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Study: Open Skies Agreements Deliver Massive Benefits To U.S. Economy, Job Creation, Tax Revenue—And Airlines

June 24, 2015 Destination North America No Comments Email Email

Two international aviation agreements targeted for “freezing” by major U.S. airlines annually support billions in economic activity and tax revenue and tens of thousands of jobs, according to new research by Oxford Economics commissioned by the U.S. Travel Association.

Moreover, the study measured the considerable fiscal benefit the Big Three U.S. airlines—American, Delta and United—enjoy themselves because of the existence of Open Skies agreements.

Open Skies treaties—essentially free trade agreements for international passenger aviation routes—have come under fire from the Big Three because they claim certain international airlines are encroaching on their market share.

U.S. Travel has vehemently opposed the move to undermine Open Skies on the grounds that the 100-plus agreements, the first of which were signed in the early 1990s, have been a colossal boon to the overall U.S. economy. On Thursday, U.S. Travel unveiled the new research to verify its position.

The study focused on the Middle Eastern carriers Emirates, Etihad and Qatar Airways—the three airlines that would be affected by the “freeze” for which the Big Three are lobbying the U.S. government—but is indicative of the broader value of Open Skies and the dangers of selectively tampering with the agreements.

In 2014, the Gulf carriers brought 1.1 million international passengers to the United States, primarily from underserved markets in the Middle East and South Asia. These visitors spent over $4 billion during their visits to the 11 U.S. cities the Gulf carriers serve.

Spending by those travelers supported nearly 50,000 American jobs, and generated $2.6 billion in labor income and more than $1.1 billion in federal, state and local taxes.

“When the Big Three first embarked on their lobbying campaign against Open Skies, they had our attention because they claimed that their position was about protecting U.S. jobs,” said Roger Dow. “But it took about 30 seconds of reflection to realize that breaking those agreements is likely to have terrible consequences for U.S. employment, and now we have research in hand conclusively illustrating that.”

Oxford Economics’ analysis also found 56 percent of Gulf airline passengers—620,000 in total—transferred directly onto flights operated by U.S. airlines when they arrived. This generated $140 million in revenue for U.S. airlines. Roughly 350,000 of these travelers transferred to flights operated by American, United and Delta.

Oxford’s research also refutes the U.S. legacy carriers’ claims that their passengers are being “stolen” by the Gulf carriers.

The study found that of the 1,700 routes the U.S. legacy carriers and Gulf carriers flew in April 2015, they only competed head-to-head on two routes.

Where they did compete directly, the data shows that the Gulf carriers are serving different passengers. Last year, 82 percent of the U.S. legacy carriers’ passengers flying to the U.S. originated in the Americas or Europe. More than 80 percent of all U.S.-bound Gulf carrier passengers originated in South Asia or the Middle East.

Said Dow: “The travel community weighs every policy proposal against a very basic set of criteria: is it pro-competition, pro-growth and pro-traveler? The Big Three’s move against Open Skies epic-fails every part of that test.

“Moreover, momentum in Washington is starting to turn against them. I implore my friends at American, Delta and United to abandon this folly and invest the resources in far more valuable pursuits, like real investments in the passenger experience that will get more people traveling.”

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