SInGAPORE_AIR
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EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 7:19 am

FT Extract

EU air levy plan set to heighten tension with US
By Daniel Dombey, Francesco Guerrera and Michael Mann in Brussels
Published: March 8 2002 20:12 | Last Updated: March 9 2002 13:25

US airlines could face tariffs under European Commission plans set to be unveiled days after the US enraged Brussels by announcing anti-dumping duties on steel imports.

At its meeting on Tuesday the Commission is scheduled to approve a proposal to levy duties and restrict landing rights on non-European Union airlines that benefit from unfair subsidies, a step likely to aggravate trade tensions.

The US expressed concern. "We think this is the wrong path to take," said an official on Friday.

Anyone can fly, only the best Soar.
 
eE-Kay
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RE: EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 7:44 am


So what's wrong??!
 
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STT757
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RE: EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 7:46 am

US airlines can be profitable just in domestic service (look at WN), lets see BA, AF, LH make money without Trans- Atlantic flights to the US.

If the EU puts tariffs on US carriers EU carriers will suffer too, and the EU carriers are more vulnerable to disruption of Trans- Atlantic routes than US carriers.

Since 9-11 Sabena, Swiss Air have bit the dust. BA is on shaky ground.

The big 6 US carriers have taken a hit, but bankruptcy or liquadation is unlikely for most except perhaps U. But thats still iffy.
Eastern Air lines flt # 701, EWR-MCO Boeing 757
 
donder10
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RE: EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 7:47 am

US airlines can be profitable just in domestic service (look at WN)

Apart from WN how many of them are profitable domesitcally?
 
eE-Kay
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RE: EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 7:53 am


STT757: You're right - EU carriers are more vulnerable now. The European Commission no longer permits hefty subsidies and grants from governments... but in the US, the contrary seems to be going to hold true .
 
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STT757
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RE: EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 8:07 am

If you take away international routes, flights, large widebody aircraft, landing fees, crew costs etc from the big 6 and just look at the Domestic market they most certainly make money.

It's airlines like UAL and NWA's huge fleet of widebodies like the 747s , astronomical crew pay associated with those large aircraft and long routes, and exposure to economic downturns like the Asian financial crisis which have put them in the red. Take all that away (without taking a charge for it) and im sure the reduced costs would offset the lost revenue (atleast in the last couple of years).


Airlines that built themselves on their strong Domestic networks like AA, DL, and UAL have grown while airlines dependent on international travel like Pan Am and TWA are gone.

AA, DL, and UAL made huge profits from domestic travel in the 60's through the mid 80's. In the early 80's UAL, AA and DL had almost no international flights. The profits from their Chicago-NY and Coast-Coast business travelers gave them tremendous capital to go on a spending spree in the late '80s and early '90s buying up international networks from Eastern, Pan Am and TWA.

Prior to lets say 1986, you could probably count the number of international routes AA, DL and UAL had on one hand. But they were still much bigger and twice if not 3x more profitable than PA or TWA who were big Interantional players.
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STT757
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RE: EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 8:11 am

European carriers don't get subsidies ?..

What would you call British Airways near monopoly at Heathrow, the British Gov't refuses to allow CO, DL and NWA landing rights. Why?.. To protect British citizens from the lower airfares more competition would bring. Ha!.

More likely is to protect BA from competition.
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DeltaSFO
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RE: EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 8:12 am

Apart from WN how many of them are profitable domesitcally?

Delta's domestic system is consistently profitable. You'll find the same is true of the other Big 3, as well as the rest of the majors, who don't have nearly as much international exposure as UA, AA, and DL. Check the 2000 Annual Reports.
It's a new day. Every moment matters. Now, more than ever.
 
b757300
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RE: EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 8:17 am

The EU needs to tread very lightly. If the U.S. adds tariffs to their carriers, we'll probably see a few more heading into bankruptcy.
"There is no victory at bargain basement prices."
 
777236ER
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RE: B757300

Sun Mar 10, 2002 8:21 am

This is a direct relatiation to the steel tarrifs. A few days ago I could have said "The US needs to tread very lightly. If the EU adds tarrifs to their steel producers, we'll probably see a few more heading into bankruptcy."

And btw, people go bankrupt, companies go insolvant.
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bmi330
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RE: EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 8:22 am

just the eu and the us trying to have a face off as always to see who is bigger. if you ask me all airlines should be abile to fly what everv they want anywere in the world like ba could fly jfk-lax ans ual could fly lhr-cdg whats it got to do whith anything where an airline is from they should fly where every they dam want and as menay flight as they want if you ask me
 
donder10
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RE: EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 8:25 am

I was merely asking as I didnt have a clue.Where can I get hold of annual reports DeltaSFO?
Cheers,Alex
 
aerokiwi
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RE: EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 8:26 am

So the United States continues along the lines of "Do as I say, not as I do." Typical. the hypocrisy here from the Bush Admin is increadible. Why should anyone listen to him about free trade and access to markets ever again?
 
racko
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RE: EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 8:57 am

Blabla,

if the US puts tariffs on foreign steel you say that is great, if the EU puts tariffs on foreign airlines, you say that's bad, eu airlines will go for bankrupcty etc.

United would already be dead without the subsidies they (and all other US airlines) received after 11.9. !

Lufthansa has not received one single euro yet, and they are still going to brake even in 2001.

Just like DaimlerChrysler, Daimler makes billions of profit, while chrysler loses billions
 
magyar
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RE: EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 9:24 am


If the international market is so irrelevant or even loss making
for the US airlines then why they are participate in it? Why
don't they just sell those big loss maker birds and concentrate
on the domestic market?

Janos
 
AAgent
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RE: EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 9:35 am

My educational background is finance and economics... and everything about this tariff stuff stinks to high heaven.

Respectfully,
AAgent
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STT757
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RE: EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 2:45 pm

Racko said:
"Just like DaimlerChrysler, Daimler makes billions of profit, while chrysler loses billions "

Um excuse me but your pompous ignorance is untolerable.

Are you forgetting a little episode called WWII, where NAZI Germany started a World War in which tens of millions of people were killed.

The German war machine included many companies such as Daimler Benz.

The US had to spend Billions of our own tax payer money and millions of mothers had to give their son's lives to defeat Germany.

And after the War what did we do with the ruble of Western Europe, make them Suffer as the Russians did with the Eastern European Countries. NO!

President Truman and the US Congress went ahead with the Marshall plan which spent BILLIONS more of US tax payer money rebuilding the lives and economies of the same people who were trying to kill us.

50 years after WWII Western Europe's people and companies like Benz thrive because the US SUBSIDIZED THEM, so the people of Western Europe could work and not starve. Go ask the folks who lived in the Eastern block countries like Poland, the former East Germany and Romania how they faired after WWII.

I laugh when the EU complains about US subsidies, because if the US had not spent the Billions to rebuild Western Europe there would be no EU, no Airbus, no Daimler Benz, no Siemans. Nothing.


Zero.

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Guest

RE: EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 3:04 pm

STT757, EU airlines more vulnerable ?
Uhhm, just because the government don't put billions of cash into them. As already said, there wouldn't be something called UA anymore if it didn't happen.

Ok, I don't see the point why the following was mentioned here but it's true that Daimler makes cash whereas Chrysler doesn't. Maybe the statement was just a bit exxagerated.

BTW: I like the last sentence in the release.
"we think this is the wrong path..." LOL
What a great statement ! I guess that's the same as many people said when they heard about the steel story.
 
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STT757
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RE: EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 3:26 pm

Cheap steel has been dumped on the markets by Asian and European companies, where's everybody missing the picture?..

You make the assumption that UAL wouldn't be here if it weren't for the grants because of economic circumstances or mis-mangement , that may be true to an extent. However that alone isn't enough to get the Congress to throw them money.

More likely it was due to the fact that teams of International terrorists had targeted US airline flights on 9-11 as symbols of the US GOV't, the pilots of these flights had their throats slashed and the planes were crashed into buildings killing thousands.

US AIRLINES were targeted for attack by terrorists who viewed thm as symbols of the US.

This caused a (short term) crisis in the US airline industry, which was alleviated by the grants.

THE GRANTS WERE NOT SUBSIDIES to weak performing companies, but were compensation for victims of the attacks. The tens of thousands of airline employees were as much targets as the actual victims who lost their lives on 9-11, the terrorists were purposly commiting acts of terrorism on many levels economic, psychological etc.

The airlines and their employees were compensated for their economic losses just as the families of victims who lost their lives on 9-11 are being compensated for the lost wages their loved ones could have earned over their lifetimes.
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Joni
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RE: EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 7:38 pm


STT:

It isn't an issue of dumping cheap steel, but that the US steel industry is inefficient and noncompetitive. It needs to be restructured in order to compete in the world steel market.

 
LJ
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RE: EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 7:55 pm

STT757, you should get your facts straight. US airlines DID dump seats on the European market. Maybe the grants weren't intended as subsidies but the US airlines did use them as subsidies to get traffic. Maybe the best proof is that all US airlines lowered their fares ex Amsterdam to real rock bottom levels (one US airlines was even willing to sell AMS-NYC for EUR 100).

However, the fact that US airlines dumped on the Europe-Amrica route was understandable. What wasn't (and triggered a very negative response by the European airlines) was that US airlines also started dumping on the Europe-Latin America route. Fares on Amsterdam - Sao Paulo and fares to many other Latin American destinations reached a new low point after September 11th with the US airlines taking a lead in selling the real rock bottom fares. Without any doubt these fares were below cost and thus may be considered dumping.

Fortunately the US airlines discovered they were doing something stupid and stopped most dumping fares late December. However, they EU already started an inquiry by then.

BTW before you say that EU airlines did also receive compansationm I have to point out that the EU airlines only received compansation for the 4 days that they couldn't use American and/or Israeli airspace. The numbers are very low. Finally, next time anyone accuses EU airlines of getting subsidies they must know that these things are all over and subsidies from governments are forbidden and the EU Commission looks after that it won't happen (and the majority of European airlines haven't received state support for years.

Regards
Laurens

 
LJ
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RE: EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 7:57 pm

BTW forgot to mention this. The EU Commission intended to fine US airlines well before the steel tarrifs were known.
 
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RE: EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 8:24 pm


Laurens, very well said !
Thank you man.
 
Cyprus-Turkish
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RE: EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 8:56 pm

EU's action against the US carriers is totally understandable and it is a strong way to retaliate against the US protectivism. WTO allows US administration to enforce import controls upto a certain level and Bush has taken advantage of that to protect the domestic companies. In the very same way the EU is placing its own restrictions without breaking any international agreements.

There has not been anything done by either administration which can be classified as illeagal, but EU is trying to show that it can stand up against the US to protect the economic interests of its countries. Hardening the commercial environment is not going to help either side. It will only reduce competition and hamper the consumers so it is to our best interest that the restrictions are removed we have a freer atmosphere for trade.

Regards.
 
mika
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RE: EU Plans To Implement Tariffs On US Airlines

Sun Mar 10, 2002 9:10 pm

Seems like the US is growing more and more inwards for every day with the Bush administration.
 
delta-flyer
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RE: EU Plans To Implement Tariffs On US Airlines

Mon Mar 11, 2002 12:22 am

While the EU can do as they wish, moving a relatively obscure issue of steel to the much higher profile aviation industry is frought with peril for the EU. The US market is very valuable to EU carriers and the US can wreak havoc with them even with relatively modest sanctions. Say, cutting a daily flight or two at every major US airport?

Whether you like it or not, the US is a huge net importer of goods and services, and that provides a lot of employment for Europeans and Asians.

I agree that Bush is not a team player, but he's the pres for now, so we all need to make the best of it.


Cheers,
Pete
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RE: EU Plans To Implement Tariffs On US Airlines

Mon Mar 11, 2002 12:28 am

Delta-flyer, you should not forget that let's say if the US was to do what you said (like cutting flights at airports), the EU could just do the very same.
US Airlines also need their transatlantic flights.

And it always depends on the airlines of course.
I've just read an article today that whilst BA has around 40% on transatlantic, airlines like AF/LH only have 25%. That's why they are not that much affected since September 11th.

 
Flying-Tiger
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RE: EU Plans To Implement Tariffs On US Airlines

Mon Mar 11, 2002 12:34 am

Well, actually only a very limited number of European airlines is dependent on the US market, the ones most exposed are KLM, British Airways and Aer Lingus. Other like Lufthansa for example generate less then 20% of their turn-over with flights to North-America, especially for LH the impact wouldn´t be too hard as they could re-route their traffic via Canada if necessary.

Delta Air Lines for example is heavily dependent of feed from Europe, mostly at their main hub in Atlanta, the same applies to Continental, US Airways and United which are all in a less stable position then most European carrier. Cut some US carrier their Europe networks and a good deal of domestic flights drops below break-even, especially comparably low-yield regional flights and short hops.

Pete, YOUR president has started with this crap, Europe is just responing at a field where he can feel that he has done something wrong. BTW, do you know that for every job saved in the steel industry 8 jobs in related industries in the US will be cut due to higher prices, especially in the car production? Just to get some facts straight...

My 0.02€

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Flying-Tiger
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delta-flyer
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RE: EU Plans To Implement Tariffs On US Airlines

Mon Mar 11, 2002 1:05 am

Flying-tiger & B737....

I agree with you in principle, but I have a few mitigating observations.....
....What if steel is really being dumped -- then the US response is valid.
....What if, using you Delta example, DL traffic drops in Paris due to EU tarrifs, a reciprocal US sanction reduces AF traffic between the US and France: this would seriously impact intra-Europe service because they lose some of their US feed. This cuts both ways, even if transatlantic traffic itself is not a major market. Trade sanctions ultimately hurt both sides, regardless of which side starts it.
....I doubt that 8 jobs would be lost in related industries for every job saved in steel. The raw steel content in cars and other products is not a major cost driver -- the major costs are in the forming, machining, processing, final assembly, and the fixed costs -- and these are not affected by the price of steel. In any event, the demand for manufactured products in the US is fairly inelastic, and is mostly driven by peoples' confidence in the economy rather than the price of the article. People will pay a few bucks more, and it will not stop them from buying. When I buy a $20,000 car, an extra few hundred won't stop me. Many anylists fail to factor in all relevant variables when they draw such conclusions.

Overall, trade sanctions are dumb, unless they are justified.

Oh, one more thing....please avoid statements like "Just to get some facts straight... " -- these may be viewed as personal affronts. Let's just stick to the issues.


Cheers
Pete
"In God we trust, everyone else bring data"
 
racko
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RE: EU Plans To Implement Tariffs On US Airlines

Mon Mar 11, 2002 1:17 am

Anyway, i think the whole tariff thing is crap.

I would really prefer free world trade...
 
Flying-Tiger
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RE: EU Plans To Implement Tariffs On US Airlines

Mon Mar 11, 2002 1:25 am

@ Pete.Okay, then I take "a few facts straight" back. This has been reported by a number of competent magazines and news papers in Europe thus I used this figure.

The problem with the US steel industry is that they were sleeping the past decade whilest companies in Europe consolidated, layed off thousands of workers and madetheir operations more efficient. In thus US not much happened meanwhile. Thus European steel mills con produce at alower price even when salaries are higher due to the higher output per worker.

Regards
Flying-Tiger
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