Trump Talks Infrastructure Investment With Airlines, But Stays Out Of International Competition

Trump Talks Infrastructure Investment With Airlines, But Stays Out Of International Competition

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by: Chris Dier-Scalise, Benzinga Staff Writer


Executives of several U.S. airlines met with President Donald Trump to discuss the White House's stated interest in improving the country's aging airport infrastructure and air traffic control systems. The meeting included CEOs from United Continental Holdings Inc UALDelta Air Lines, Inc. DAL and Southwest Airlines Co LUV.

There were also expectations going into the meeting that the subject of increased competition from foreign carriers introducing more direct international flights would be broached.


Making Airports Great Again

During his campaign, Trump made a consistent point of emphasizing the need for infrastructure investment in the nation's airports, comparing their current state to those of third world countries. In a press meeting prior to the summit, Trump outlined his intention to improve the customer travel experiences saying, "We want the traveling public to have the greatest customer service and with an absolute minimum of delays."

Gary Kelly, CEO of Southwest, commented during the event that the first priority toward helping U.S. airliners would be to modernize the air traffic control system. The president agreed, saying the current system is, "totally out of whack."

In an interview with CNBC following the summit, Kelly said he was heartened by the discussions saying, "It was very engaging dialogue. It was very much focused on tax reform, regulatory reform. But primarily infrastructure investment both for air traffic control and the airports." Kelly emphasized that the discussions remained preliminary, but was pleased that the industry was a priority for the president.

White House press release concerning the meeting noted tax and regulatory reform were other primary topics discussed. The release outlined statistics regarding the current airline regulations and taxes that apply to both carriers and customers and pledges to reduce both. However, It does not provide any specific policies the administration plans to enact at this time.


Flying The Foreign Skies

While the topic was said not have been addressed in the discussions, domestic airliners' have seen growing competition from foreign carriers flying out of U.S. hubs. The increase is in part a result of a decision made under the Obama administration's Department of Transportation granting international carriers the ability to book more direct international flights from U.S. airports.

Foreign carriers such as Norwegian Air and Persian Gulf airlines like Emirates and Qatar Airways have all recently expanded international flights to several U.S. airports.

The airline trade group Partnership for Open & Fair Skies, which includes companies like AAL, DAL and LUV have commented on these expansions. In two statements the organization called Qatar Airway's recent expansion into Las Vegas a, "punch in the nose to the United States of America," and characterizing Emirates announced Newark expansion as "throwing down the gauntlet."

In a recent Benzinga interview with Frank Holmes, Chief Executive Officer of U.S. Global Investors, which manages the airline industry ETF JETS, Holmes elaborated on why the increased competition is such a blow to domestic airlines. "The big part of the revenue," Holmes explained, "has been overseas travel from American Airlines Group Inc AAL, Delta and United flying to Europe. If you were living in the Middle East or India, you flew to Europe then you flew to America. But if you fly [with] Emirates and Qatar, you just fly straight to America, you don't go through Europe. So all of a sudden they lose that revenue, which is a much higher margin business."

While the competition from abroad was not on the docket during Thursday's summit, the concern is likely to be a sticking point if the new administration plans on making air travel a priority.



Image Credit: By Chairman of the Joint Chiefs of Staff from Washington D.C, United States – 170206-D-VO565-029, Public Domain, via Wikimedia Commons


© 2017 Benzinga does not provide investment advice. All rights reserved.


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