US Open Skies Agreements and Unlevel Playing Fields

We examine the relationship between ‘Open Skies’ agreements (OSAs) signed between the USA and various countries or regions on these markets and the absence of a so called ‘level playing field’; i.e. the existence of subsidies and other forms of protection that advantage one nation’s airlines over those of co-signatories to an OSA. We argue that under an oligopoly market structure, strategic competition brought about by OSAs creates incentives to subsidize and/or protect domestic airlines. Such incentives are maintained or amplified by political lobbying efforts that bias civil aviation policies towards producer interests over wider measures of economic welfare. We report on financial aid and policies which have co-evolved along with OSAs and which have advantaged US airlines during the OSA period and which suggest that unlevel playing fields have been perpetuated and possibly made more unlevel during the era of OSAs.