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Change Is In The Air

El Al Boeing 777, seen in flight from below.
photo by Dean Morley

Few people are flying these days, but this week’s news leaves little doubt that change is in the air.

Most of the attention domestically was on United Airlines’ move on Sunday to drop change fees on most domestic reservations. (Its bare-bones “basic economy” fare will continue to prohibit changes at all, aside from special allowances for the pandemic.) United’s mainline rivals, American Airlines and Delta Air Lines, adopted the same policy the next day. American went further by also dropping change fees on flights to Canada, Mexico and the Caribbean.

Welcome though these changes may be, these are desperate measures appropriate for an industry in dire straits. Traffic at the start of this week was still running at less than one-third the rate of a year ago, after having been crushed by more than 95% earlier in the pandemic. Nearly every major U.S. airline, including the three big players in this week’s news, expects to make big job cuts at the start of October once federal aid restrictions expire, barring a second round of job-preserving aid.

Even so, there is less to the fee changes than meets the eye. Besides the smaller number of travelers who are flying domestically, Canada has severely limited cross-border travel (as has the United States, reciprocally). Air travel is still permitted to Mexico and to some Caribbean destinations, but few travelers are taking advantage in a season where pandemics and hurricanes overlap. Europe and Asia remain largely closed off, and change fees still apply on those routes anyway.

Ancillary fees accounted for around 15% of U.S. airline revenue last year, The Wall Street Journal reported, citing data from IdeaWorksCompany. It would have been a much larger share of their profit. For the airlines, profits are now an even more distant dream than passenger demand returning to normal. If the pandemic magically vanished tomorrow, it would still take months, if not years, for travel patterns to return to the halcyon days of the 2010s – assuming they ever do.

Still, when airlines say they are “permanently” eliminating ancillary fees for ticket changes or other amenities, I treat it like a permanent change to the tax laws. Tax laws change permanently every four years or so, on average. This fee change will be permanent only as long as airlines see it in their interest to give travelers the penalty-free right to alter their plans, paying only the difference in fares. Once that is no longer true, the permanent change will most likely prove temporary.

But there was another change in the air this week, of potentially much greater and more lasting significance. On Monday, El Al Flight 971 left Tel Aviv and landed in Abu Dhabi, becoming the first commercial flight under a new peace deal between Israel and the United Arab Emirates. The flight was allowed to cross Saudi Arabia’s airspace, another breakthrough in the multigenerational hostility between Israel and its Arab neighbors.

The pioneering flight carried Israeli and American dignitaries including presidential envoy and son-in-law Jared Kushner. Kushner is widely credited with midwifing the deal to normalize relations between the two adversaries.

It is Israel’s third peace settlement with an Arab neighbor, following agreements with Egypt in 1978 and Jordan in 1994. While arguably nothing will top the precedent-setting agreement between Egypt’s President Anwar Sadat and Israeli Prime Minister Menachem Begin that President Jimmy Carter helped forge, this year’s settlement with a state on the Persian Gulf may prove more strategically significant in our era. It has the tacit support of the Saudis, as the El Al flight plan made clear. And it makes public an already de facto arrangement between Israel and the Persian Gulf Arab nations to collaborate against the threats from Iran they mutually face.

Palestinian leaders were enraged by the agreement, just as they were with the earlier peace deals involving Egypt and Jordan. They see all three of the agreements as betrayals by their fellow Arabs of their goal of an independent state comprising most of the Israeli-occupied West Bank and Israel’s capital, Jerusalem.

But for exactly that reason, the agreement is both a strategic and political coup for the Trump administration. That is probably why his opponent Joe Biden and other Democrats have said virtually nothing about it.

Trump has clearly decided that the unsavory Saudi regime governed (in fact, if not in name) by Crown Prince Mohammed bin Salman is the lesser of two evils when compared to Tehran. Brokering a working relationship between Israel, the Saudis and the other Gulf states isolates the Iranians, and their proxies in Syria and Lebanon. At the same time, it reinforces a message to the Palestinians that time is not working in their favor in settling the long-running conflict with Israel. The Arab front-line states now seem to want to send the same message. The exceptions are Syria and Lebanon, both of which have territorial disputes with Israel stemming from the 1967 Six-Day War.

Trump reinforced this message when he broke with prior American policy and recognized Jerusalem as the Israeli capital. He also drew a clear line between himself and Biden by withdrawing from the 2015 nuclear deal with Iran. Biden, then Barack Obama’s vice president, supported it at the time and has pledged to reinstate it if elected. Israel and many American Jewish leaders saw the deal as both a financial reward for Iranian aggression and a long-term path to nuclear arms for the Tehran regime.

Which is why the Israeli-UAE settlement, and that El Al flight, are politically significant. With the Jewish high holy days approaching and a presidential election hanging in the balance, don’t doubt that most American synagogues will host discussions of the Middle East situation, either in person or virtually. It won’t change the election’s outcome in New York or California. But it could be a valuable boost to the president in Florida – if only by depressing the typically Democratic Jewish vote that Biden needs, even if those voters don’t move over to Trump’s side.

It will be more of a mixed picture in Michigan, home to America’s largest Arab minority as a proportion of the population. Pro-Palestinian sentiment is strong there. Resentment toward the administration’s support of Israel is more widespread and overt. But that does not necessarily mean Arab Americans will uniformly, or even predominantly, oppose a peace deal involving another Arab state. The Jewish vote is smaller than the Arab population in Michigan, but not by very much.

It has been a good year on the administration’s part in containing the Iranians and demonstrating a contrast between Trump’s foreign policy and his predecessor’s. The year began with the assassination of the Iranian Revolutionary Guard Corps commander Qassem Soleimani, which Biden promptly and sharply criticized. Now that symbolic El Al flight has created new facts on the ground. This may be the strongest sign yet that further change really is in the air – even if it’s not the change America’s airlines were hoping for.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.

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