It's Official: US Govt Investigating ME3 Finances
astuteman
RE: It's Official: US Govt Investigating ME3 Finances
Quoting 29erUSA187 (Reply 1):
Here's hoping they find some illegal finances!
Quoting thekorean (Reply 13):
They do not get a dime from the government. It is not a subsidy
If you don't mind me asking, what is the differentiation between a national corporate law that allows a firm to offload a whole load of liabilities onto someone else, and having those liabilities taken off them by government?
The result is the same.
seems like a journey into semantics to me..
Quoting pu (Reply 26):
This "globally central hub" idea is a catchphrase many have unquestionably bought into, which in turn leads them to unquestionably accept ideas like a potential order for 200 A380s without any government help, guarantees or subsidies
presumably this would be more acceptable if it was the same number of seats but on twin-aisle twin engine aircraft...
Quoting toobz (Reply 14):
yet EK, which in your last TR, only delivered half the aircraft the second meal
Wait what, was there a second meal promised at all? There should have been, given that even UA give a second (however pathetic) "meal" (AKA a little cheese thing westbound, a sad little croissant and fruit eastbound).
Quoting BestWestern (Reply 40):
Without the ME3, there is a huge hole in the 787 and 77x sales books.
Addition: Without the ME3, there is a bigger hole in the 77x sales book than there is actually a book. As in I think ~79% of that book is a hole.The 787 would still fare fine as it actually has had strong worldwide interest.
psa188
During the past decade, government approval of airline mergers has resulted in the creation of a customer-unfriendly oligopoly which colludes to offer horrible customer service while nickel-and-diming their customers with endless nuisance fees. Travel writer Joe Brancatelli sums it up the best: "Americans dislike the oligarchy that the U.S. carriers have created and they hate the service and policies that they offer. Moreover, Americans like competition and they love the kind of cut-throat, price-slashing competition the Gulf carriers have brought to air travel."
Before making an issue of potential subsidies to foreign airlines, the U.S. government needs to consider all of the assistance given to domestic airlines. Post 9/11 bailouts and abuse of bankruptcy laws by major airlines immediately come to mind. The United States should open domestic routes to foreign airlines; this might restore some actual competition where none currently exists. The government should NOT respond to self-serving complaints by airlines that cannot compete in the global market place.
Cubsrule
Quoting psa188 (Reply 52):
The United States should open domestic routes to foreign airlines; this might restore some actual competition where none currently exists.
You think EK is going to buy some CRJs to run ATL-CRW? Or are they going to bring 380s to compete with WN on STL-LAS?
Post 9/11 bailouts and abuse of bankruptcy laws by major airlines immediately come to mind.
Please identify all airlines that you contend have "abused" the Bankruptcy Code?
I can't decide whether I miss the tulip or the bowling shoe more
What has any of this got to do with the US other than potentially changing the open skies agreement ?
And why not go after the many, many other airlines that are state-owned?
And why not stop Chapter 11 in the interests of competing fairly?
"Everyone writing for the Telegraph knows that the way to grab eyeballs is with Ryanair and/or sex."
thekorean
Quoting [email protected] (Reply 54):
CH.11 is not a subsidy, nothing unfair about it. European carriers have done it all the time.
Just not under that name.
See Burssels Airlines, Alitalia etc.
yowza
Quoting lightsaber (Reply 22):
My opinion varies on which ME3 airline we are discussing. I think we'll find 3 different answers. One I think will be exonerated. One will be iffy. But I think one is subsidizing.
Spot on. There is the potential for this to shake out as a huge win for EK, a partial win for the US carriers, and a giant step backwards for EY and QR.
Well how are they going to enforce 50% connecting PAX?
By looking at the bookings...
I did not say it was a subsidy: I said it distorts competition. And as they are alleging subsidies received by the MEB3 distorts competition it is quite amusing.
pnwtraveler
It all depends on how far down the US investigation goes and how deep they go. When the same ultimate owner or family, albeit under different company names, runs all aspects or has pieces of the complete supply chain, then there is plenty of room to spread the love around, As I have said before, similar would be if the Queen of England owned BA, owned Heathrow, built the long talked about 3rd runway at LHR without any barriers, built a giant terminal specially for BA, owned the catering, owned the refueling, owned the oil company itself, made them all tax free because North Sea Oil had now tripled in volume and was generating enough money, and used Her financial might to underwrite massive aircraft purchases etc etc. Because even if it is BA leasing the planes, knowing the owner is the richest woman on earth has an effect.
That being said. The study will generate enough election content in the US but won't be disruptive enough to upset trade.
scbriml
In a "you want our money, allow us some of your money' way. Boeing orders are worth far more to the US economy than a few route rights.
Not to mention a significant trade surplus in favour of the US (which includes all those Boeings).
Time flies like an arrow. Fruit flies like a banana!
There are 10 types of people in the World - those that understand binary and those that don't.
No it doesn't. Companies that has no future are still liquidized.
billreid
Quoting silentbob (Reply 15):
suspect that the political ramifications will have a lot more impact than what the US airlines need. There is a large US military presence in Qatar and the US needs that a lot more than they need a happy US3.
Correct. Also with the DL CEO suggesting the IM bank be shut down this might result in a not so great result for the US3.
Some people don't get it. Business is about making MONEY!
Chapter 11 enables the renegotiation of contracts, the ending of contracts, costs to be cut, and so forth. This clearly distorts competition.
Anyway, getting back to my main point: beyond potentially changing the UAE-US open skies, what business is it of the USA?
mjoelnir
They have not. They have been bailed out in different ways, but there is no chapter 11.
There are processes when a company goes bankrupt, that the entity gets sold and runs on.
My biggest complained with chapter 11 that it does not get safely rid of the shareholders and the management team having ridden the firm into bankruptcy. The danger of bankruptcy, for the management losing the job without a golden parachute, for the shareholders losing all there investment, could perhaps produce some interest in management and shareholders to think about long term goals a little bit more than only about this years dividends and bonuses.
Quoting mjoelnir (Reply 63):
Only the ones that create FAIR competition. That way the industry can jack up the fares and screw the passengers.
joeljack
How is this any different than ICT giving Airtran millions every year to fly to ICT when United, Delta and American got nothing? The city/ airport is subsidizing the low cost carrier or the carrier they prefer. This happens all the time domestically already, airports giving airlines breaks via direct payment, marketing, landing fees, gate fees etc just to get service, when other, existing carriers get nothing.
What am I missing here?
But that is between the company and creditors.
Creditors do get something back, ch 11 is not a get out of jail free card.
If that is distorting competition then QR and EY definitely is too, as in loss making airlines supported by the government to undercut the legacies.
sierra3tango
The beamounth in the corner is EK, the other 2 are bit part players as far as the US3 are concerned
The US3 have the least case against it ..think thats agreed ? stated in their report / paper; whatever is over
exuberantly stated here.
The only way the US3 are going to compete for places like Asia etc is by, at a very minimum, matching them
on seat cost. The only way the US3 are going to do this is by changing their business model. Which in turn
costs lots of money / work and is higher risk; also risks bonuses / increases shareholder risk
The US3 model is concentrated on a domestic short / mid haul business and provides an acceptable transport methodoly for that type of business alone. They then wish to export this model to the world long haul and (with the support of the US Government) fail in so doing. OK they are trying to up the game now but far to late, the train is leaving / has left the station.
IMHO EK haven't got a case to answer, so what to do? (as they say in this part of the world)
1) Change your business model - chinese walls / long haul subsidiaries with different SOPs - sort of bring back
a PA subsidiary; buy dozens of A380's to compete, whatever cuts the mustard / seat cost. No too risky / expensive
doesn't fit the model, maybe even risks the management bonus; short term thinking
2) So construct (possibly) a prime face case against 2 of them and chuck in the beahmouth in to tarnish all 3
with the same brush.
The travelling public will work it out in the long run - its the vision (or lack of it), short termism and very much
an unwillingness to change that irritates / which will stick with the pax in the long run.
What will it be next - the Chinese carriers ?
Bring back PA in its glory days
Compared to a bankruptcy were shareholders loose everything and management the boot, it is exactly that, a get out of jail card for shareholders and especially management.
No it doesn't. Companies that has no future are still liquidized
In a lot of situations the company only has a future because they are able to curtail such things as lease contracts early, with no penalty and not having to spend money on end of contract refurbishments.
That pushes a lot of cost back onto the lessor, who had to recover the aircraft, make it fit to fly, and refurbish it on their own dime. See the case of the US airline in the past few years who managed to get rid of a load of leased aircraft they had parked up in just such a way.
In other words, if you remove the debt and obligations, every company has a future.
Quoting moo (Reply 69):
Indeed and thereby distorting competition. Tut, tut.
But who really cares if the US are investigating it? They aren't aviation police. If they feel grieved they can renegotiate the US-UAE traffic agreement.
redflyer
Why would you hope for that, and not for the investigation finding the truth?
While I'm not a fan of the ME3, I hope the truth comes out. If it shows there have been market-distorting subsidies then we will know how they've managed to succeed in the face of such fierce competition. And if it shows that there have been no subsidies then we will know how they've managed to succeed by relying on an age-old business tactic - superior customer service.
A government big enough to take away a constitutionally guaranteed right is a government big enough to take away any guaranteed right. A government big enough to give you everything you need is a government big enough to take away everything you have.
Liquidation exist everywhere.
Makes zero sense.
I am not sure you know what ch.11 is.
Creditors have to agree to a deal. These people make sure they don't lose everything through liquidation.
No government money involved. One on one between creditors and companies.
ME3 can do it and far less people will complain if privately owned.
Liquidation exist everywhere
Very few countries have the equivalent of Chapter 11.
Quoting parapente (Reply 33):
The fact remains the Dubai is nearly perfectly situated relative to the World's landmasses (the other half is the Pacific) to be the ideal place to make the stop.
Quoting scbriml (Reply 34):
conveniently ignore the fact the Dubai is a superb location for connecting a very significant proportion of the World's population masses.
No point in independent thought when one can just repeat the Emirates website, is there?
It is very true that the Persian Gulf is central to something like 3/4ths of the world's population. But, there is an important part 2 to this story which Emirates PR didn't tell you..
.wait for it.
*** 4/5ths of the world's population lives in utter poverty. They never fly. They will not fly much in our lifetimes. Most of these people are in Asia, especially India, which has an average income of about 3000 euro per year.
*** There are THREE centers of global air traffic and indeed 3 centers of world economic activity: Europe, East Asia and North America. The three are more or less the same size economically although Europe and North America are much richer on a per-person basis.
*** = The Persian Gulf is a convenient place to connect between Europe and Asia. Period.
It does NOT connect the Americas to either East Asia or Europe, which is a combined economic and air traffic volume much bigger than Europe connecting to Asia.
*** Arguing that Dubai is a place to connect 'anywhere to anywhere' serves only the weak minded who don't wish to think too deeply into how the Emirates grew so fast. The world is round, there is no center, and connecting anywhere to anywhere is irrelevant, the thing that matters is connecting those who can afford to fly.
*** The people who live closest to Dubai are largely poor and most of them cannot afford to fly. The big air passenger volume is between three centers of world commerce - the three 15 trillion dollar economies - and Dubai only arguably connects Asia to Europe. Besides, domestic traffic in both Europe and America is far bigger than their intercontinental traffic = plenty of reason to question how Emirates can grow so fast merely as an international carrier.
Quoting Alfons (Reply 32):
but it will try to find a balanced solution which will please both parties.
Quoting YTZ (Reply 44):
Have a look at map of the Boeing supply chain.
Boeing's supply chain is 2/3rds overseas.
http://www.boeingblogs.com/randy/archives/2013/02/supply_chain.html
Quoting penguins (Reply 47):
The three states that will be "most affected" are states that almost always vote the same.
Presidentially, yes Illinois and Texas are safe. But Georgia is in play.
Besides, there is also a thing called the US Congress, which is very much in contention on a district by district level in these large states.
Yes they do.
Its just not called ch.11
Fold up shop and set up another.
Rdh3e
While I agree IL is probably safe, we did just elect a Republican governor. But Presidential elections turn out higher numbers which in IL tends to mean more Dems.
goosebayguy
I guess after 911 no American airline had a subsidy?
I think you do not know what chapter 11 means. Fold up shop and set up another is exactly NOT chapter 11.
ukoverlander
Quoting SWADawg (Reply 8):
This will probably not end well for the ME3. I suspect they need the U.S. for their global expansion plans a lot more than the U.S. needs rights to operate the the Mid East.
But I'm fairly sure that Boeing pretty badly want to sell aircraft to the ME3!!!
ytz
On the 787. There's a lot more of Boeing, than just the 787.
It does NOT connect the Americas to either East Asia or Europe
And nobody, including the airlines in question ever claimed to connect American to East Asia or Europe. When it comes to the Americas, the ME3 aim to connect them to South Asia, the Middle East, East Africa and to a lesser extent Southeast Asia.
Arguing that Dubai is a place to connect 'anywhere to anywhere' serves only the weak minded who don't wish to think too deeply into how the Emirates grew so fast. The world is round, there is no center, and connecting anywhere to anywhere is irrelevant, the thing that matters is connecting those who can afford to fly.
Really? Then why do any hubs exist? There is after all a logical place where there are trade flows or concentrations of populations to build up a hub. And you are being disingenous (and you know it) to reject the anywhere-to-anywhere argument. They are clearly aren't going to connect JFK to LAX through DXB. But they can connect IAH to BKK via DXB.
The people who live closest to Dubai are largely poor and most of them cannot afford to fly.
And yet EK manages to fill the upper deck of an A380 with mostly business class. That's how hubs work.
Oh and the local nationals most certainly aren't poor. Neither is the large immigrant middle class there. Don't mistake the labourers as the only residents who live there. And Dubai now gets 10 million tourists a year and is head office central for most multinationals operating in the Middle East.
It's following the Singapore model to a tee...and it's better located:
http://www.academia.edu/252091/From_...ai_s_Aviation-Based_Transformation
747megatop
I do mind the possible dishonesty
I don't mind the dishonesty either. Let's not pretend the world is an honest place where everyone (especially the big corporations) are playing by the rules. Corporations are mean money making machines and will go to great lengths and do whatever it takes to turn a profit and line the pockets of greedy CEOs. The good outcome of all this is that hopefully it will put the brakes and slow down ME3 from becoming a triopoly on certain routes. In fact the US & EU Govts should also intervene and do something about the transatlantic JVs as well and break them up or at least limit the number of carriers in a JV to 2 so there is more competition.
The average fare paying passenger cares a damn about whether the carriers are subsidized or bailed out by the govt etc. and would like to see more competition rather than see protectionist measures.
Do that and you can't take any of the old companies assets. In Chapter 11 you get to keep all of the stuff you want, and ditch all of the debt and liabilities you don't want. And invariably the board get to keep their jobs.
Close a company in that manner in most European countries and you get banned from being an owner or a director of a company for many years.
In Chapter 11, suppliers, shareholders and creditors get shafted, but the board and management gets to merrily carry on. In the UK, in the equivalent process, the first action taken is the company is taken out of the hands of the board and management, and put into the hands of an independent company who administrate the company under the direction of a judge.
The administrators then attempt to come to an amicable, best possible agreement with the creditors to continue the company. If they cant, the company is liquidated and as much money is returned to the creditors as possible.
With some manuvering yes they can.
Swissair and Swiss International Airlines?
Austrian Airlines flying as Tyrolean?
In Chapter 11, suppliers, shareholders and creditors get shafted, but the board and management gets to merrily carry on.
can't they force them into chapter 7 if they think that leads to better outcome for them?
Well, there is prophecy in the bible after all: 2 Timothy 3:1-6
Swissair was put into liquidation and its assets were sold to Crosshairs by Swissair's main creditors in an effort to recover their costs.
Swissair died in March 2002.
I dont see a comparable to Chapter 11 here - directors were struck off and banned, the company was dissolved, as much money was returned to creditors as possible, and assets were sold off.
As for Austrian Airlines, doesn't even come close as all of its restructuring was done internally and with funding by Lufthansa, not with the protection of a court.
I'm not sure that one is necessarily better than the other. If we look at Frontier's Chapter 11, for instance, it's hard to make a case that management needed be sacked.
Protection of the court, not subsidized by US government. Protection so creditors can claim something in case the company has to liquidize.
Do not see the differrence between what happened to Swissair and ch11
People need to realoze ch 11 is not something most broke companies can do.
flyby519
Let's pretend the U.S. finds that the ME3 have received subsidies. Would that prevent them from entering into a Trans-Atlantic JV with a U.S. carrier?
Could B6 start TATL service, and sign a JV to include all 3 ME3 carriers allowing them back into the Euro-US markets?
swissair went trough the chapter 7 equivalent.
Quoting 747megatop (Reply 81):
The good outcome of all this is that hopefully it will put the brakes and slow down ME3 from becoming a triopoly on certain routes.
There will be no triopoly on any route. Simply because every country they fly to has a national airline. And most of them are engaged in alliances which make the very same connections. So if you're going from IAH to DEL, there's a dozen different options for you.
In fact the US & EU Govts should also intervene and do something about the transatlantic JVs as well and break them up or at least limit the number of carriers in a JV to 2 so there is more competition.
I've always viewed the ME3 as a competitive pressure, keeping the JVs honest. This is why I've been unhappy about the ME3 being heavily restricted in Canada, where we have one of the JVs players that so heavily dominant. I'd happily trade some restriction on the ME3 for the US Govt breaking up the JVs entirely. That's a deal that would be fair to consumers.
Quoting tommy1808 (Reply 89):
All just technical differences.
Different story if Swiss International never emerged.
Planesmart
As others have posted, the ME3 are not generic. There is a leader (in strategy) and two followers. Three if you include TK.
The investigations will be good (but costly and distracting), as long as the terms of reference focus on outcomes for customers, not shareholders and corporations, and include the US3 and EU3 as well as the ME3.
Hopefully the scope includes JV's and freight, most of which are anti-competitive, constraining service standards and inflating prices for businesses and public.
name a countries or the countries that doesn't have a chapter 7 bankruptcy law.
Except it is a subsidy because its protection granted by a court formed by the US as a country, and allows US companies to remain operating as a continuing entity when foreign airlines would be sold to new owners.
And its also interesting the number of US airlines that have under gone Chapter 11 in the past decade as a planned restructuring - see American Airlines in 2011, who put themselves into Chapter 11 a mere 4 months after placing one of the largest orders for aircraft ever.
During their Chapter 11 period, AA managed to divest themselves of a tonne of leases with no penalty, including many aircraft they had parked in the desert because it was cheaper to park them than refurbish them as required under the terms of the lease agreement. Lessors were told to remove the aircraft or be charged for the storage.
AA went into Chapter 11 with over a billion US dollars in liquid operating capital. Just how does that make sense?
If you don't see the difference between a death sentence and a slap on the wrist, then you need to step away from this discussion.
Different story if Swiss International never emerged
Swissair didn't emerge, it died after its assets were sold by its creditors and the administrators. You can claim different all you want, but Swiss International is owned by a different entity, with different directors, and was funded by different creditors. The money that went from the sale of assets was used to pay down the company debt - show me where that happens in Chapter 11.
if the government money is not involved it is not a subsidy. Ch 11 gets creditors and companies to get together and work out a deal thats all that is. Companies get nothing from the government.
If thats a subsidy then EK and other government owned carriers should have been banned altogether from US skies.
Ch 11 is not a slap on the wrist. I do not believe you understand what it really is.
Severe conflicts of interests many members of congress and government get special airline benefits not available to the general public or to elite fliers.
Mitico12
One thing's for certain, the government of the UAE definitely knows how to give its airlines and transportation system a good "head start" in helping to support them. Good infrastructure, a gentle tax policy, and a fairly quick turnaround on initatives needed to expand and grow in Dubai, Doha, and Abu Dhabi.
If anything, the US3 whistleblowing on EK, EY, QR is to help "shake" the US government into doing the same for its airlines. How a ticket, for example, from EWR to MXP can have a base fare of $150 each way, yet be taxed over $600 on a total base fare of $300 makes no sense, especially when very little of that $600 is being used to improve the airport or air traffic infrastructure.
If anything, the US3 are trying to blow the whistle on their own government...
Joined: Tue Jul 25, 2006 11:00 pm
So many uninformed people here commenting on stuff they have no clue about. The next person saying chapter 11 is similiar to a subsidy should be banned from this forum. Really.
Starting with the fact that chapter 11 and 7 exist in nearly every economy of the Western World, just have different names in each country, seems not to be common knowledge here. No company can go into Chapter 11 without the creditors and debtees agreeing.
So and Chapter 11 (and all similar procedures worldwide) are bad why again? Because most people keep their job and only some instead of all money is lost? Yeah, right. If you would force all companies close to bankruptcity into Chapter 7 most people working at this company would look their jobs, the creditors would loose all money they borrowed the company to stay afloat and the market would loose another competitor. The overall outcome without Cheapter11-like procedures would be way worse for the whole economy (if we talk about large companies at least). It is better for every creditor to just loose some of their Money and only a few jobs being lost than the whole thing going belly-up.
And talking about jobs and contracts, because some here always get going about the airlines in Chapter 11 canceling all contracts with the workforce/unions. What would be the outcome if the same Company would go into Chapter 7? Oh right, everyone would loose their job. And the ones getting hired at the next competitor? Do you imagine they would get paid their old wage? They would be hired at way lower conditions. So Chapter 11 might not be that bad at all?! Rant over..
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