The fight between the US carriers and the Middle East carriers is just starting to ramp up, but people are quickly taking sides. As you saw in my lukewarm reception, I think there is merit to what the US carriers are saying but outside of revisiting fifth freedom rights, it’s hard to see how any other restrictions would make sense. Now that the cards are on the table, we’ll see different defenses formed to combat the accusations. While I’m sure some will be better than others, none will be worse than the argument that US carriers should just improve their product and win on that basis. That’s just not going to happen. Nor should it.
The Chairman and CEO of Emirates (and pretty much half of everything in Dubai) has said “offer the best to the passengers and people will fly with you.” Yeah, sure. If you offer me the best then I’ll take it. Wait, I don’t have to pay extra for it do I?
The answer with the Middle East carriers is no. They can keep their costs much lower, and they don’t have the same level of pressure to make a profit. Both Qatar and Etihad in particular will just get more money pumped in from the government. No problem.
These airlines can spend a lot more on things that people might like but won’t influence purchase decisions. So they spend the money and offer tickets for the same price or lower than what airlines offer today in the market. If you’re a passenger that sounds great.
But should American carriers “up their game”? Yes, to an extent, and they have, especially in the premium cabin. Look at what Delta has done by installing flat beds with direct aisle access in business class on its long haul fleet. Look at American doing the same thing. United has been quietly investing in everything from seats to upgrading meals and lounges. In coach there’s been investment as well, particularly by Delta. But these investments only make sense if passengers are going to pay for them. That does mean full flat beds up front are a necessity. Emirates still hasn’t even done that. But does it mean providing limos to every passenger and free hotels on overnight connections? No, it doesn’t.
The other issue, of course, is labor. Qatar’s CEO is incredibly outspoken about his anti-union stance, and he can do that because he lives in Qatar. He can fire people without cause and he can impose strict rules that govern their behavior even off the clock. He can really do whatever he wants in that regard. In the US, that simply can’t happen. It doesn’t matter if you’re anti or pro-union. The rules are the rules, and you can’t just fire people because they’re too old or too large or, incredibly, just too lazy to properly do the work. It’s not how things work here. The airlines might like more flexibility but they will never get anywhere near what can be done in the Middle East.
Could or should a US carrier become like an Etihad or Qatar? No. First of all, with the way labor rules work in the US, they’re just not going to be able to provide the same kind of service as foreign carriers. I mean, I guess they could if they paid a ton of money to get all the angry, disgruntled people to leave on a regular basis but that gets us to the larger issue. US carriers have to create a business that’s profitable (or at least tries to be). Costs are inherently higher for US carriers than they are for Middle Eastern carriers thanks to structural differences. And if costs aren’t low enough to make a profit, they can just get in line for another cash infusion in the Middle East. So for the US carriers to match what those carriers do means they’ll have to charge more. And while some people will always pay more for quality, they’re not going to pay the US carriers significantly more to get the same level of service that the Middle Eastern carriers can provide.
So US carriers are right to focus their investments in areas where people are going to be willing to pay for improvement. It’s not like they’re sitting still as the Middle East carriers might have you believe, but they’re not busy lighting money on fire to match a Middle Eastern product that they could never offer at a competitive fare. Nor should they.