In the past you could have made an argument about foreign airlines not being held to FAA standards.
But today, FAA knows exactly which jurisdictions regulate airlines to a comparable standard and which don’t. Denying cabotage and other higher rights to those airlines is 100%, as you say, naked protectionism.
They‘re actually defined by ICAO, a UN agency with states as members. And the actual restrictions are of course a matter of domestic legislation stemming out countries sovereignty over their airspace. These restrictions largely don‘t exist among European Union member states and between Australia and New Zealand.
IATAs cartel like behavior was due to them regulating airline prices and services. This started at a time when governments where still regulating domestic prices thinking that competition on price or service would lead to cutting corners on safety.
You make it sound like that's a US-specific rule, but there's an equivalent rule in basically every country (with some exceptions, the main one being between EU member states).
Given that many foreign airlines are at least in part government owned, this could be problematic. Do we really want Air China to come in and drastically undercut US based carriers in order to drive them out of business?
Sure? If the Chinese government (or more realistically Qatar or UAE etc) wants to subsidize US business and tourism by making it cheaper to fly within the US it seems like a good thing for the US.
As we've seen, anytime an airline raises prices it is pretty easy for another carrier (or even a brand new carrier) to come in and replace them. So it isn't like a hypothetical foreign government owned carrier could somehow make long term sustained profits.
Let them spend their money on that if they are that dumb!
If there was a monopoly situation (which of course is a big "if") then it's reasonable to have laws requiring specific levels of service from the airline. It's fairly easy to write those laws to force the airline to fly.
If the Chinese state intervenes in US domestic travel affairs then the US has the option to nationalize their fleet. All their assets and operational staff are in the US and the staff aren't going to oppose keeping their jobs...
I guess I just don’t get it then. What’s wrong with the following scenario:
1) China comes in and undercuts US prices.
2) US carriers are unable to compete with a business subsidized by one of the largest economies in the world, and China Air forms a monopoly as it drives competitors out of business.
3) China Air folds, leaving the US with no means of air travel at all.
I’m pretty sure China could outlast any airline in the US in a price war, given how thin the margins that US carriers already operate on are. They don’t have to care about making profits—their only goal is to damage the US economy, as on the world stage it’s a zero-sum game. Any damage to the US is a benefit to China.
So yeah, let them. And what effect do you think it will have on the economy when there are literally zero air carriers left in the United States?
Firstly, the US has a bunch of existing laws to deal with monopolies already. Use them.
And if China Air suddenly folds then the US nationalizes their fleet or some similar intervention. Similar has been done during crises in the banking sector, and similar has been done in other countries when an airline went bust.
I think you are probably mostly familiar with high profile cases in the tech space. Outside that the DoJ has a pretty strong record of success in antitrust cases.
Recent examples include:
* A case involving wage suppression by a secret agreement of poultry procesors in Georgia (May 2023)
* A divestment agreement for ASSA ABLOY AB to take over Spectrum Brand Holding Inc.’s Hardware and Home Improvement division
* An antitrust lawsuit against Activision for esport wage surpression.
I mean, in principle I agree with you. If Qantas or Lufthansa can come in and run things cheaper and better, I have no problem with letting them try to compete on the open market. But just like I wouldn’t want a US government owned airline to operate in competition with private carriers, I think it would be unfair competition to allow foreign governments to come in and operate any sort of ostensibly private company in the US, particularly one that provides a critical infrastructure service.
The even more difficult question is how to tell whether a foreign company is truly private or is secretly receiving government funding. With no way to collect tax information or audit the books of foreign companies operating in the US, there’s no way to tell.
I don’t think it’s inconceivable that China could set up a shell company to operate super cheap flights on, say, the west coast, with the express purpose of causing that market to collapse, leading to a domino effect as US carriers start to fold. Maybe it would work, and maybe it wouldn’t, but consider that the annual revenue for domestic carriers in 2022 was about $160 billion, and profit was about 1% of that. Given that China’s military budget is estimated at $230 billion, it doesn’t seem at all out of the realm of possibility to me that they might well try, entirely legally, undermine the US economy.
I’m not saying cabotage laws are the only thing preventing this scenario, or that it couldn’t be dealt with should it become apparent that it’s happening, but I think it’s definitely something to be consider when discussing the possibility of opening up any domestic market to foreign competition.
> I wouldn’t want a US government owned airline to operate in competition with private carriers
Why not? Ironically, that is the ultimate solution to the problem you're describing - if we consider this market so critical and so easily disrupted, then having a government-owned service provider that focuses on long-term availability of basic services over profits is a sensible precaution. Private airlines can still compete by offering more/better service for more money, or cheaper service due to less overhead.
But today, FAA knows exactly which jurisdictions regulate airlines to a comparable standard and which don’t. Denying cabotage and other higher rights to those airlines is 100%, as you say, naked protectionism.