AviationTrade limits could hurt Open Skies

New nationalism stoking fears of aviation protectionism

New nationalism stoking fears of aviation protectionism
Photo Credit: Senohrabek/Shutterstock.com

When IATA released its latest 20-year Air Passenger Forecast in October, before the election of Donald Trump, it was already sounding warning bells about the potential impact on commercial aviation of global trends toward trade protectionism.

"Economic growth is the only durable solution for the world's current economic woes," IATA stated in a summary of the forecast. "Yet we see governments raising barriers to trade rather than making it easier. If this continues, in the long term it will mean slower growth, and the world will be poorer for it."

IATA projected that under current international trade policies, commercial passenger numbers worldwide would increase by 3.7% per year over the next 20 years, reaching 7.2 billion by 2035. But if protectionism were to ramp up, the airline trade group predicted that growth would slow to 2.5% annually, meaning that just 5.8 billion passengers would take to the skies in 2035.

The victory of president-elect Trump, who made protectionist trade policies a central tenet of his campaign platform, could reinforce IATA's concerns about a rising tide of anti-globalization around the world. Most notably, of course, Trump's win followed the U.K.'s Brexit vote in late June.

"Economic growth is the only durable solution for the world's current economic woes." -- IATA

Meanwhile, nationalist candidate Norbert Hofer in Austria is locked in a tight race ahead of that country's Dec. 4 presidential election.

Nationalist movements are also gaining momentum in other European countries, including France, where Marine Le Pen, leader of the far-right National Front party, is seen as a top contender in France's presidential election next year.

It remains to be seen how Trump will govern. But barring an about-face, Seth Kaplan, managing partner of the newsletter Airline Weekly, said his election likely signals the end of the Trans-Pacific Partnership, a trade deal that, by increasing global commerce, would likely have bolstered international business travel.

Protecting the legacy airlines

As president, Trump will also get to consider a long-standing push by American Airlines, Delta and United for the federal government to block U.S. expansion of the Gulf airlines -- Emirates, Qatar and Etihad -- that the Big Three U.S. legacy carriers allege are receiving illegal subsidies from their governments.

Indeed, the Partnership for Open & Fair Skies, an advocacy group made up of unions and the Big Three, sounded emboldened by the Trump victory in a post-election statement.

"The Gulf carrier subsidies threaten the jobs of 300,000 U.S. aviation workers and the American aviation industry as a whole, and we are optimistic that the Trump administration will stand up to the [United Arab Emirates] and Qatar, enforce our trade agreements and fight for American jobs," the group said.

A Trump administration might also have a say in the long-delayed application of discount operator Norwegian Air Group for a foreign air carrier permit for its Ireland-based subsidiary.

Uncertain future for Open Skies

The rising tide of global protectionism could also shape broader airline issues. As Brexit moves forward, the U.K. must work out new aviation agreements with the EU and potentially with the U.S.

Britain could end up remaining a party to the U.S.-EU Open Skies agreement, a standing similar to other non-EU countries such as Norway, Iceland and Switzerland.

But if not, it would likely be up to the Trump administration to negotiate a U.K.-U.S. Open Skies deal.

If the harshest protectionist instincts were then to prevail, said analyst Bob Mann of R.W. Mann & Co., such negotiations could spell difficulties for the joint-venture alliances between American and British Airways and between Delta and Virgin Atlantic.

While Mann didn't suggest that such an outcome was likely, Willie Walsh, who heads British Airways' parent, International Aviation Group, did warn at the World Travel Market in London a day before the Trump election that trending anti-globalization sentiments could hamper market access for new-entry, low-cost airlines, according to an Air Transit World report.

Emirates president Tim Clark expressed similar sentiments at the London show.

Kaplan said he did not believe that more protectionist-minded leaders, including Trump, would roll back existing open skies agreements, which have steadily liberalized the world's air travel since the early 1990s. But protectionist leadership could hamper progress on future aviation deals.

For example, early this month, the DOT approved American Airlines for the last flight allocation into Beijing or Shanghai that is available to a U.S. carrier under the current U.S.-China aviation agreement. Trump's election could delay a liberalization of that agreement.

"You would have to imagine that is now further in the future than it otherwise would have been," Kaplan said.


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