Cork’s US flight path under threat from anti-competitive practices

It appears the planned direct flights connecting Cork with New York and Boston are being put at risk due to a nasty bout of lobbying that unmasks an unedifying aspect of American culture.

This time, we cannot blame local or national politics, airport administration, or any regulatory hold-ups within Ireland.

Instead, it is patently clear that the plan by Norwegian to launch innovative flights from Cork are being banjaxed by plain old anti-competitive practices.

Norwegian Air Shuttle’s plight joins that of three gulf carriers — Emirates, Etihad, and Qatar.

All three bring intense competition to the marketplace and offer products and services that have been unparalleled in global commercial aviation.

Instead of embracing these new entrants to the Atlantic market, forces within the US has aggressively lobbied to keep the Gulf airline ambitions in check.

There are even calls for the gulf carriers’ growth to be stunted and reversed.

Nefarious arguments have been put forward to explain this resistance to competition.

The key allegation is that Gulf airlines receive huge subsidies from their home countries and this gives them an unfair advantage.

A secondary criticism is they are not unionised and this is an affront to practices within American industry.

These arguments are fatuous and risible.

A number of mega airlines in the US exist because of legislation known as Chapter 11.

That law allows companies to effectively go bust, walk away from existing employment, pension, and aircraft ownership contracts, and re-emerge free of those financial burdens to compete actively in the market.

Moreover, those Chapter 11 companies often resurface larger and in more control of key markets than was the case prior to, in reality, going bust.

The charge about non-unionised workforces is also a bit rich coming from a country that has produced a large number of globally successful companies that tend to have few unions.

A cursory glance across a wide range of US IT and other industrial businesses which employ large numbers in Ireland shows a very patchy level of union representation.

So, if what’s good for the goose is good for the gander, why is America listening to voices that are effectively deploying oligopolistic tendencies?

An oligopoly is defined as a market structure in which a few firms dominate.

The US airline industry looks, smells and feels like an oligopoly after a bout of consolidation and Chapter 11 events that have created four giant carriers. These now dominate the lobbyists and powerbrokers that represent the US airline sector which, in turn, has been a vociferous critic of Gulf airlines and Norwegian Air Shuttle.

The ultimate irony in this spat is the fact that Gulf airlines and Norwegian have ordered billions of dollars worth of Boeing equipment to compete in the market.

Boeing is a major US industrial employer yet the airlines that are based in that jurisdiction seem hell bent on stopping expansion by these key Boeing customers.

What Norwegian is trying to do in Cork is truly innovative.

It wants to deploy all new technology narrowbody Boeing 737 Max (which flew for the first time this week) on so-called thin routes such as Cork-Boston.

The Max offers efficiencies that make such a mission viable and if the concept is proven, expect flocks of Max aircraft to ply routes between Europe and the US that were not feasible before that aircraft was invented — by American engineers.

The fight that Norwegian and the Gulf airlines are undertaking reminds me of another battle in the 1970s.

Then, too, it was a new entrant who wanted to offer no frills and low fares in competition with domineering high fare incumbent carriers.

They nearly broke that new entrant’s resolve by using the law, politics, and short-term fare crushing to eliminate his airline.

They failed, and Herb Kelleher went on to create Southwest Airlines, one of the great successes in US airline history.

Mr Kelleher, whose family hailed from Macroom, had to dig deep to stay afloat and today his carrier operates a fleet of more than 700 aircraft.

Joe Gill is director of corporate broking with Goodbody Stockbrokers. His views are personal.


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