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27 May 2015 The Honorable John F. Kerry Secretary of State U.S. Department of State 2201 C Street, NW Washington, DC 20520

Dear Secretary Kerry: I am a prominent travel blogger, writing the One Mile at a Time blog on BoardingArea.com since early 2008. Prior to that role , I wrote for FlyerTalk
, TravelSort , and other publications . I have been interviewed by dozens of media outlets, including CNN, Fox News, CBS News, The Wall Street Journal
, Los Angeles Times
, USA Today
, Forbes
, Travel + Leisure , and many others. Since a very young age, I have been traveling internationally . Currently, I fly an average of 400,000 mile s per year and my lifetime travel exceeds three million miles to more than fifty countries on six continen ts. I’d like to provide my thoughts as both a frequent flyer and airline industry watcher on the Open Skies battle between the major U.S. airlines (American, Delta, and United, known as the US3) and the major Gulf States airlines (Emirates, Etihad, and Qat ar, often referred to as the ME3). Industry Inno vation Beginning with some firsthand experience, let me point out that t he ME3 are bringing significant, much needed innovation to the airline market. A case in point, I was on the first flight of Etihad’s wi dely covered new A380. Much of the discussion of this plane centered on The Residence, a 125 square foot, private apartment instal led in otherwise wasted space in the plane’s forward upper deck . I toured this cabin and it was impressive, but I believe the First Class Apartment product is truly revolutionary. It offers both seated and full

- bed accommodations, along with all the technology, perks
, and service you’d expect, including a shared bathroom and shower facility for nine Apartment guests.

The Residence and Apartments offer a different level of luxury in air travel, comparable in some ways to a private jet . Travelers who can afford to fly comfortably and arrive refreshed after long

- haul flights are benef itting from options like these, and s uch h ard products demonstrate the extent to which the ME3 are re

- envisioning air travel

. That they are challengers for high

- end customers is no surprise, and their reputation is well deserved. We can only hope that the ME3 continue to drive innovation in the ma rket. Many commentators, however, are too quick to focus in on these products and whether the US3 can compete with them. This misses the point. The US3 are not taking issue with the ME3 based solely on 10 admittedly breathtaking upscale accommodations on l ong

- haul flights

. There are bigger, more difficult issues at work. Is the competitive field unbalanced? When the US3 first made their Open Skies argument with regards to the ME3, I thought the issues they raised were worth examination. In the intervening m onths, that evaluation has been made by myself and other independent voices across the travel industry with results that disappoint the US3.To point out the obvious, the US3 are the most profitable airlines in the world. Delta is the most profitable (net)

. The ME3 are, by comparison, upstarts

– perhaps attention

- getting ones, but early stage airlines. The survival of the US3 does not hinge on suppression of the ME3’s growth in the US, despite their claims. In fact, they rarely compete for the same routes. And the US3’s willingness to resort to casual mention of terrorism and to engage in what are essentially smear campaigns (e.g., on Islamic values incorporated in their labor practices) has not helped their case. They do have a case, but most who dig into it deeply find that there are holes, as well as limits to what can be done to completely balance the international airline market. The ME3 are run differently. Many Americans overlook or misunderstand this point. Emirates operations may resemble those of a for

- profit business in many respects, but Etihad and Qatar are definitively not for

- profit businesses. They are proud to lose money. Why? Because the goal of both airlines isn’t to turn a profit on flying, but rather to put their countries

– and hub cities

– on the global map and to build an economy beyond oil. Profit is not the motive; building infrastructure for Qatar and the UAE is. Can the U.S. hold it again st the ME3 that the motivating purpose of these airlines is to return a different kind of

“ shareholder value”? We could, but it’ s difficult to see where the payoff is for the U.S. traveler heading overseas.

Government ownership is unfair . Now what ? I readily acknowledge that government

- owned carriers can present a challenge. Ofte n, these airlines are overstaffed and grossly mismanaged, and these factors have generally masked the clear advantages they have in terms of capital, lack of profit motive, regulatory leniency, etc. The reason we are discussing the ME3 is because they have broken the mold, not only in accommodations, but in efficient operations by what is essentially an extension of the government. Is it “unfair” that some Middle Eastern airlines aren’t operating for

- profit, and for

- profit airlines are having to compete with them? Yes. Do the differing labor laws and cost structures put U

. S

. and Europea n airlines at a disadvantage? Also y es. These issues are hardly the only ones that can be cited. Is it fair when a European or Asian airline is bailed out by the government? Is it fai r when a U

. S

. airline is allowed to go through Chapter 11 bankruptcy protection , transfer pensions to a government agency, or receive fuel subsidies ? While I’m all for fair competition, I also believe that competing in the global airline industry means ac cepting that life sometimes isn’t fair and that not all airlines are on a level playing field, whether w e are looking at staffing costs, capital, or profit goals. If the argument is that it’s not “f air” to compete with government

- owned airlines, it hardly seems fair to single out only three . The US3 really should go after all government

- owned airlines, but that’s a slippery slope. At what point do we say that government ownership is no longer a competitive issue. At 50% government ownership? At 5%? Or is t he US3’s real criteria entirely different. Is it acceptable to compete with an airline wholly owned by China as long as it doesn’t represent much of a threat?

T he situation becomes even more difficult to adjudicate as the int erconnections among airlines be come more complicated. Qatar Airways is buying 9.99% of British Airways, which is buying Aer L ingus, of which Etihad

own s 5%. Will British Airways soon be sufficiently backed by Qatar and UAE t o have its Open Skies status subject to question?A lack of vision, not the presence of competition The subject of fairness is important and probably impossible to get entirely right. The US3’s demands to adjust Open Skies, however, truly hinge on whether they are being harmed. The US3 have claimed that due to such unfair advantages, the ME3 is somehow forcing them to leave markets or preventing them from entry. Here is where their claims no longer reflect reality. Take for example India. True, Delta once operated a nonstop flight between the U.S. and India. Delta l aunched a flight between Atlanta and Mumbia in 2008, when oil prices were at their peak. Less than a year later they discontinued the route.
At the time, Etihad and Qatar had a fraction of the service to the U.S. they have today and were not in any way

res ponsible for Delta pulling out of the market. The reason Delta left was that ultra long

- haul flights weren’t profitable at 2008 oil prices. Delta was also unwilling to devote the time to grow demand and market share and determine if the route could become sustainable long term.
The open secret about the Open Skies debate is that the US3 never really saw the potential of India and other markets where the ME3 are now highly successful . For years they were almost exclusively China

- focused. To now blame the ME 3 for their own lack of vision is ludicrous. The US3 are among the largest airlines in the world, and they have many long

- haul, fuel efficient planes on order, like the 787. Are they really trying to tell us they couldn’t make point

- to

- point 787 service b etween the US and India work? And if they can’t, how are the ME3 to blame? The fact is, the US3 aren’t competing head to head against the ME3, with rare exception. They could easily enter these markets, but have chosen not to do so for r easons unrelated to the ME3. If the U.S. government intervenes to freeze growth of ME3 routes, travelers should not expect the US3 to jump in and fill the gap. Trav e lers will lose the convenient connections, affordable fares, and yes, luxurio us accommodations that the ME3 su pply

. Conclusion The US3 have some basis to claim that the ME3 enjoy certain market advantages, but these must be weighed against the advantages that have benefited the US3, such as bankruptcy protections, transfer of pension obligations, and other assista nce that amounts to subsidization. And they must also be compared with all the other imbalances across the international airline industry. Open Skies agreements will never be able to fully resolve unfairness, but they don’t have to. The US3 will continue t o be successful, will probably continue to dominate the market, even with the Open Skies agreements with the ME3 untouched. It will be up to the US3 whether or not to build routes to key parts of Southeast Asia, the Indian Subcontinent, Northern Africa, an d other destinations where the ME3 thrives. They have chosen not to do so in the past for reasons unrelated to the ME3’s success and may hold strong to that choice. In the meantime, it would be a huge disservice to travelers, global interaction, and the ec onomy to back out of the Open Skies agreements with the ME3, as the US3 are requesting. I hope that the U.S. will look very carefully at the basis not only of the US3’s complaints but also seek proof of actual harm before taking such a step.
Sincerely,

Be n Schlappig

CC: Secretary of Transportation Anthony Foxx Secretary of Commerce Penny S. Pritzker