HOW TAXPAYERS SUBSIDIZE U.S. AIRLINES

With an offensively misleading campaign against Gulf Carriers by suspect interest groups, it is time for a counterattack. Not because I love Gulf Carriers and certainly not because I hate U.S. carriers — but because the truth must be exposed. Today’s topic: 10 ways U.S. taxpayers subsidize U.S. airlines.

U.S. Military training pilots

 

The careers of many U.S. airline pilots start in the U.S. military, where they receive world-class training subsidized by the federal government. This saves airlines millions in training costs, shifting the burden to taxpayers.

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Essential Air Service

 

Under this taxpayer-funded federal program, 163 rural communities receive air service that is not otherwise commercially viable. While the goal of linking small communities to larger hubs is admirable, this represents a pure subsidy to airlines who provide this service and is antithetical to “free market” principles.

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Fly America Act

Since 1974, federal agencies have been required to use U.S. carriers for both cargo and passenger transport when Uncle Sam is footing the bill for travel. While codeshare agreements have broadened the definition of what it means to fly on a U.S. carrier, this program has subsidized U.S. airlines for decades.

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Air Transportation Safety and Stabilization Act

 

Don’t forget that after the 09/11/01 attacks, U.S. air carriers received massive taxpayer bailouts in order to survive.

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Airport Construction

 

All those taxes that are embedded into your ticket prices are not the only dollars that go toward airport construction. Take LaGuardia Airport in New York City–the $4BN initial phase of renovation program is being funded half by private entities…and half by the Port Authority of New York. That’s hardly the “free market” at work.

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Chapter 11 (Bankruptcy) protection

 

Consider the immense protection airlines have in seeking bankruptcy protection, allowing them to shed obligations like pension guarantees onto taxpayers. American, Delta, and United have all used U.S. bankruptcy laws to shield themselves from unwanted debt and labor costs. See this WSJ story.

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Federal preemption

If someone rips you off, you can take them to court and sue them. Thanks to federal protections unique to airlines, you cannot seek redress through local and state courts against airlines. You must file a more expensive, time-consuming case in federal court.

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Consolidation

We have shrunk from six major legacy carriers to just three. This has been done with the blessing of the U.S. Department of Justice. Essentially, the federal government has picked winners and losers in the airline industry, rubber stamping an era of mergers with only questionable due diligence on the ramifications to consumers it would have.

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Airport slots/rules

 

Permiter rules and slot restrictions enshrine established legacy carriers and block meaningful competition. Legacy airlines don’t really want “free market” conditions in markets in which they dominate. The result? Higher prices, a backdoor subsidy to entrenched airlines.

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