? Thanks for saying the truth! Maybe some people will finally realize the charade going on behind the US3!

  16. Rob hit the nail on the head with his March 7th post. The issue with the ME3 is that they have unlimited funds from their governments to pour into services and products that are out of reach for airlines that are subject to normal financial and operational principles. The As such, the Chinese carriers do not fall into the same category as the ME3.

  17. When I lived it DC it was near the DOT headquarters and the big three US carriers plastered our metro station (Navy Yard) with anti-ME3 billboards for months on end during 2015-16. Needless to say I was really tired of seeing sad but patriotic pilots claiming their jobs were being jeopardized by the evil ME3. I was thrilled when they finally took them down for someone else’s campaign. Also, I started walking to Eastern Market most days. That’s mostly because the green line sucks at rush hour, not to avoid the ads, but it did have that added benefit.

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