Money & Finance

The Debate & Opportunity: Open Skies

Estimates are that new non-stop service from Orlando to Dubai, which is scheduled to debut next month, could have an annual economic impact of $100 million for the Central Florida area.
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By Carl Kotala

Estimates are that new non-stop service from Orlando to Dubai, which is scheduled to debut next month, could have an annual economic impact of $100 million for the Central Florida area. But the three biggest airlines in the United States are standing staunchly against it.

“We have real high hopes for what this can do for us,” said George Aguel, president and CEO of Visit Orlando. Emirates Airlines will operate the new airline route under the Open Skies agreement the U.S. introduced in the 1990s to improve international travel. However, Delta, United and American – known as the big three, or legacy carriers, among U.S. airlines – have asked the Obama Administration to renegotiate the Open Skies policy based on their claims that Gulf carriers Emirates, Qatar and Etihad have received government subsidies over the past 10 years that allow them to compete unfairly in the global market.

A 55-page white paper, which the legacy carriers say documents the subsidies and unfair benefits Gulf carriers have received, was released on March 5. They are backed by unions representing pilots and cabin crew members. In addition, 262 House lawmakers and 21 U.S. Senators have signed letters to Secretary of State John Kerry, Secretary of Transportation Anthony Foxx and Secretary of Commerce Penny Pritzker asking for a review.

 

Two Sides to Every Coin

A letter signed by U.S. Travel Association President Roger Dow and 23 other national airline, hotel and business CEOs was sent to the administration on June 11, supporting the Open Skies policy. The letter notes that in 2014, the Gulf carriers brought 140,000 international visitors to the United States who generated more than $2 billion in economic output.

“Essentially, almost the entire full breadth and scope of the travel industry in the United States is on the side of the argument for keeping Open Skies just exactly the way it is, and not doing anything to freeze or ratchet it backward as the legacy carriers are proposing,” Aguel said. “I think this is one of the most impactful, unified positions the travel/tourism industry has taken in quite some time.”

Phil Brown, executive director of the Greater Orlando Aviation Authority, said that while international travel represents only 12 percent of MCO’s total traffic right now, it’s growing at a 15 to 20 percent rate with about 4.5 million passengers annually.

“The dominant amount of our international service over the last decade has been due to Open Skies’ growth,” Brown said. “We’ve been able to accomplish that because it’s an economic proposition to the airlines. We’ve got a strong destination, obviously, with tourism, but a growing business side – particularly in the tech sector. Changing the Open Skies policy would inhibit our ability to grow.”

 

Moving to No. 10

Emirates Airlines released a lengthy, point-by-point rebuttal of the big three’s subsidies claims on June 30. In addition to the travel business these international airlines bring to this country, the proposal is beneficial to American manufacturing companies like Boeing. Emirates has an order for 199 new 777 aircraft at approximately $320 million per unit or over $60 billion in economic impact. These aircrafts will help Emirates operate – and add to – its 84 flights each week from nine U.S. cities: Boston, Chicago, Dallas/Fort Worth, Houston, Los Angeles, New York, San Francisco, Seattle, and Washington DC. On Sept. 1, Orlando will become No. 10.

Dwayne Weppler, a public relations manager for the airline, said that Emirates has been booking reservations for the new route for several months. “Passengers are interested in connecting to all parts of Central Florida. Orlando is a business and leisure hub for Emirates passengers,” Weppler commented. “From a business standpoint, Orlando has many meeting and convention centers, making this a great place for passengers from all over the world to connect. Leisure travelers will enjoy the theme parks in Orlando and the bustling entertainment culture that has set this city apart.”

Not only will the flight attract visitors from the Middle East, but the ability to use Dubai as a hub will help Visit Orlando tap into potentially big markets in India and across Asia. Brand USA announced on June 1 that during the fiscal 2014 year, the U.S. welcomed 75 million international passengers with a goal of 100 million international travelers by 2021, which is unlikely if there are changes to the Open Skies policy.

 

When Will the Debate Be Settled?

“I think it will be resolved at some point, but I’m not sure it’s going to be resolved before this administration leaves,” Brown said. “I think it will be somewhere in the next presidential term before it gets resolved because it is a politically divisive issue right now and there are some very well-funded campaigns that are supporting it and there are other folks who are trying to counteract it.

“Our view is that we’ve benefitted from airline competition as epitomized by Open Skies and we’d like to see that continue. It helps us grow, it helps the economy grow and it supports the demand that we know Central Florida has for visitors from all over the world.” 


This article appears in the August 2015 issue of i4 Business.
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