OVER the past few decades, established airlines in Europe and America have been hit by one thing after another. First came low-cost carriers, chipping away at their short-haul routes. Lately, a new crop of super-connecting airlines in the Gulf, Emirates, Etihad and Qatar Airways, has lured away their long-haul passengers with superior service and lower fares. Now looms the biggest threat of all—the rise of several promising Chinese airlines (see article). Unfortunately, the response of the incumbents risks depriving passengers of the benefits from this latest wave of competition.

China’s airlines are rising up the world rankings at a breathtaking pace. In 2007 passengers in China made 184m journeys by air; last year around 550m did. The International Air Transport Association, a trade group, predicts that China will leapfrog America as the world’s biggest market in the coming five years. During the next two decades Airbus and Boeing, the world’s two big manufacturers of passenger aircraft, forecast that Chinese carriers will buy more jets than American ones.

Passengers who had a choice used to avoid Chinese airlines. Delays were common, accidents frequent and the food inedible. However, after a concerted effort to improve standards, they are winning flyers over. OAG, a data firm, reckons that in 2011-17 the proportion of passenger seats between China and America on Chinese airlines rose from 37% to 61%.

Losing the battle to fly people in and out of China is one thing. But the menace to the world’s established carriers goes deeper. Just as the Gulf airlines expanded by offering connecting flights to international passengers through their Middle Eastern hubs so, too, are Chinese airlines turning themselves into connectors. The cheapest way to get from London to Australia, for instance, is no longer via Dubai or Abu Dhabi but through Guangzhou, Shanghai or Wuhan. The Chinese authorities have loosened visa requirements to encourage this kind of transfer traffic.

China’s arrival as an aviation superpower has prompted two responses from big Western carriers—both predictable, neither good. The Europeans are crying foul about government aid, just as they did when the Gulf airlines became a threat. The bosses of Air France-KLM and Lufthansa wail that they are the victims of “unfair trade”. They are lobbying for rules that would let the European Union place unilateral sanctions on subsidised foreign rivals, Chinese carriers among them, even before any investigation has been concluded.

The fact that Chinese airlines benefit from support from the state is not in question. But the outrage of rivals is shamelessly confected. Around the world, the aviation industry has been built on government support. CE Delft, a research firm, reckons that French airlines get €1bn ($1.2bn) in energy subsidies alone each year. Unilateral sanctions might benefit incumbents, but would restrict choice and harm passengers. A tit-for-tat battle over flying rights would hit Europe harder than China, which is fast becoming a sizeable net exporter of tourists.

The big three American carriers have taken a different tack. They are also happy to play the protectionist card when it suits them. American, Delta and United have all been lobbying hard against the Gulf carriers, for instance. But with China they sniff an opportunity as well as a threat. They want an open-skies treaty, which would allow airlines to fly between any airport in the two countries.

Fare trade

In theory, passengers have much to gain from a deal of this sort. In practice, open-skies deals open the door to joint ventures (JVs), which are granted immunity from antitrust rules and so can potentially lead to higher prices. In 2006-16 the share of long-haul passenger traffic controlled by such JVs leapt from 5% to 25%. Three JVs account for almost 80% of the transatlantic market. The established American airlines would love to team up with Chinese rivals in order to dominate the Pacific, too.

Neither shutout nor carve-up is good for passengers. In an ideal world, Europe and America would seek open-skies deals with China but design them to nurture competition rather than mute it. Airline JVs would be barred from gaining antitrust immunity. Airport slots would be allocated more fairly, so that the best landing and take-off times were not hoarded. State handouts would be transparent.

Alas, the chances of reaching such a sensible accommodation with China’s airlines are low. Rising trade tensions between America and China are only part of the explanation (see article). The real problem is that big Western carriers would not much like such policies either.